The FSA has proposed new rules to prevent firms paying financial penalties imposed on present or former employees.
In its latest consultation paper, Decision Procedure and Penalties manual and Enforcement Guide review 2010, the regulator proposes a raft of changes including new rules to prevent any authorised firm, except a sole trader, paying a financial penalty imposed on a present or former employee, partner or director of the firm or an affiliated company.
The consultation paper says: “We do not know how frequently firms may have paid financial penalties imposed on their employees in the past, but concerns have been expressed to us about this practice. Such action could be in breach of Principles 1 and 11 of our Principles for Businesses, but we consider the introduction of such a rule would address a potential regulatory failure.”
The FSA is also making changes to its policy for publishing decision notices. A decision notice is usually issued after a person makes representations to the FSA on the back of a warning notice. The decision notice states what reasons for the action and informs that person that they have 28 days to make a referral to the upper tribunal. A final notice is issued if the matter is not referred.
New proposals would see the regulator only publish a decision notice if a person decides to refer the matter to the Tribunal, unless there is a compelling reason to do otherwise, such as early publication being essential to allow consumers to avoid any potential harm arising from the firm’s actions. If the person does not refer, the FSA will only publish a final notice.
Other proposals include extending the settlement discount scheme to the length of time a firm is suspended for. Currently a firm receives a 30 per cent financial discount for settling at the earliest stage. This would mean that a firm that has been suspended for 10 months but settles at the earliest stage would see that suspension reduced to seven.