FSA enforcement process review
| Date | 01 January 2006 |
| Published date | 01 January 2006 |
| Pages | 14-23 |
| DOI | https://doi.org/10.1108/13581980610644716 |
| Author | Richard Burger |
| Subject Matter | Accounting & finance |
FEATURE ARTICLES
FSA enforcement process review
Richard Burger
Mills & Reeve, Cambridge, UK
Abstract
Purpose – To consider the recommendations made by the Financial Services Authority (FSA)
enforcement process review (the review).
Design/methodology/approach – This paper has considered the concerns raised by the Financial
Services and Markets Tribunal in the Legal & General case, the reaction of the FSA to those concerns
and the terms of reference for the review, plus the impact of the review’s 44 recommendations.
Findings – That the recommendations will bring greater transparency to the FSA’s process of
investigating regulatory breaches and taking enforcement action against firms and individuals,
although it may take some time for the regulator and the city to adapt to the revised enforcement
process.
Originality/value – This paper will be of interest to firms and individuals in the regulated sector
and regulatory lawyers interested in the FSA’s enforcement process.
Keywords Financial ServicesAct, Tribunals, Process control
Paper type Case study
Introduction
The enforcement process review (the review) was largely commissioned as a result of
the decision of the Financial Services and Markets Tribunal (the tribunal) in the
challenge by Legal & General Assurance Society Limited (Legal & General) again st a
decision notice issued by the Financial Services Authority (FSA) Regulatory Decisions
Committee (RDC)[1].
The Legal & General Tribunal referral
In October 2003, the RDC issued a decision notice against Legal & General, imposing a
financial penalty of £1.1 million for alleged rule breaches in sales of low cost
with-profits endowment mortgage policies. A month later, Legal & General made a
referral to the tribunal.
At the tribunal, the FSA claimed that Legal & General’s compliance procedures
were deficient and that there was actual mis-selling of policies. Legal & General denied
these allegations and argued that it had the correct procedures in place and the
allegations of mis-selling were incorrect.
After various pre-trial hearings, the tribunal hearing commenced on Monday, 13
September 2004. After hearing the evidence of 13 Legal & General customers, eight
experts, five members of FSA staff and eight members of Legal & General staff, plus
considering some 40,000 pages of documentation, the tribunal hearing closed on 21
October 2004.
On 18 January 2005, the tribunal gave its first decision. The tribunal, for the most
part, upheld the FSA’s allegation regarding Legal & General’s compliance proced ures;
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
JFRC
14,1
14
Journal of Financial Regulation and
Compliance
Vol. 14 No. 1, 2006
pp. 14-23
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980610644716
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