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UK financial watchdogs shake up enforcement system
[LONDON] Britain's financial regulators have changed how they pursue rule-breakers to speed up enforcement and make the process more flexible after criticisms over how it handled the collapse of lender HBOS nearly a decade ago.
The Financial Conduct Authority and the Bank of England's Prudential Regulation Authority published revised rules on Wednesday following a public consultation last year.
Among the changes, firms facing enforcement action can challenge sanctions without the risk of losing discounts on fines for early settlements, reducing the likelihood of being bounced into an agreement, lawyers said.
"It is essential that our enforcement decision-making processes command public confidence and operate both efficiently and fairly," said Mark Steward, the FCA's director of enforcement.
The changes are being made in response to a December 2014 review by the finance ministry of how regulators take enforcement decisions.
Recommendations on changing enforcement practice were also set out in two reviews published in November 2015 into the collapse of HBOS during the financial crisis, which sparked criticism that few individuals have been punished.
The FCA is now looking at whether it should ban individuals involved in the HBOS collapse in 2008.
"Anything which increases the transparency of regulatory decision-making is good for public and market confidence, and good for those being investigated," said Stuart Alford, a partner at Latham & Watkins law firm.
"These changes also give both sides in an investigation more options for resolving the issues, which must help bring quicker conclusions to these cases."
The regulators say they will give firms and individuals more information on why they are being pursued, backed by regular updates during the investigation.
The supervisory arm of the regulators will also be in closer touch with enforcement officials during an investigation.
The new "partly contested" provision will allow firms to challenge some aspects of a case before an internal FCA committee, while accepting others.
"They will still have the ability to obtain a discount on the penalty that will reflect the extent that issues have been agreed," the FCA said.
In addition, the FCA said it will allow those under investigation to proceed more directly and quickly to the Upper Tribunal, an external adjudication body that is wholly independent of the watchdog.
Simon Morris, a financial lawyer at CMS, said the changes showed that regulators can view enforcement from the "sometimes frightening perspective" of a firm or individual being pursued.
"The promise to speak more often to firms and individuals undergoing enforcement about the progress, timing and direction of the case will be very welcome," Mr Morris said.