New FSA suspension powers
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The FSA is implementing new enforcement rules allowing the regulator to suspend or restrict authorised and app-roved persons and impose fin-ancial penalties on people who perform controlled functions without approval.
The final rules are set out in its paper, Implementing Aspects of the Financial Services Act 2010, published last week.
Where an authorised person has breached FSA rules or regulatory requirements, the new powers allow the regulator to suspend any permissions the person has to carry out a regulated activity or impose restrictions on that activity for a maximum of 12 months.
For approved persons, the FSA can suspend someone from performing one or more controlled functions or impose restrictions for a maximum of two years.
The FSA says it believes it is reasonable to use its suspension powers against authorised or approved persons “whenever it is appropriate to do so” and not just in situations that are deemed to be the most serious.
The FSA previously only had the power to suspend an individual in order to protect consumers. It now has the power to use suspensions as a punitive measure.
The regulator says if it deems that both a financial penalty and a suspension is appropriate, it will consider reducing one or both of the sanctions if the combined effect is disproportionate.
At the end of a suspension period, the suspended person would not have to re-apply for authorisation or approval.
The FSA says their pre-suspension permissions or app-rovals would automatically resume.
The regulator says some respondents to the consultation argued that where an individual performs a controlled function without approval, it may be more appropriate to take action against the firm rather than the individual. The FSA says it will take this into account when deciding whether to take action against an individual.
The new rules also give the FSA the power to impose financial penalties on people who breach short selling prohibition or disclosure rules.
The Act gives the FSA the power to require disclosure of information about short selling and prohibit short selling in specified cases, require information or documents to be produced to determine if short selling rules have been contravened and impose penalties or issue censures in the event that a person has contravened short selling rules.
But the regulator has narrowed the scope of the rights issue disclosure obligation, which means that the disclosure regime would be restric-ted to UK companies and companies for which a UK prescribed market is the main trading venue for their securities.
The FSA has also taken on new information-gathering powers. The regulator has the power to request information or documents from firms that may be relevant to UK financial stability.
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