FCA sets out how and when it investigates firms

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The FCA has published detailed criteria for when and how it refers firms to enforcement action.

The regulator says before deciding whether to appoint investigators, it considers which regulatory tool would achieve its statutory objectives most effectively.

The FCA says: “Enforcement action is an expensive and resource-intensive option for the subject of the investigation as well as for the FCA, so we need to exercise our discretion to ensure that in all the circumstances it is the appropriate course of action to take and the best use of our resources.”

Other options the FCA will consider include: appointing a skilled person to carry out a section 166 review; agreeing with firms what action it wants them to take through regular supervisory correspondence; imposing restrictions on particular activities or products; and making firms pay redress to customers.

When deciding whether to take enforcement action, the FCA considers whether an investigation is likely to further its aims and objectives.

This involves considering the strength of the evidence and the proportionality of opening an investigation, and what purpose would be served if the FCA did end up taking enforcement action.

The regulator says its main reasons for taking enforcement action are: deterring wrongdoers from repeating their behaviour; deterring other firms from breaking the rules; holding those responsible to account with proportionate fines and sanctions; and removing wrongdoers from the industry.

FCA acting director of enforcement and market oversight Georgina Philippou says: “Enforcement is not the only tool at our disposal where we see misconduct by firms or individuals, nor is it the most appropriate one to use in every case.

“Today’s publication will make our decision making process more transparent. Firms and the public will now have a clearer understanding of the questions we ask ourselves before we start a formal investigation.”