Comment on FCA Enforcement Guide From Norton Rose Fulbright

Here are some insights and comment on the FCA’s new Enforcement Guide from Katie Stephen, partner and London Co-Head of the Contentious Financial Services Group at Norton Rose Fulbright:

“Many will see the ‘name and shame’ reversal in position as a rare success story for industry push-back, which may embolden future challenge. However, it remains to be seen whether the FCA will in future stretch the provision for investigation announcements to be made in “exceptional circumstances”, given its clear desire to publicise that action is being taken.

“Obtaining anonymous details about investigations could help firms to avoid pitfalls, if enough information is provided, but a balance needs to be achieved so as not to give away the identity of the subjects and lead to unhelpful speculation. Senior managers will need a process for identifying lessons learned and any actions they need to take in their areas of the business, as failing to do so will be treated as an aggravating factor if any similar issues are uncovered in the future.

“Individual cases of bad behaviour and associated firm-related failings remain on the regulatory agenda for investigation and potential enforcement action, particularly if the FCA is speeding the process up and making inroads into the backlog of historic cases. Some recent outcomes demonstrate that the FCA is still keen to make examples of individuals falling below its standards.

“The FCA has confirmed that it now has fewer open investigations. This is a double-edged sword for firms in that they are less likely to be investigated but more likely to face an outcome if they are. There may also be a greater risk of a public supervisory intervention if the FCA seeks to take action – and makes this public – at an earlier stage when concerns are identified. It puts the emphasis for firms firmly on compliance and prevention, so as to avoid being dragged into the spotlight.

“Senior managers will need to consider that – if the current approach to enforcement does not work as a deterrent – the pendulum could swing back, as it did following the global financial crisis. That could mean more investigations and ultimately more visible and severe penalties for both firms and individuals.”