DEC Decision Making

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DEC 1

Application,
Purpose and Introduction

DEC 1.1

Application and Purpose

01/12/2004

Application

DEC 1.1.1

This manual gives guidance on the FSA's decision making and other procedures for giving statutory notices listed in DEC 2 Annex 1 G and DEC 3 Annex 1 G. This manual also gives guidance on the FSA's procedure for using its powers under Part XXIV of the Act (Insolvency), Part XXV of the Act (Injunctions and restitution), Part XXVII of the Act (Criminal Offences) and the Unfair Terms Regulations. It also gives guidance on the FSA's procedures for using certain similar powers with respect to insolvency and criminal offences under the Building Societies Act 1986, the Friendly Societies Acts 1974 and 1992, the Credit Unions Act 1979 and the Industrial and Provident Societies Act 1965. It is relevant to firms, approved persons, applicants for Part IV permission, persons for whom an application for approval under section 59 of the Act has been made, and other persons, whether or not they are regulated by the FSA. The UKLA's procedure for giving statutory notices under Part VI of the Act (Official listing) is set out in the listing rules and related guidance.

01/04/2003
Future version of DEC 1.1.1 after 01/07/2005

Purpose

DEC 1.1.2

Section 395 of the Act (The FSA's procedures) requires the FSA to publish a statement of its procedure for the giving of statutory notices. The purpose of the Decision making manual (DEC) is to fulfil this obligation.

21/11/2002

DEC 1.1.3

DEC 4.6.1 G and DEC 4.6.2 G set out the FSA's policy on the procedure to be followed:

(1) if the FSA decides to use its:

(a) powers to apply to the civil courts for insolvency orders, injunctions, restitution orders and collective investment scheme related orders; or

(b) powers to prosecute criminal offences; and

(2) if the FSA decides to discontinue any proceedings begun by the use of these powers.

21/11/2002

DEC 1.1.4

DEC 4.6.2A G and DEC 4.6.2B G set out the FSA's policy on the procedure to be followed:

(1) if the FSA decides to use its powers to prosecute criminal offences under the Building Societies Act 1986, the Friendly Societies Acts 1974 and 1992, the Credit Unions Act 1979 and the Industrial and Provident Societies Act 1965, in each case as amended; and

(2) if the FSA decides to discontinue any proceedings begun by the use of these powers.

21/11/2002

DEC 1.2

Introduction

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DEC and the other manuals

DEC 1.2.1

The Authorisation manual (AUTH), the Supervision manual (SUP), the Enforcement manual (ENF) and the Decision making manual (DEC) form the regulatory processes part of the Handbook:

(1) AUTH sets out the relationships between the FSA and applicants for Part IV permission and persons wishing to exercise EEA rights, Treaty rights or UCITS directive rights;

(2) SUP sets out the relationship between the FSA and authorised persons (referred to in the Handbook as firms). As a general rule, material that is of a continuing relevance after authorisation is in SUP;

(3) ENF describes the FSA's enforcement powers under the Act and sets out its policies for using those powers; and

(4) DEC is principally concerned with, and sets out, the FSA's decision making procedures for decisions that involve the giving of statutory notices.

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Statutory notices

DEC 1.2.2

The Act designates certain notices as warning notices, decision notices or supervisory notices ('statutory notices') for which there are certain specified procedures, actions and protections.DEC 1.2.3 G summarises the statutory notices and related notices and provides references to where they are described in the Act.

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DEC 1.2.3

Summary of statutory and related notices

Reference to the Act

Notice

Description

Further information

Section 387

Warning notice

A warning notice gives the recipient details about action that the FSA proposes to take and about the right to make representations.

DEC 2.2

Section 388

Decision notice

A decision notice gives the recipient details about action that the FSA has decided to take.

DEC 2.3.1 G to DEC 2.3.5 G

Section 388

Further decision notice

A further decision notice gives the recipient details about different action from that set out in a decision notice and which the FSA has decided to take concerning the same matter covered by the decision notice . The FSA may give a further decision notice only if the person to whom the original decision notice was given consents.

DEC 2.3.6 G to DEC 2.3.7 G

Section 389

Notice of discontinuance

A notice of discontinuance identifies proceedings set out in a warning notice or decision notice and which are not being taken or are being discontinued.

DEC 2.3.8 G to DEC 2.3.10 G

Section 390

Final notice

A final notice sets out the terms of the action that the FSA has decided on and the date it takes effect.

DEC 2.3.11 G to DEC 2.3.12 G

Section 395(13)

Supervisory notices

A supervisory notice gives the recipient details about action that the FSA has taken or proposes to take.

Statutory notice procedure: Supervisory notice procedure

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Decision making on giving statutory notices

DEC 1.2.4

The FSA has different decision making procedures depending on whether or not a statutory notice is given.

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DEC 1.2.5

Events leading to the giving of a statutory notice are covered in AUTH, SUP, ENF and COLL or CIS. DEC 2 Annex 1 G and DEC 3 Annex 1 G list the relevant references.

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DEC 1.2.6

Decisions whether to give a statutory notice and decisions associated with the statutory notice once it has been given (a 'statutory notice associated decision', see DEC 4.1.2 G) will be taken by a 'decision maker'. References to the 'decision maker' concerning statutory notice decisions refer to decisions taken by:

(1) the Regulatory Decisions Committee (RDC); or

(2) FSA staff under executive procedures.

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Future version of DEC 1.2.6 after 20/10/2005

DEC 1.2.7

DEC 4.1 describes the allocation of decisions between the RDC and executive procedures. DEC 4.2 provides further information on the RDC. DEC 4.3 provides further information on executive procedures.

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Future version of DEC 1.2.7 after 20/10/2005

Other decisions

DEC 1.2.8

The FSA will make regulatory decisions falling outside section 395 of the Act. These will include exercise of statutory powers which do not require statutory notices to be given, for example: when the FSA grants an application for a Part IV permission on the terms applied for (such decisions are made by internal staff procedures as described in AUTH 8.2.5 G to AUTH 8.2.8 G); when the FSA grants other applications; decisions on applications for waivers; decisions to give individual guidance; and decisions generally in the course of the FSA's oversight of regulated institutions. They also include decisions on recommendations by FSA staff to the RDC.

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Future version of DEC 1.2.8 after 20/10/2005

DEC 1.2.9

The FSA's general policy is that regulatory decisions should be taken at a level of seniority which is appropriate to the decision having regard to such factors as:

(1) the significance of the decision to those who would be affected by it;

(2) its novelty in the light of stated policy and established practice;

(3) the complexity of the relevant considerations;

(4) the range of alternative options; and

(5) the extent to which the facts relating to the decision are or may be disputed.

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DEC 1.2.10

The FSA expects that most decisions will be made by individuals accountable through line management to the Board within the management structure of the FSA. Where appropriate, decisions will be made collectively by a group of staff. Decisions will be made within the stated policies of the FSA and in accordance with the Act and other legal requirements.

01/12/2004

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Legal Instruments that change this Chapter Application, Purpose and Introduction

DEC 2

Statutory notice procedure: Warning notice and decision notice procedure

DEC 2.1

Warning notice and decision notice procedure: Introduction

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DEC 2.1.1

The Act and certain other enactments requires the FSA, when proposing to exercise its powers in certain circumstances, to use the warning notice and decision notice procedure.

21/11/2002

DEC 2.1.2

The circumstances to which the warning notice and decision notice procedure in DEC apply are set out in DEC 2 Annex 1 G. Three flowcharts are provided in DEC 2 Annex 2 G to DEC 2 Annex 4 G. These illustrate:

(1) the procedure for giving warning notices and decision notices in the case of applications for Part IV permission, applications for approval under section 59 of the Act (Approval for particular arrangements), applications for variation of permission, and for certain other applications (see DEC 2 Annex 2 G);

(2) the procedure for giving warning notices and decision notices in non-application cases (see DEC 2 Annex 3 G); and

(3) the procedure for giving warning notices and decision notices in the case of notifications of a change in control (see DEC 2 Annex 4 G).

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DEC 2.1.3

DEC 1.2.3 G includes a summary of the purpose of warning notices and decision notices.

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DEC 2.2

Warning notice procedure

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DEC 2.2.1

Under the circumstances listed in DEC 2 Annex 1 G, if FSA staff consider that action is appropriate, they will recommend to the relevant decision maker that a warning notice be given. A specimen warning notice for enforcement cases is at DEC 2 Annex 5 G.

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DEC 2.2.2

After considering the staff recommendation, the decision maker may:

(1) decide not to take further action (with or without a private warning (see ENF 11.3(Private warnings)); or

(2) decide to give a warning notice to the person concerned.

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DEC 2.2.3

In the case of a proposed refusal of an application for approval under section 59 of the Act, the FSA must send a warning notice to all interested parties. Under section 62(5) of the Act (Applications for approval: procedure and right to refer to Tribunal), the interested parties in relation to an application for approval, are:

(1) the applicant;

(2) the person in respect of whom the application is made ('A');

(3) the person by whom A's services are to be retained, if not the applicant.

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DEC 2.2.4

Under regulation 22 of the OEIC Regulations, in the case of a warning notice concerning a proposed change in respect of an ICVC, the notice must be given to the depositary as well as the ICVC. The only exception is if the proposal is to replace the depositary or any director.

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DEC 2.2.5

If the FSA decides to give a warning notice to a person, in accordance with section 387 of the Act (Warning notices), the warning notice must:

(1) state the action which the FSA proposes to take;

(2) be in writing;

(3) give the FSA's reasons for the proposed action;

(4) state whether section 394 of the Act (Access to FSA material) applies (see DEC 2.4); and

(5) if that section applies, describe its effect and state whether any secondary material exists to which the person concerned must be allowed access under it.

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DEC 2.2.6

If the FSA decides to take no further action and the FSA had previously informed the person concerned that it intended to recommend action, the FSA will communicate this decision promptly to the person concerned.

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DEC 2.2.7

The warning notice will contain a statement that the person concerned is entitled to make representations to the FSA. The notice must specify a reasonable period, of at least 28 days from receiving (see DEC 5.3) the warning notice, within which the person to whom it is given may make representations.

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DEC 2.2.8

The procedures for making representations are set out in DEC 4.4.

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DEC 2.2.9

The warning notice will contain (where appropriate) a statement that the mediation scheme is available. The applicability of the FSA's mediation scheme is described in DEC App 1.

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DEC 2.3

Decision notice procedure

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DEC 2.3.1

The decision maker will consider any representations made in accordance with DEC 4.4 in relation to a warning notice which has already been given. A decision will be stated in a decision notice or (where appropriate) a notice of discontinuance or other written notice. The decision notice sets out the terms of the decision. A specimen decision notice for enforcement cases is at DEC 2 Annex 6 G.

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DEC 2.3.2

In accordance with section 388 of the Act (Decision notices), the decision notice must:

(1) be in writing;

(2) give the FSA's reasons for its decision to take the action to which the decision notice relates;

(3) state whether section 394 of the Act (Access to FSA material) applies (see DEC 2.4);

(4) if that section applies, describe its effect and state whether any secondary material exists to which the person concerned must be allowed access under it; and

(5) give an indication of:

(a) any right given by the Act to have the matter referred to the Tribunal; and

(b) the procedure on referring a case to the Tribunal.

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DEC 2.3.3

In the case of a proposed refusal of an application for approval under section 59 of the Act, the FSA must give a decision notice to all interested parties (see DEC 2.2.3 G).

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DEC 2.3.4

In the case of a decision notice concerning a notification of a proposed change in respect of an ICVC, the FSA must give a decision notice to the depositary as well as to the ICVC, if the depositary received the warning notice (see DEC 2.2.4 G).

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DEC 2.3.5

The decision maker may decide to take action different from that proposed in the warning notice. However, under section 388(2) of the Act, that action must be made under the same Part of the Act as the action proposed in the warning notice.

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Further decision notice

DEC 2.3.6

Under section 388(3) of the Act, following the giving of a decision notice but before the FSA takes action to which the decision notice relates, the FSA may give the person concerned a further decision notice relating to different action concerning the same matter. Under section 388(4) of the Act, the FSA can only do this if the person receiving the further decision notice gives his consent. In these circumstances the following procedure will apply:

(1) FSA staff will recommend to the decision maker that a further decision notice be given, either before or after obtaining the person's consent;

(2) the decision maker will consider whether the action proposed in the further decision notice is appropriate in the circumstances;

(3) if the decision maker decides that the action proposed is inappropriate, he will decide not to give the further decision notice. In this case, the original decision notice will stand and the person's rights in relation to that notice will be unaffected. If the person's consent has already been obtained, the FSA will notify him of the decision not to give the further decision notice;

(4) if the decision maker decides that the action proposed is appropriate then, subject to the person's consent being (or having been) obtained, a further decision notice will be given;

(5) a person who had the right to refer the matter to the Tribunal under the original decision notice will have that right under the further decision notice. The time period in which the reference to the Tribunal may be made will begin from the date on which the further decision notice is given.

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DEC 2.3.7

For the purpose of establishing whether the person receiving the further decision notice gives his consent, the FSA will normally require consent in writing. If the person concerned is an individual, the FSA will normally require a letter or signed memorandum from him recording his consent. If the person concerned is a body corporate or partnership, the FSA will normally require a letter or signed memorandum on behalf of the body corporate or partnership stating its consent.

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Notice of discontinuance

DEC 2.3.8

If the FSA decides not to take action proposed in a warning notice or the action to which a decision notice relates, section 389 of the Act (Notices of discontinuance) requires the FSA to give a notice of discontinuance to the person to whom the warning notice or decision notice was given. (Section 389 of the Act does not apply if the discontinuance of the proceedings results in the granting of an application made by the person to whom the warning notice (or decision notice) was given.)

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DEC 2.3.9

A notice of discontinuance:

(1) must identify what proceedings are being discontinued (section 389(3)); and

(2) must state that the FSA may publish information about the matter if the person to whom the notice of discontinuance is given consents (section 391(2)).

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DEC 2.3.10

Where the FSA is required to give a person a copy of a notice of discontinuance (see DEC 2.4.10 G), the copy must be accompanied by a statement that the FSA may publish information about the matter, so far as relevant to the person to whom the copy is given, if that person consents.

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Final notice

DEC 2.3.11

Under section 390 of the Act (Final notices), the FSA must give a final notice to the person to whom it has given a decision notice:

(1) if the matter was not referred to the Tribunal within the period of 28 days of the date when the decision notice was given, or within any other period that may be prescribed in the Tribunal rules, in which case the FSA will give a final notice at the same time as it takes the action to which the decision notice relates;

(2) if the matter was referred to the Tribunal within the period of 28 days of the date when the decision notice was given, or within any other period that may be prescribed in the Tribunal rules, in which case the FSA will give a final notice at the same time as it takes action in accordance with any directions given by the Tribunal or the Court under section 137 of the Act (Appeal on a point of law).

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DEC 2.3.12

A final notice sets out the terms of the statement, order, penalty or other action, and will give details of the date when the action takes effect.

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DEC 2.4

Third party rights and access to FSA material

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DEC 2.4.1

Sections 393 (Third party rights) and 394 (Access to FSA material) of the Act confer additional procedural rights relating to third parties and to disclosure of FSA material. These rights apply in certain warning notice and decision notice cases referred to in section 392 of the Act (Application of sections 393 and 394). The cases in which these additional rights apply are identified in DEC 2 Annex 1 G by asterisks; these are generally cases in which the warning notice or decision notice is given on the FSA's own initiative rather than in response to an application or notification made to the FSA.

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Access to FSA material

DEC 2.4.2

If section 394 of the Act (Access to FSA material) applies and the FSA gives a person a warning notice or decision notice, it must under section 394(1) allow that person ('A') access to:

(1) the material on which the FSA relied in taking the decision which gave rise to the obligation to give the warning notice (or the decision notice); and

(2) any secondary material, which, in the opinion of the FSA, might undermine that decision.

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DEC 2.4.3

However, the duty under section 394(1) is qualified in the following ways:

(1) under section 394(2), the FSA does not have to allow A access to material that is excluded material;

(2) under section 394(2)(a) and (b), the FSA does not have to allow A access to material if this:

(a) relates to a case involving a person other than A; and

(b) was taken into account in A's case only for the purpose of comparison with other cases;

(3) under section 394(3), the FSA may refuse A access to particular material to which it would otherwise have to allow him access if, in the FSA's opinion, allowing him access to the material would not be in the public interest or would not be fair, having regard to:

(a) the likely significance of the material to the person concerned in relation to the matter about which he has been given a notice; and

(b) the potential prejudice to the commercial interests of a person (other than A) which would be caused by the material's disclosure.

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DEC 2.4.4

If under section 394(2) the FSA does not allow A access to material because it is excluded material consisting of a protected item, it must give A written notice of the existence of the protected item and of the FSA's decision not to allow him access to it (section 394(4)).

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DEC 2.4.5

If under section 394(3) the FSA refuses to allow A access to particular material, it must give him written notice of the refusal and the reasons for it (section 394(5)).

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DEC 2.4.6

If the FSA receives a request for access to material, the FSA may within a reasonable period after the request was made:

(1) provide facilities for the inspection and photocopying of the material that it considers it is required to disclose; or

(2) provide a photocopy of the material.

The FSA will provide the first photocopy of the material free of charge, but will charge for subsequent copies it provides to the same person.

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Third party rights

DEC 2.4.7

If section 393 (Third party rights) applies and any of the reasons given in the warning notice relate to a matter which:

(1) identifies a person ("the third party") other than the person to whom the warning notice is given; and

(2) in the FSA's opinion is prejudicial to the third party;

then the FSA must give the third party, in accordance with section 393 of the Act, a copy of the warning notice.

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DEC 2.4.8

A copy of the warning notice will not be given if the FSA considers that this would be impracticable, or the FSA has already given the third party a separate warning notice about the same matter. Similarly, a copy of the warning notice will not be given if the FSA gives the third party such a notice at the same time as it gives the warning notice which identifies him.

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DEC 2.4.9

DEC 2.4.7 G and DEC 2.4.8 G apply similarly in relation to a decision notice.

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DEC 2.4.10

The FSA must give a copy of the notice of discontinuance, decision notice or final notice (as appropriate) to a third party who has been given a copy of the warning notice or decision notice (section 393(14), 393(5) and 390(1) of the Act).

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DEC 2.4.11

If the FSA gives a copy of a warning notice or decision notice to a third party, the copy must be accompanied by an indication of the third party's right under section 393(9) to refer the case to the Tribunal and the procedure on such a referral.

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DEC 2.4.12

If the FSA gives a copy of a warning notice or decision notice to a third party, the provisions about access to FSA material also apply to the third party (DEC 2.4.2 G to DEC 2.4.6 G). Under section 393(12), the material that the FSA must disclose under section 394 is material that relates to the matter that identifies the third party.

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DEC 2 Annex 1

Statutory notice procedure: Warning notice and decision notice procedure

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List of warning notices and decision notices under the Act (other than Part VI)and certain other enactments

Note: Third party rights and access to FSA material apply to the powers listed in this table where indicated by an asterisk * (see DEC 2.4)

Section of the Act

Description

Handbook reference

Decision maker

52(6)(a)/52(9)(a)

when the FSA is proposing/deciding to grant an application for a Part IV permission with a limitation or a requirement which was not applied for, or with a narrower description of regulated activity than that applied for

AUTH 3

RDC

52(6)(b)/(9) (b)

when the FSA is proposing/deciding to grant an application to vary a firm's Part IV permission but, otherwise than as part of the application, to restrict the Part IV permission (either by imposing a limitation or requirement which was not applied for or by specifying a narrower description of regulated activity than that applied for)

SUP 6

RDC / executive procedures (Note 1)

52(7)/(9)(c)

when the FSA is proposing/deciding to refuse an application for a Part IV permission

AUTH 3

RDC

52(7)/(9)(c)

when the FSA is proposing/deciding to refuse an application to vary a firm's Part IV permission

SUP 6

RDC / executive procedures (Note 1)

52(7)/(9)(c)

when the FSA is proposing/deciding to refuse an application to cancel a firm's Part IV permission

SUP 6

RDC

54(1)/(2)

when the FSA is proposing/deciding to cancel a firm's Part IV permission otherwise than at its request*

ENF 5

RDC

57(1)/(3)

when the FSA is proposing/deciding to make a prohibition order against an individual*

ENF 8

RDC

58(3)/(4)

when the FSA is proposing/deciding to refuse an application for the variation or revocation of a prohibition order

ENF 8

RDC

62(2)/(3)

when the FSA is proposing/deciding to refuse an application for approval of a person performing a controlled function under section 59 of the Act (in conjunction with an application for Part IV permission)

AUTH 6

RDC

62(2)/(3)

when the FSA is proposing/deciding to refuse an application for approval of a person performing a controlled function (otherwise than in conjunction with an application for Part IV permission)

SUP 10

RDC

63(3)/(4)

when the FSA is proposing/deciding to withdraw approval from an approved person *

ENF 8

RDC

67(1)/(4)

when the FSA is proposing/deciding to take action against an approved person by exercising the disciplinary powers conferred by section 66*

ENF 11/12/13

RDC

when the FSA is proposing/deciding to impose a sanction for market abuse *

ENF 14

RDC

183(3)/186(1)

when the FSA is proposing/deciding to object to a change in control following receipt of a notice of control

SUP 11

Executive procedures

185(3)/(4)

when the FSA is proposing/deciding to approve a change in control following receipt of a notice of control but subject to conditions

SUP 11

Executive procedures

187(1)/(3) and 188(1)

when the FSA is proposing/deciding to object to a person who has failed to submit a notice of control or a notice on acquiring, or increasing, control, or to object to an existing controller

SUP 11

Executive procedures

200(4)/(5)

when the FSA is proposing/deciding to refuse an application for variation or rescission of a requirement imposed on an incoming firm

ENF 4

RDC / executive procedures (Note 1)

207(1)/208(1)

when the FSA is proposing/deciding to publish a statement in respect of an authorised person (under section 205) or impose a financial penalty on an authorised person (under section 206)*

ENF 11/12

RDC

245(1)/(2)

when the FSA is proposing/deciding to refuse an application for an authorisation order declaring a unit trust scheme to be an AUT

COLL 2 and CIS 16

RDC / executive procedures (Note 2)

252(1)/(4)

when the FSA is proposing/deciding to refuse approval of a proposal to replace the trustee or manager of an AUT

COLL 2 and CIS 16

Executive procedures

255(1)/(2)

when the FSA is proposing/deciding to make an order under section 254 revoking the authorisation order of an AUT *

ENF 16

RDC

260(1)/(2)

when the FSA, on an application to revoke or vary a direction under section 257, proposes/decides to refuse to revoke or vary the direction or proposes/decides to vary the direction otherwise than in accordance with the application

ENF 16

RDC

264(2)/265(4) (Note 3)

when the FSA is notifying/deciding not to withdraw a notice, to the operator and relevant EEA State authorities, that the way in which a collective investment scheme constituted in another EEA State intends to invite persons in the United Kingdom to participate in the scheme does not comply with UK law

COLL 9 and CIS 16

Executive procedures

269(1)/(2)

when the FSA , on an application under subsection (4) or (5) of section 267 by an operator of a section 264 recognised scheme to revoke or vary a direction that the promotion of the scheme be suspended, proposes/decides to refuse the application or to vary the direction otherwise than in accordance with the application

ENF 16

RDC

271(1)/(3)

when the FSA is proposing/deciding to refuse approval of a collective investment scheme as a recognised scheme under section 270

COLL 9 and CIS 16

Executive procedures

276(1)/(2)

when the FSA is proposing/deciding to refuse an application for an order declaring a collective investment scheme to be a recognised scheme under section 272

COLL 9 and CIS 16

Executive procedures

280(1)/(2)

when the FSA is proposing/deciding to direct that a section 270 recognised scheme is to cease to be recognised or to revoke a section 272 order in respect of a recognised scheme *

ENF 16

RDC

321(8)/(9)

when the FSA is proposing/deciding to refuse an application for variation or revocation of a direction or a requirement imposed on a former underwriting member of Lloyd's*

None

RDC

331(1)/(3)

when the FSA is proposing/deciding to make an order disapplying the exemption from the general prohibition under section 327*

ENF 18

RDC

331(7)/(8)

when the FSA is proposing/deciding to refuse an application for the variation or revocation of an order made under section 329*

ENF 18

RDC

345(2)/(3)

when the FSA is proposing/deciding to disqualify an auditor or actuary from being the auditor of, or acting as an actuary for, any authorised person or class of authorised person or from being the auditor of any AUT or ICVC *

ENF 17

RDC

385(1)/386 (1)

when the FSA is proposing/deciding to exercise the power under section 384(5) to require a person to pay restitution*

ENF 9

RDC

Paragraph 15(6)(c) of Schedule 3 (Note 3)

when the FSA is notifying/ deciding not to withdraw a notice issued to an EEA UCITS management company wishing to deal in units in a collective investment scheme in the United Kingdom and relevant EEA State authorities, that the way in which the EEA UCITS management company intends to market a relevant scheme in the United Kingdom does not comply with UK law.

AUTH 5

Executive procedures

Paragraph 19(8)/(12) of Schedule 3

when the FSA is proposing/deciding to refuse to give a consent notice to a UK firm wishing to establish a branch under an EEA right

SUP 13SUP 13

RDC

Section of the Building Societies Act 1986 (Note 5)

Description

Handbook reference

Decision maker

36A(5)/(5A) (Note 6)

when the FSA is proposing/deciding to issue a prohibition order under section 36A prohibiting the continuance or carrying on of an activity and requiring the disposal of assets acquired or otherwise in a building society's possession by virtue of the activity, where the society has failed to carry into effect a restructuring plan which it has been directed to carry out by the FSA under section 36(8)

None

RDC

46A(1)(a)/(3) (a) (Note 7)

when the FSA is proposing/deciding to give a direction under section 36(3), (5), (6), (7) or (10) requiring a building society to submit for its approval a restructuring plan or to submit to the society's members the requisite transfer resolutions for a transfer of the society's business to a company or (if such a direction is given) imposing limitations on the issue of shares, acceptance of deposits or making of loans or requiring the society to take certain steps or refrain from certain action or requiring the removal of a director or other officer (Note 8)*

None

RDC

46A(1)(b)/(3) (b) (Note 7)

when the FSA is proposing/deciding to give a direction under section 42B(1) (other than a direction varying a previous direction with the agreement of the building society concerned) that a building society transfers all its engagements to one or more other building societies under section 94 or that it transfers its business to an existing company under section 97*

None

RDC / executive procedures (Note 9)

93(6) (Note 10)

when the FSA , on an amalgamation between building societies each of which has a Part IV permission to accept deposits, notifies the successor society of the terms of its Part IV permission

None

RDC / executive procedures (Note 11)

Section of the Credit Unions Act 1979

Description

Handbook reference

Decision maker

where the FSA is proposing to cancel or suspend the registration of a credit union or to petition for the winding up of a credit union

CRED 15 Annex 1 G

RDC

Section of the Friendly Societies Act 1992 (Note 5)

Description

Handbook reference

Decision maker

58A(1)(a)/(3) (a) (Note 12)

when the FSA is proposing/deciding to give a direction under section 54 or section 55 requiring a friendly society to take or refrain from taking steps where certain activities have become disproportionate to those of the friendly society group or, as the case may be, the society, or varying such a direction other than at the request of the society*

None

RDC

58A(1)(b)/(3) (b) (Note 12)

when the FSA is proposing/deciding to give a direction under section 90 providing for a transfer of the engagements of a friendly society *

None

RDC

85(4A) (Note 10)

when the FSA , on an amalgamation between friendly societies each of which has a Part IV permission, notifies the successor society of the terms of its Part IV permission

None

RDC / executive procedures (Note 11)

OEIC Regulations reference

Description

Handbook reference

Decision maker

Regulation 16(1)/(2)

when the FSA is proposing/deciding to refuse an application for an authorisation order in respect of a proposed ICVC

COLL 2 and CIS 16

RDC / executive procedures (Note 2)

Regulation 22(1)/(2)/(4)/ (5)

when the FSA is proposing/deciding to refuse approval of (or, having given a warning notice , deciding to approve (Note 4)) a proposal to replace the depositary or director of an ICVC , or any other proposal/decision falling within regulation 21

COLL 2 and CIS 16

Executive procedures

Regulation 24(1)/(2)

when the FSA is proposing/deciding to revoke an authorisation order relating to an ICVC under regulation 23(1)*

ENF 16

RDC

Regulation 28(1)/(2)

when the FSA is proposing/deciding to refuse an application to revoke or vary a direction in accordance with a request under regulation 25(7) or to vary the direction in accordance with the application

ENF 16

RDC

Paragraph 20 of schedule 5

when the FSA is proposing/deciding to use the disqualification powers under section 249(1)*

ENF 17

RDC

Note 1: The decision will be made by the RDC if it involves a fundamental (see DEC 4.1.5 G) change to the nature of a permission.

Note 2: The decision will be made by the RDC if it relates to an application for an authorisation order by an authorised fund manager who is not the operator of an existing AUT or ICVC.

Note 3: Although the notice under section 265(4) is a decision notice, the notice under section 264(2) is not a warning notice. The FSA will operate a procedure compliant with section 264 for the section 264(2) notice, which will be similar to the procedure for a warning notice.

Note 4: The FSA must give a decision notice under regulation 22(5) of the OEIC Regulations when, having given a warning notice, it decides to approve a proposal. But this decision notice has the effect of a written notice giving the FSA's approval under regulation 21(3)(a) of the OEIC Regulations. Although the FSA will comply with the statutory requirements regarding the giving of decision notices, DEC should otherwise be read as if the decision notice was a written notice granting an application.

Note 5: As amended by the Financial Services and Markets Act 2000 (Mutual Societies) Order 2001 (SI 2001/2617).

Note 6: There is no right to refer a decision to issue a prohibition order under section 36A to the Tribunal. Accordingly, a decision notice under section 36A(5A) is not required to give an indication of whether any such right exists. A decision notice under section 36A(5A) may only relate to the issue of a prohibition order under section 36A. Where such a decision notice is given, no final notice is required under section 390 of the Act and the FSA may issue the order at the same time as or after giving the decision notice. For the purposes of section 391 of the Act (Publication), the decision notice is treated as if it were a final notice.

Note 7: These powers become exercisable by the FSA if a building society fails to comply with any of the following requirements imposed by the Building Societies Act 1986: section 5(1)(a) or (b) (purpose or principal purpose and principal office); section 6(1) (the lending limit); and section 7(1) (the funding limit).

Note 8: The warning notice and decision notice must set out the terms of the direction which the FSA proposes/has decided to give. A decision notice given under section 46A(3) must give an indication of the society's right, given by section 46A(5), to have the matter referred to the Tribunal. A decision notice under section 46A(3) may only relate to action under the same section of the Building Societies Act 1986 as the action proposed in the warning notice. A final notice under section 390 of the Act must set out the terms of the direction and state the date from which it takes effect. Section 392 of the Act is to be read as if it included references to a warning notice given under section 46A(1) and a decision notice given under section 46A(3).

Note 9: The decision will be made under executive procedures if the society has agreed to the giving of the direction and its terms.

Note 10: The FSA notifies the successor of the permission by giving it a decision notice. The decision notice is not preceded by the giving of a warning notice. No final notice is required under section 390 of the Act and for the purposes of section 391 of the Act (Publication), the decision notice is treated as if it were a final notice. The giving of permission is treated for the purposes of section 55 of the Act (Right to refer matters to the Tribunal) as if it were the determination of an application made by the successor under Part IV of the Act. Part IX of the Act (Hearings and appeals) accordingly applies, but with the omission of section 133(9), which would otherwise prevent the FSA from giving the permission on the terms notified in the decision notice until after any reference and appeal.

Note 11: The decision will be made under executive procedures where the terms of the permission have been agreed with the successor.

DEC 2 Annex 2

Statutory notice procedure: Warning notice and decision notice procedure

01/12/2004

The FSA's decision making procedure for applications concerning Part IV permission, applications for approval under section 59 of the Act, and for certain other applications involving warning and decision notices

01/12/2004

DEC 2 Annex 3

Statutory notice procedure: Warning notice and decision notice procedure

01/12/2004

The FSA's decision making procedure in non-application cases involving warning and decision notices

01/12/2004

DEC 2 Annex 4

Statutory notice procedure: Warning notice and decision notice procedure

01/12/2004

The FSA's decision making procedure on notification of a change in control involving warning and decision notices

01/12/2004

DEC 2 Annex 5

Specimen Warning Notice

01/12/2004

This annex consists only of one or more forms or templates. Forms and templates are to be found through the 'Forms' link under Useful Links section at www.fsahandbook.info or on the Handbook CD-ROM.

01/12/2004

DEC 2 Annex 6

Specimen Decision Notice

01/12/2004

This annex consists only of one or more forms or templates. Forms and templates are to be found through the 'Forms' link under Useful Links section at www.fsahandbook.info or on the Handbook CD-ROM.

01/12/2004

Export chapter as

Legal Instruments that change this Chapter Statutory notice procedure: Warning notice and decision notice procedure

DEC 3

Statutory notice procedure: Supervisory
notice procedure

DEC 3.1

Supervisory notice procedure

01/12/2004

DEC 3.1.1

The Act requires the FSA, when proposing to exercise its powers in certain circumstances, to use the supervisory notice procedure. The relevant circumstances are set out in DEC 3 Annex 1 G. DEC 1.2.3 G includes a summary of the purpose of supervisory notices.

01/12/2004

DEC 3.1.2

In DEC 3.1.3 G to DEC 3.1.10 G, the supervisory notice about a matter first given to the recipient is referred to as the "first supervisory notice" and the supervisory notice given after consideration of any representations is referred to as the "second supervisory notice". DEC 3 sets out the procedure which applies when the FSA gives a supervisory notice. The flowchart in DEC 3 Annex 2 G illustrates the procedure for the giving of supervisory notices. A specimen notice for enforcement cases is at DEC 3 Annex 3 G.

01/12/2004

First supervisory notice

DEC 3.1.3

In the circumstances listed in DEC 3 Annex 1 G, if FSA staff consider that action is appropriate, they will recommend to the relevant decision maker that a supervisory notice be given. The recommendation will say whether the action should take effect immediately, on a specified date, or when the matter is no longer open to review.

01/12/2004

DEC 3.1.4

After considering the staff recommendation, the FSA may:

(1) decide to take no action; or

(2) decide to give a first supervisory notice to the person concerned.

01/12/2004

DEC 3.1.5

If the FSA decides to give a first supervisory notice to a person, in accordance with the sections of the Act listed in DEC 3 Annex 1 G, the notice must:

(1) give details of the action;

(2) inform him when the action takes effect, which may be immediately, on a date specified in the notice or (except for a supervisory notice given under section 321 of the Act) when the matter is no longer open to review;

(3) state the FSA's reasons for the action and for its decision as to when the action takes effect;

(4) inform him of his right to refer the matter to the Tribunal and give an indication of the procedure on such a reference; and

(5) inform him that he may make representations to the FSA within such a period as may be specified in the notice (whether or not the matter has been referred to the Tribunal).

21/11/2002

DEC 3.1.5A

Except for a supervisory notice given under section 321 of the Act, the action may take effect immediately (or on a specified date) only if the FSA considers this necessary, having regard to the ground on which it is taking the action.

21/11/2002

DEC 3.1.6

01/12/2004

DEC 3.1.7

The procedures for making representations are set out in DEC 4.4. If the FSA receives no representations within the period specified in the first supervisory notice, the default procedures set out in DEC 4.4.13A G apply.

21/11/2002

Second supervisory notice

DEC 3.1.8

The FSA will consider any representations made in accordance with DEC 4.4 concerning a first supervisory notice which the FSA has already given.

01/12/2004

DEC 3.1.9

If the FSA decides to take the proposed action, or to take action in a different way, or decides not to rescind action that is already effective, then in accordance with the sections of the Act listed in DEC 3 Annex 1 G, a second supervisory notice must be given.

01/12/2004

DEC 3.1.10

If the FSA decides to give a second supervisory notice, its content will depend on the action the FSA decides to take.

(1) If the FSA decides to take the action proposed in the first supervisory notice, or if action has already been taken which the FSA decides not to rescind, in accordance with the sections of the Act listed in DEC 3 Annex 1 G, the notice must inform the person concerned of his right to refer the matter to the Tribunal. If a notice informs a person of his right to refer the matter to the Tribunal, it must also describe the procedure on such a reference.

(2) If the FSA decides to take different action from that proposed in the first supervisory notice, then in accordance with the sections of the Act listed in DEC 3 Annex 1 G, the second supervisory notice must be in the same form as a first supervisory notice (see DEC 3.1.5 G).

01/12/2004

DEC 3.1.11

If the FSA decides not to take action, or decides to rescind action that is already effective, then in accordance with the sections of the Act listed in DEC 3 Annex 1 G, the person concerned must be informed in writing.

01/12/2004

DEC 3 Annex 1

Statutory notice procedure: Supervisory notice procedure

01/12/2004

Section of the Act

Description

Handbook reference

Decision maker

53(4)/(7)/(8)(b)

when the FSA is exercising its own-initiative power to vary a firm'sPart IV permission

Variation of Part IV permission on the FSA's own initiative

SUP 7

RDC / executive procedures (Note)

when the FSA is proposing/discontinues the listing of a security

LR 5

RDC/ Executive procedures

when the FSA is proposing/suspends the listing of a security

LR 5

Executive procedures

when the FSA is proposing/deciding to exercise or deciding to maintain, vary or revoke any of the powers in sections 87K or 87L in respect of an infringement of any applicable provision.

PR 5

Executive procedures

when the FSA is proposing/suspends trading in a financial instrument

DTR

Executive procedures

197(3)/ (6)/(7)(b)

when the FSA is exercising its power of intervention in respect of an incoming firm

Intervention against incoming firms

SUP 7

RDC / executive procedures (Note)

259(3)/(8)/(9) (b)

when the FSA is exercising its power to give or, on its own initiative, to vary a direction to the manager and trustee of an AUT

Collective investment schemes

RDC

268(3)/(7)(a) or (9)(a) (as a result of (8)(b)/(13))

when the FSA is proposing/deciding to give or, on its own initiative, to vary a direction to the operator of a recognised scheme

Collective investment schemes

RDC

282 (3)/(6)/(7)(b)

when the FSA is exercising its power to give a direction to an operator, trustee or depositary of a recognised scheme

Collective investment schemes

RDC

321(2)/(5)

when the FSA is exercising its power to impose a requirement on a former underwriting member of Lloyd's

None

RDC

OEIC Regulations reference

Description

Handbook reference

Decision maker

Regulation 27

when the FSA is exercising its power to give or, on its own initiative, to vary a direction to an ICVC and its depositary

Collective investment schemes

RDC

Note: The decision will be made by the RDC if it involves a fundamental change (see DEC 4.1.5 G) to the nature of a permission.

DEC 3 Annex 2

Statutory notice procedure: Supervisory notice procedure

01/12/2004

The FSA's decision making procedure for supervisory notices

21/11/2002

DEC 3 Annex 3

Specimen first supervisory notice

01/12/2004

This annex consists only of one or more forms or templates. Forms and templates are to be found through the 'Forms' link under Useful Links section at www.fsahandbook.info or on the Handbook CD-ROM.

21/11/2002

Export chapter as

Legal Instruments that change this Chapter Statutory notice procedure: Supervisory notice procedure

DEC 4

The decision maker

DEC 4.1

Allocation of decision making

01/12/2004

DEC 4.1.1

This section sets out the allocation of decision making between the RDC and executive procedures for decisions which:

(1) give rise to an obligation to give a statutory notice; or

(2) are associated with statutory notice decisions ("statutory notice associated decisions").

01/12/2004

DEC 4.1.2

Statutory notice associated decisions include decisions:

(1) to set or extend the period for making representations (see DEC 4.4);

(2) whether a copy of the statutory notice needs to be given to any third party and the period for the third party to make representations;

(3) to refuse access to FSA material; and

(4) as to the information it is appropriate to publish about the matter to which a final notice, or a supervisory notice which has already taken effect, relates.

01/12/2004

DEC 4.1.3

FSA staff responsible for preparing and recommending action in individual cases will allocate cases to the RDC (by full or modified procedures) or to executive procedures in accordance with DEC 4.1.4 G and DEC 4.1.6 G.

01/12/2004

Decisions to be taken by the RDC

DEC 4.1.4

The RDC has responsibility for statutory notice decisions and statutory notice associated decisions if the FSA proposes or takes any of the following actions:

(1) to impose a limitation or a requirement which was not applied for, or specify a narrower description of regulated activity than that applied for, on the grant of a Part IV permission;

(2) to restrict a Part IV permission on the FSA's own initiative (by removing a regulated activity, by imposing a limitation or requirement or by specifying a narrower description of regulated activity) in a way that would make a fundamental change (see DEC 4.1.5 G) to the nature of the Part IV permission held (whether indefinitely, or for a limited period);

(3) to refuse an application to vary a Part IV permission, or to restrict a Part IV permission on the grant of a variation (by imposing a limitation or requirement which was not applied for or by specifying a narrower description of regulated activity than that applied for), in a way that would make a fundamental change (see DEC 4.1.5 G) to the nature of the Part IV permission that would have been held had the application been granted in full (whether indefinitely, or for a limited period);

(4) to refuse an application for a Part IV permission, to refuse an application to cancel a Part IV permission or to cancel a Part IV permission on the FSA's own initiative;

(4A) to refuse an application for, or to revoke, a small e-money issuer certificate (see ELM 8 (Small e-money issuers));

(5) to refuse approved person status, or withdraw it under section 63 of the Act (Withdrawal of approval);

(6) to make a prohibition order in relation to any person, or refuse an application to vary or revoke such an order;

(7) to impose a requirement on an incoming firm with an effect equivalent to making a fundamental change (see DEC 4.1.5 G) to the nature of a permission, or to refuse an application to vary or rescind such a requirement;

(8) to exercise the FSA's powers to impose a financial penalty or public censure on any person, or to make a restitution order against any person;

(9) to exercise any power of the FSA relating to a regulated collective investment scheme, other than to:

(a) refuse an application for an authorisation order (but see (10)); or

(b) refuse an application for recognition of a collective investment scheme under section 270 (Schemes authorised in designated countries or territories) or 272 (Individually recognised overseas schemes) of the Act; or

(c) object to a notice of intention to invite persons to participate in a collective investment scheme constituted in another EEA State; or

(d) refuse approval of changes to an AUT or ICVC;

(10) to refuse an application for an authorisation order, if the applicant is not the operator of an existing AUT or ICVC;

(11) to impose a requirement on a former underwriting member of Lloyd's or refuse an application to vary or rescind such a requirement;

(12) to make an order disapplying the exemption in section 327(1) of the Act (Exemption from the general prohibition) in relation to a professional firm to the extent specified in the order, or refuse an application to vary or revoke such an order;

(13) to disqualify an auditor or actuary;

(14) to refuse to give a consent notice to a UK firm wishing to establish a branch under an EEA right;

(15) to give a direction under any of the following sections of the Building Societies Act 1986:

(a) section 36(3), (5), (6), (7) or (10) (power to direct restructuring of business or submission of resolutions for a transfer of society's business to a company when society is failing to comply with principal purpose or the lending or funding nature limits);

(b) section 42B(1) (power to direct transfers of engagements or business), other than a direction where the giving of the direction and its terms have been agreed with the society concerned;

(16) to issue a prohibition order under section 36A of the Building Societies Act 1986;

(17) to determine the appropriate Part IV permission for the successor society on an amalgamation:

(a) under section 93 of the Building Societies Act 1986 between building societies each of whom has a Part IV permission to accept deposits; or

(b) under section 85 of the Friendly Societies Act 1992 between friendly societies each of whom has a Part IV permission;

in a case where it has not been possible to agree the terms of the proposed permission with the successor society; and

(18) to give a direction under any of the following sections of the Friendly Societies Act 1992:

(a) sections 54 and 55 (power to direct a society to refrain from taking steps where certain activities have become disproportionate);

(b) section 90 (power to direct a transfer of engagements).

21/11/2002
Future version of DEC 4.1.4 after 14/01/2005

DEC 4.1.5

In DEC 4.1.4 G(2), (3) and (7), making a fundamental change to the nature of a permission means:

(1) removing a type of activity or investment from the firm's permission; or

(2) refusing an application to include a type of activity or investment; or

(3) restricting a firm from taking on new business, dealing with a particular category of client or handling client money by imposing a limitation or requirement, or refusing an application to vary or cancel such a limitation or requirement; or

(4) imposing or varying an assets requirement (as defined in section 48(3) of the Act (Prohibitions and restrictions)), or refusing an application to vary or cancel such a requirement.

01/12/2004
Future version of DEC 4.1.5 after 20/10/2005

Decisions to be taken by executive procedures

DEC 4.1.6

Statutory notice decisions and statutory noticeassociated decisions which are not taken by the RDC, will be taken under executive procedures.

01/12/2004

Examples of allocation of decision making

DEC 4.1.7

Examples of matters decided by the RDC include:

(1) refusing an application to vary a Part IV permission to carry on insurance business or to accept deposits for the first time; in these cases, the firm will normally have been required to complete parts of the application pack (SUP 6.4.14 G);

(2) refusing an application to vary a Part IV permission to carry on regulated activities with private customers for the first time;

(3) refusing an application to vary a Part IV permission to remove a requirement to enable the firm to hold or control client money for the first time; and

(4) varying a Part IV permission on the FSA's own initiative by removing a regulated activity from a firm's permission.

01/12/2004
Future version of DEC 4.1.7 after 20/10/2005

DEC 4.1.8

Examples of matters decided by executive procedures (where the FSA decides or is required to use the statutory powers in question rather than to achieve the action required in other ways, for example through individual guidance or securing the agreement of a firm to take action on a voluntary basis) include:

(1) imposing a requirement that a firm submit regular reports covering, for example, trading results, management accounts, customer complaints, connected party transactions (SUP 7.4.2 G (1)), or varying such a requirement, on the FSA's own initiative, or refusing an application by the firm to vary such a requirement;

(2) imposing a requirement that a firm submit a business plan (SUP 7.3.3 (3)), or varying such a requirement, on the FSA's own initiative, or refusing an application by the firm to vary such a requirement;

(3) setting prudential limits through a requirement, for example on large exposures, foreign currency exposures or liquidity gaps (SUP 7.3.3 (2)), or varying such a requirement, on the FSA's own initiative, or refusing an application by the firm to vary such a requirement;

(4) imposing a requirement that a firm maintain a particular amount or type of financial resources (SUP 7.3.3 (5)), or varying such a requirement, on the FSA's own initiative, or refusing an application by the firm to vary such a requirement;

(5) refusing an application to vary a Part IV permission, or to restrict a Part IV permission on the grant of a variation (by imposing a limitation or requirement which was not applied for, or by specifying a narrower description of regulated activity than that applied for), in a way that would not make a fundamental change (see DEC 4.1.5 G) to the nature of the Part IV permission that would have been held had the application been granted in full (indefinitely, or for a limited period);

(6) objecting to the acquisition or increase of control under section 186 of the Act (Objection to acquisition of control), objecting to existing control under section 187 of the Act (Objecting to existing control), or attaching conditions to an approval to a change in control under section 185 of the Act (Conditions attached to approval);and

(7) refusing a request for an authorisation order for an operator's proposed AUT or ICVC (if the operator is an operator of an existing AUT or ICVC), refusing approval of a scheme becoming a recognised scheme authorised in a designated territory under section 270 of the Act or refusing an application in respect of a proposed individually recognised overseas scheme under section 272 of the Act.

01/12/2004
Future version of DEC 4.1.8 after 01/01/2005

DEC 4.2

The Regulatory Decisions Committee

01/12/2004

DEC 4.2.1

The Regulatory Decisions Committee (RDC) is appointed by the FSA Board to exercise certain regulatory powers on behalf of the FSA Board. The RDC is accountable to the FSA Board for its decisions.

01/12/2004

DEC 4.2.2

The RDC comprises a Chairman, one or more Deputy Chairmen, and other members.

01/12/2004

DEC 4.2.3

The RDC is a body outside the FSA's management structure. Apart from the Chairman, none of the members of the RDC is an FSA employee. The members represent the public interest and comprise:

(1) current and recently retired practitioners with financial services industry skills and knowledge; and

(2) non-practitioners.

21/11/2002

DEC 4.2.4

The RDC is supported by the RDCSecretariat. The RDCSecretariat is separate from FSA staff involved in making recommendations to the RDC.

01/12/2004
Future version of DEC 4.2.4 after 20/10/2005

Appointment and removal of members of the RDC

DEC 4.2.5

The Chairman of the RDC is appointed by the FSA Board on the recommendation of an independent group established by the Board for that purpose. A non-executive member of the FSA Board chairs the independent group. The FSA Board also appoints all other members of the RDC, including its Deputy Chairman or Deputy Chairmen, on the recommendation of the Chairman of the RDC.

01/12/2004

DEC 4.2.6

All members of the RDC are appointed for fixed periods.

01/12/2004

DEC 4.2.7

The FSA Board may remove a member of the RDC but only in the event of that member's misconduct or incapacity.

01/12/2004

Constitution and procedure of the RDC

DEC 4.2.8

The RDC will meet as a full committee or in panels. Except in an urgent supervisory notice case, where the Chairman or a Deputy Chairman and, where possible, any one other member of the RDC will make a decision (see DEC 4.5.7 G (2)), each meeting of the RDC will include:

(1) its Chairman or a Deputy Chairman (who will chair the meeting); and

(2) at least two other members.

01/12/2004

DEC 4.2.9

However, the composition and size of panels of the RDC, and the frequency of their meetings, may vary depending on the nature of the particular matter under consideration.

01/12/2004

DEC 4.2.10

(1) If a member of the RDC has a potential conflict of interest in any matter before the RDC he will disclose the conflict to the Chairman of the RDC (or if he is the Chairman of the RDC, to the Chairman or Deputy Chairman of the FSA). He will also disclose the conflict to the RDCSecretariat.

(2) If the Chairman of the RDC (or where appropriate the Chairman or Deputy Chairman of the FSA) considers it reasonable and appropriate, he will require the member of the RDC to stand down from consideration of that particular matter. The Chairman of the RDC (or Chairman or Deputy Chairman of the FSA) may ask another member of the RDC to assist him in considering the potential conflict.

01/12/2004
Future version of DEC 4.2.10 after 20/10/2005

DEC 4.2.11

The RDCSecretariat will record and document all disclosures of potential conflicts of interest and the steps taken to manage them.

01/12/2004
Future version of DEC 4.2.11 after 20/10/2005

DEC 4.2.12

The meetings of the RDC will be in private, and will be conducted in the manner the RDC considers suitable in order to enable it to determine fairly the matters which it is required to consider.

01/12/2004

DEC 4.2.13

Each member of the RDC present is entitled to vote on the matter under consideration. The Chairman of the meeting of the RDC will have a vote as a member of the RDC and will have the casting vote in a tie.

01/12/2004

DEC 4.2.14

The RDC may require FSA staff to attend its meetings.

01/12/2004

Consideration of previous breaches

DEC 4.2.15

FSA staff are entitled to put to the RDC the previous disciplinary record of a person, including any previous breach of the Act, the Principles, or other rules (including the record prior to the Act). FSA staff may also draw to the RDC's attention the compliance history of a person, including that under previous legislation.

01/12/2004

DEC 4.2.16

The RDC may not consider any of the matters in DEC 4.2.15 G for the purpose of proving a later breach. The matters in DEC 4.2.15 G may be considered when determining whether to take action or, where appropriate, as one of the factors described in ENF 13.3.3 G, in determining the level of the financial penalty.

01/12/2004

Administrative procedure for representations

DEC 4.2.17

Representations to the RDC are received in accordance with DEC 4.4.

01/12/2004

DEC 4.2.18

The FSA will fix a date or dates for a meeting to consider the representations and to decide:

(1) whether to take the action proposed;

(2) if the action has been taken, whether to rescind the action; and

(3) in either case, whether to take the action in a different way.

01/12/2004
Future version of DEC 4.2.18 after 20/10/2005

DEC 4.2.19

The RDCSecretariat will ensure that a record is kept of:

(1) who took the decision;

(2) the representations made to the RDC;

(3) the material considered by the RDC;

(4) the nature of the decision;

(5) the reasons for the decision; and

(6) the dates on which the decision was taken and then communicated by the FSA to the person concerned.

01/12/2004
Future version of DEC 4.2.19 after 20/10/2005

DEC 4.3

Executive procedure for statutory notice decisions and statutory notice associated decisions

01/12/2004

Who makes the decision?

DEC 4.3.1

All statutory notice decisions (and statutory notice associated decisions) under executive procedures are made under authority delegated by the FSA Board. The FSA's senior executive committee may from time to time determine that particular categories of statutory notice decision (and statutory notice associated decisions) which may be made by executive procedures will be made by a senior staff committee. Alternatively, a senior staff committee may take such decisions if referred to it by FSA staff (see DEC 4.3.7 G (2)). Otherwise, such decisions will be made by an individual FSA staff member.

01/12/2004

Separation of functions

DEC 4.3.2

Section 395(2) of the Act (The FSA's procedures) requires that the FSA's procedure for the giving of statutory notices must be designed to secure that "the decision which gives rise to the obligation to give any such notice is taken by a person not directly involved in establishing the evidence on which that decision is based".

01/12/2004

DEC 4.3.3

In accordance with section 395(2) of the Act,statutory notice decisions taken under executive procedures will not be taken by staff directly involved in establishing the evidence on which that decision is based, except in accordance with section 395(3) of the Act (see DEC 4.3.17 G to DEC 4.3.19 G).

01/12/2004

Decision making by an individual FSA staff member

DEC 4.3.4

If an individual FSA staff member makes a statutory notice decision (or statutory noticeassociated decision) the decision will be:

(1) made by an executive director of the FSA Board, or his delegate (who will be of at least the level of associate);

(2) on the recommendation of an FSA staff member of at least the level of associate; and

(3) with the benefit of legal advice from an FSA staff member of at least the level of associate.

01/12/2004

DEC 4.3.5

The individual who takes a decision under executive procedures is accountable to the FSA Board directly (if an executive director) or otherwise through line management responsible for the decision concerned.

01/12/2004

DEC 4.3.6

An FSA staff member who considers that a statutory notice decision (or statutory noticeassociated decision) should be taken above his own level is free to refer that decision to a more senior level. If an FSA staff member consults another staff member about a decision, the decision remains the independent decision of the FSA staff member who consults his colleague, unless it is agreed that the decision should instead be taken by the colleague, and the colleague has the delegated authority to do so.

01/12/2004

DEC 4.3.7

If an individual responsible for a decision by executive procedures (or a more senior FSA staff member with responsibilities in relation to the decision concerned) considers that it warrants collective consideration, the individual may:

(1) take the decision himself, following consultation with other FSA staff members, as above; or

(2) refer it to a senior staff committee, which will take the decision itself.

01/12/2004

Decision making by a senior staff committee

DEC 4.3.8

A senior staff committee, other than the FSA's senior executive committee, will consist of such FSA staff members as the FSA's senior executive committee, may from time to time determine. The FSA's senior executive committee may authorise the chairman of a senior staff committee to select its other members.

21/11/2002

DEC 4.3.9

A senior staff committee, other than the FSA's senior executive committee, is accountable for its decisions to the FSA's senior executive committee, and through it, to the FSA Board. The FSA's senior executive committee is accountable for its decisions to the FSA Board.

18/10/2001

DEC 4.3.10

A senior staff committee may operate through standing or specific sub-committees to consider particular decisions or classes of decision, for which accountability will lie through the committee. Each meeting of a senior staff committee, or sub-committee, will include:

(1) an individual with authority to act as its chairman; and

(2) at least two other members.

01/12/2004

DEC 4.3.11

A senior staff committee will operate on the basis of a recommendation from an FSA staff member of at least the level of associate, and with the benefit of legal advice from an FSA staff member of at least the level of associate.

01/12/2004

DEC 4.3.12

If FSA staff recommend action be taken and they consider that the decision falls within the responsibility of a senior staff committee (or sub-committee):

(1) in general, but subject to the need to act swiftly in urgent cases, the FSA staff's recommendation will go before the senior staff committee (or sub-committee);

(2) in an urgent case, if, in FSA staff's opinion, the action proposed should occur before it is practicable to convene a meeting of the senior staff committee (or sub-committee), the FSA staff's recommendation may be considered by the senior staff committee's chairman or a deputy chairman and, where possible, but subject to the need to act swiftly, one other member of the senior staff committee;

(3) in an exceptionally urgent case, if in the FSA staff's opinion:

(a) the action should be taken before a recommendation to the chairman or a deputy chairman of the senior staff committee could be made; and

(b) an urgent decision on the proposed action is necessary to protect the interests of consumers;

the FSA staff's recommendation will be considered and the decision made by a member of the FSA's executive of at least director of division level.

01/12/2004

General

DEC 4.3.13

A statutory notice given under executive procedures will identify the decision maker. A decision to give a decision notice or second supervisory notice will normally be made by the same decision maker (that is, the individual or committee) who made the decision to give the warning notice or first supervisory notice.

01/12/2004
Future version of DEC 4.3.13 after 20/10/2005

DEC 4.3.14

If a firm wishes to make representations in response to a warning notice or first supervisory notice, those representations will be received in accordance with DEC 4.4.

01/12/2004

DEC 4.3.15

The decision maker will ensure that a record is kept of:

(1) who took the decision;

(2) any representations to the decision maker;

(3) the material considered by the decision maker;

(4) the nature of the decision;

(5) the reasons for the decision; and

(6) the dates on which the decision was taken and then communicated to the person or persons concerned.

01/12/2004

DEC 4.3.16

FSA staff are required by their contract of employment to comply with a code of conduct which imposes strict rules to cover the handling of conflicts of interest which may arise from personal interests or associations. FSA staff who are subject to a conflict of interest must declare that interest to the person to whom they are immediately responsible for the decision. In the case of decisions by a senior staff committee, any conflict of interest must be declared to the chairman of the committee (or, if the person with the conflict is the chairman, to any member of the FSA's senior executive committee or, if the person with the conflict is the chairman of the FSA's senior executive committee, to the Deputy Chairman of the FSA. He will also disclose the conflict to the secretariat to the senior staff committee (or FSA's senior executive committee)). The individual to whom the conflict of interest is declared may ask another person to assist him in considering the potential conflict, and will decide whether that conflict precludes the involvement of the FSA staff member in making a decision.

21/11/2002

DEC 4.3.16A

The secretariat to the senior staff committee, or to the FSA's senior executive committee, or to the FSA Board, as appropriate, will record and document all disclosures of potential conflicts of interest and the steps taken to manage them.

21/11/2002

Section 395(3) decisions

DEC 4.3.17

Under section 395(3) of the Act, the FSA's procedure may permit a decision which gives rise to an obligation to give a supervisory notice to be taken by a person involved in establishing the evidence on which the decision is based if:

(1) the FSA considers that, in a particular case, it is necessary in order to protect the interests of consumers; and

(2) the person taking the decision is of a level of seniority laid down by the procedure.

01/12/2004

DEC 4.3.18

The FSA expects to exercise the power provided by section 395(3) only in exceptional cases. This means cases in which the FSA believes action is needed to protect the interests of consumers in the face of a material threat to those interests, but in which the requirements for separation cannot be met: for example where the notice needs to take immediate effect in order to protect the interests of consumers.

01/12/2004

DEC 4.3.19

The level of individual who may make such a decision is a member of the FSA's executive of at least director of division level or a member of a committee which reports directly to the FSA's senior executive committee.

01/12/2004

DEC 4.4

Representations

01/12/2004

DEC 4.4.1

(1) Any warning notice or first supervisory notice will contain a statement that the person concerned will have a certain amount of time in which to make representations to the decision maker. In the case of a first supervisory notice the person concerned may make representations whether or not the matter to which the notice relates has been referred to the Tribunal.

(2) If a second supervisory notice is given where the decision maker has decided to take action different from that which was proposed in the first supervisory notice, the second supervisory notice will provide a similar statement about the right to make representations.

01/12/2004

DEC 4.4.2

In the case of a warning notice, section 387(2) of the Act requires that the warning notice must specify a reasonable period for the making of representations. This must be at least 28 days. The Act does not specify a minimum period that the FSA must give for making representations for supervisory notices.

01/12/2004

DEC 4.4.3

In deciding on the period to make representations, the decision maker will have regard to the circumstances of each case, including the nature of the proposed action and its likely effect on the person concerned. The decision maker will have particular regard to the risk to the FSA's regulatory objectives of any delay in imposing proposed action. The period for representations will normally be 28 days from the date when the person receives the notice, subject to his right to seek an extension of time.

01/12/2004

Request for an extension of time

DEC 4.4.4

(1) After receiving the warning notice or first supervisory notice, if the person concerned considers that its stated period for representations is too short, then he may, within 14 days of receiving the notice, request the FSA in writing for more time. In the case of a warning notice, this may be appropriate, for example, if a person has entered or wishes to enter into settlement discussions with FSA staff.

(2) In accordance with section 387(3) of the Act and other relevant sections of the Act, the decision maker may extend the period of time for representations specified in the warning notice or supervisory notice.

01/12/2004

DEC 4.4.5

Requests for an extension of time will be considered by the decision maker who will notify the recipient of the notice promptly whether the request has been accepted or not.

01/12/2004

Written representations

DEC 4.4.6

Any written representations should be sent to the FSA at the address stated in the warning notice or supervisory notice.

01/12/2004

Oral representations

DEC 4.4.7

If he so chooses, a person who receives a warning notice or first supervisory notice may make oral representations to the decision maker and attend a meeting for that purpose.

01/12/2004

DEC 4.4.8

If the person wishes to make oral representations, he should send a written notification of this to the FSA at the address stated in the warning notice or supervisory notice. The notification should be made at least five business days before the end of the period for representations specified in the notice. The notification should specify the matters on which the person wishes to make oral representations, include an estimate of how much time the person expects the representations to take, and provide the names of any representatives appointed to attend the meeting at which the representations will be made. If after notifying the FSA of his intention to make oral representations, the person chooses not to make those representations, the decision maker will nevertheless decide the matter.

18/10/2001

DEC 4.4.9

A person may appoint a representative of his choice (who may be legally qualified) to attend the meeting at which oral representations will be made. The representative may make or assist in making the representations.

01/12/2004

DEC 4.4.10

The decision maker will specify a time as soon as is reasonably possible after receiving the notification for receiving the oral representations. The decision maker may specify the place where he will receive the representations and may specify that the representations will be received in private. The decision maker may limit the type, length and content of any representations. The decision maker may ask the person or his representative at the meeting to clarify any issue arising out of the representations and may require the person, and any representatives, to leave the meeting after they have made their representations.

01/12/2004

DEC 4.4.11

DEC 4.4.13 G and DEC 4.4.14 G explain the procedure where no representations are received or made.

01/12/2004

Third parties

DEC 4.4.12

DEC 4.4 applies also to a third party who has received a copy of a warning notice, in relation to those matters affecting the third party.

01/12/2004

Default procedures

DEC 4.4.13

If the FSA receives no response or representations within the period specified in a warning notice, the decision maker may regard as undisputed the allegations or matters in the warning notice. In such cases, a decision notice will be given accordingly. A person who has received a decision notice and has not previously made any response or representations to the FSA, may, nevertheless, refer the FSA's decision to the Tribunal as described in DEC 5.1.

21/11/2002

DEC 4.4.13A

If the FSA receives no response or representations within the period specified in a first supervisory notice, the FSA will not give a second supervisory notice. The outcome depends on when the action took or takes effect (as stated in the notice). If the action:

(1) took effect immediately, or on a specified date which has already passed, it continues to have effect (subject to any decision on a referral to the Tribunal); or

(2) was to take effect on a specified date which is still in the future, it takes effect on that date (subject to any decision on a referral to the Tribunal); or

(3) was to take effect when the matter was no longer open for review, it takes effect when the period to make representations (or the period for referral to the Tribunal, if longer) expires, unless the matter has been referred to the Tribunal.

21/11/2002

DEC 4.4.14

In exceptional cases, the decision maker may permit representations from a person who has received a decision notice (or a second supervisory notice) given in accordance with DEC 2.3 (or DEC 3.1.8 G to DEC 3.1.10 G) (or against whom action, detailed in a first supervisory notice, has taken effect as described in DEC 4.4.13A G), and shows on reasonable grounds that he did not receive the warning notice (or first supervisory notice), or that he had reasonable grounds for not responding within the specified period. In these circumstances, the decision maker may decide to give a notice of discontinuance (DEC 2.3.8 G to DEC 2.3.9 G) or a further decision notice (or a written notice or a supervisory notice).

21/11/2002

DEC 4.5

Delegation of RDC decisions and modified RDC procedures

01/12/2004

DEC 4.5.1

The making of the following types of statutory notice decisions and statutory notice associated decisions falling within DEC 4.1.4 G (Decisions to be taken by the RDC) will be discharged, on behalf of the RDC, by the Chairman of the RDC or FSA staff, so that they will be made by modified rather than full RDC procedure:

(1) in relation to warning notices and decision notices:

(a) those relating to financial penalties for late submission of reports (see DEC 4.5.2 G to DEC 4.5.6 G);

(b) those relating to the revocation of recognition of section 270 or 272 recognised schemes, where there is a common understanding between the scheme management and the FSA about the need for revocation (see DEC 4.5.14 G to DEC 4.5.15 G);

(2) in relation to supervisory notices:

(a) those involved in taking urgent action by supervisory notice (see DEC 4.5.7 G and DEC 4.5.8 G);

(b) those relating to the use of the FSA's own-initiative power and other cases involving the imposition of requirements, where there is a common understanding between the FSA and the person concerned about the need for the action (see DEC 4.5.9 G to DEC 4.5.13 G).

01/12/2004

Financial penalties for late submission of reports

DEC 4.5.2

When the FSA decides whether to impose a financial penalty on a firm for the late submission of a report (regardless of the period of delay), FSA staff will report on the late submission to at least one other member of staff who is:

(1) at a level senior to that of the member of staff who reports on the late submission and on the reasons for it; and

(2) not directly involved in the day-to-day supervision of the firm concerned, or in establishing the evidence on which the decision is based.

11/04/2002

DEC 4.5.3

FSA staff at the appropriate level of seniority will consider the report about the late submission. They will then decide whether a financial penalty is appropriate and, if so, its amount. If they decide a penalty is appropriate, the FSA will give a warning notice.

01/12/2004

DEC 4.5.4

If the firm makes representations in relation to the penalty stated in the warning notice, the matter will be referred to the Chairman or Deputy Chairman of the RDC. The Chairman or Deputy Chairman of the RDC will decide whether to confirm the penalty stated in the warning notice or that the penalty should be of a different amount and, if so, give a decision notice.

01/12/2004

DEC 4.5.5

If the firm makes no representations, by the time a decision is to be made about the giving of a decision notice, then the decision maker may regard the matters in the warning notice as undisputed. A decision notice will be given accordingly.

21/11/2002

DEC 4.5.6

If the firm objects to the decision notice, it may refer the matter to the Tribunal. The right to refer a matter to the Tribunal is outlined in DEC 5.1.

01/12/2004

Supervisory notices: urgent cases

DEC 4.5.7

If FSA staff recommend action be taken and they consider that the decision is the RDC's responsibility:

(1) in general, but subject to the need to act swiftly in urgent cases, the FSA staff's recommendation will go before an RDC panel;

(2) in an urgent case, if, in FSA staff's opinion, the action proposed should occur before it is practicable to convene an RDC panel, the FSA staff's recommendation will be considered by the RDC's Chairman or a Deputy Chairman of the RDC and, where possible, but subject to the need to act swiftly, one other RDC member;

(3) in an exceptionally urgent case, where in the FSA's opinion:

(a) the action should be taken before a recommendation to the Chairman or a Deputy Chairman of the RDC can be made; and

(b) an urgent decision on the proposed action is necessary to protect the interests of consumers;

the FSA staff's recommendation will be considered by a member of the FSA's executive of at least director of division level. In these circumstances, the FSA will ensure as far as possible that the executive making the decision was not involved in establishing the evidence on which the decision is based.

18/10/2001

DEC 4.5.8

If the executive making the decision has been involved in establishing the evidence on which the decision is based, and a notice is given on the grounds of urgency, this will be in accordance with DEC 4.3.17 G to DEC 4.3.19 G.

01/12/2004

Supervisory notices: non-urgent cases

DEC 4.5.9

In certain other cases, including cases relating to collective investment schemes (see DEC 4.5.14 G to DEC 4.5.15 G), FSA staff may be in a position to inform the person concerned of their concerns, and of the action they are considering, before they begin to exercise supervisory notice procedures. If the person concerned consents to the action at that stage, FSA staff may decide to use the modified decision making procedure in DEC 4.5.10 G to DEC 4.5.13 G.

01/12/2004

DEC 4.5.10

FSA staff will make recommendations for action to at least one other member of staff who is:

(1) at an appropriate level of seniority; and

(2) not directly involved in the supervision of the person concerned, or in establishing the evidence on which the decision is based.

01/12/2004

DEC 4.5.11

FSA staff at the appropriate level of seniority will consider the recommendations. If they are satisfied that the person concerned agrees to the recommended action, they will consider whether the FSA should give a first supervisory notice (see DEC 3.1.3 G to DEC 3.1.7 G).

01/12/2004

DEC 4.5.12

If FSA staff decide to give the first supervisory notice and the person concerned accepts its terms, the FSA will then consider whether to give a second supervisory notice (see DEC 3.1.8 G to DEC 3.1.10 G) confirming the decision.

01/12/2004

DEC 4.5.13

The FSA will only give the second supervisory notice when it is satisfied that the person concerned accepts the terms of the first supervisory notice, and the circumstances of the case have not materially changed since that notice was given. If FSA staff are not satisfied, or circumstances of the case have changed, they will refer the possible giving of a second supervisory notice to the RDC. In such cases the RDC will follow the process in DEC 3.1.8G to DEC 3.1.10G.

01/12/2004

Modified procedures in collective investment scheme cases

DEC 4.5.14

In DEC 4.5.15 G, the term "scheme management" refers:

(1) in relation to an AUT, to the manager and trustee;

(2) in relation to an ICVC, to the directors and the depositary;

(3) in relation to a recognised scheme, to the operator, and (if any) the trustee or depositary.

01/12/2004

DEC 4.5.15

In certain cases where it is proposing to exercise its powers under section 257 (Directions), 279 (Revocation of recognition) or 281 (Directions) of the Act or under regulation 23 or 25 of the OEIC regulations, the FSA may be in a position to inform the scheme management of its concerns, and of the action it is considering, before it exercises those powers. Alternatively, the scheme management may request the FSA to exercise one of the powers. For example, the manager and the trustee of an AUT may ask the FSA to give a direction under section 257(2)(a) for the suspension of the issue and redemption of units because of a temporary problem in valuing the property subject to the scheme. If there is a common understanding between the FSA and all the members of the scheme management about the need for the exercise of the power in question at that stage (that is, before the FSA begins to exercise the statutory procedures), the FSA may:

(1) in the case of the exercise of its powers under sections 257 or 281 or under regulation 25, decide to use the modified decision making procedure for non-urgent supervisory notices in DEC 4.5.9 G to DEC 4.5.13 G; or
(2) in the case of the exercise of its powers under section 279 or regulation 23, decide to use a modified decision making procedure under which the matter will be delegated to FSA staff of an appropriate level of seniority. The procedure will be as set out in DEC 4.5.9 G to DEC 4.5.13 G but adapted to be appropriate for a case involving a warning notice and decision notice.

01/12/2004

DEC 4.6

Decisions to apply to the civil courts and to prosecute criminal offences

01/12/2004

DEC 4.6.1

A decision to begin, or discontinue, proceedings using the powers listed in DEC 1.1.3 G will be made by the RDC Chairman or, in an urgent case and if the Chairman is not available, by an RDC Deputy Chairman and where possible, but subject to the need to act swiftly, one other RDC member.

01/12/2004

DEC 4.6.2

In an exceptionally urgent case the matter will be decided by the director of Enforcement or, in his absence, another member of the FSA's executive of at least director of division level. An exceptionally urgent case in these circumstances is one where FSA staff believe that a decision to begin proceedings using the powers in DEC 1.1.3 G:

(1) should be taken before it is possible to follow the procedure described in DEC 4.6.1 G; and

(2) is necessary to protect the interests of consumers or potential consumers.

01/12/2004

DEC 4.6.2A

Decisions to prosecute for criminal offences under the legislation listed in DEC 1.1.4 G may be taken by the procedure described in DEC 4.6.1 G and DEC 4.6.2 G, or alternatively may be taken under executive procedures.

21/11/2002

DEC 4.6.2B

In determining which procedure should be followed in deciding to prosecute for an offence under the legislation listed in DEC 1.1.4 G, the FSA will have regard to the seriousness of the offence involved, the size and profile of the defendant and the complexity of the issues. The less serious the offence and the less complex the issues, the more likely the decision to prosecute will be taken under executive procedures.

21/11/2002

DEC 4.6.3

Decisions to bring proceedings using the powers in DEC 1.1.3 G do not involve any of the procedures relating to the giving of statutory notices including the procedures described in DEC 4.4 relating to representations. Further details about the FSA's policy and procedures in the use of the powers to apply to the civil courts for injunctions, restitution orders, insolvency orders, collective investment scheme related orders and the powers to prosecute criminal offences are contained in ENF 6 (Injunctions), ENF 9 (Restitution and redress), ENF 10 (Insolvency proceedings and orders against debt avoidance), ENF 16 (Collective investment schemes) and ENF 15 (Prosecution of criminal offences) respectively.

01/12/2004

Export chapter as

Legal Instruments that change this Chapter The decision maker

DEC 5

References to the Tribunal, publication and service of notices

DEC 5.1

The Tribunal

01/12/2004

DEC 5.1.1

(1) A person who receives a decision notice or supervisory notice (including a third party who has been given a copy of a decision notice) has the right to refer the FSA's decision to the Tribunal.

(2) The Tribunal is established under Part IX of the Act (Hearings and Appeals) and is governed by Part IX and Schedule 13 to the Act (The Financial Services and Markets Tribunal). The Tribunal is independent of the FSA and appointed by the Lord Chancellor's Department in accordance with the Financial Services and Markets Tribunal Rules 2001 ("the Tribunal rules").

01/12/2004

DEC 5.1.2

Under section 133(1) of the Act (Proceedings: general provisions), any reference to the Tribunal must be made within 28 days of the date on which the decision notice or supervisory notice is given, or within any period prescribed by the Tribunal rules. Under section 133(2) of the Act, the Tribunal rules may allow a reference to be made after the end of the 28 day period.

01/12/2004

DEC 5.1.3

A reference to the Tribunal will be a full rehearing of the matter that gave rise to the decision referred to the Tribunal. On a reference the Tribunal:

(1) must determine what (if any) is the appropriate action for the FSA to take in relation to the matter referred (section 133(4)); and

(2) may consider any evidence relating to the subject matter of the reference, whether or not it was available to the FSA at the time the FSA took its decision.

01/12/2004

DEC 5.1.4

In determining a reference:

(1) made as a result of a decision notice, the Tribunal may not (section 133(6)) direct the FSA to take action which the FSA would not, as a result of section 388(2) of the Act (Decision notices), have had the power to take when giving the decision notice;

(2) made as a result of a supervisory notice, the Tribunal may not (section 133(7)) direct the FSA to take action which would otherwise have required the giving of a decision notice.

01/12/2004

DEC 5.1.5

On determining a reference, the Tribunal:

(1) must (section 133(5)) remit the matter to the FSA with such directions (if any) as the Tribunal considers appropriate for giving effect to its determination; and

(2) may make recommendations as to the FSA's regulating provisions or its procedures.

01/12/2004

DEC 5.1.6

Under section 133(9) of the Act, the FSA must not take any action specified in a decision notice during the period within which a reference may be made to the Tribunal. Nor may it take such action, if the matter is referred, until the reference, and any appeal against the Tribunal's decision, has been finally disposed of.

01/12/2004

DEC 5.1.7

The FSA is required to act in accordance with the determination of, and any direction given by, the Tribunal and an order of the Tribunal will be enforceable as if it were an order of the county court or, in Scotland, as if it were an order of the Court of Session.

01/12/2004

DEC 5.2

Publication

01/12/2004

Publication of final notices and effective supervisory notices

DEC 5.2.1

Section 391(4) and (5) of the Act (Publication) provides that the FSA must publish such information about the matter to which a final notice, or supervisory notice that has taken effect, relates, as it considers appropriate. See also DEC 5.2.3 G.

01/12/2004

Publication of notices of discontinuance

DEC 5.2.2

If the FSA has given a notice of discontinuance, the FSA may, if the person to whom the notice is given consents, publish such information as it considers appropriate about the matter to which the discontinued proceedings related (section 391(2) of the Act). Similarly, section 391(3) of the Act indicates that where a notice of discontinuance has been copied to a person, the FSA may, if the person to whom the notice is copied consents, publish such information as it considers appropriate about the matter to which the discontinued proceedings related, so far as relevant to that person. See also DEC 5.2.3 G.

01/12/2004

No publication if unfair or prejudicial

DEC 5.2.3

Section 391(6) of the Act provides that the FSA may not publish information relating to a final notice, supervisory notice that has taken effect or notice of discontinuance if publication would, in the FSA's opinion, be unfair to the person with respect to whom the action was taken or prejudicial to the interests of consumers.

01/12/2004

Warning and decision notices: no publication

DEC 5.2.4

Section 391(1) of the Act provides that neither the FSA nor any other person to whom a warning notice or decision notice is given or copied may publish the notice or any details concerning it.

01/12/2004

Manner of publication

DEC 5.2.5

Section 391(7) of the Act provides that information which is published may be published in such a manner as the FSA considers appropriate. The FSA will consider the particular circumstances of each case in deciding what manner of publication will be appropriate.

01/12/2004

DEC 5.3

Service of notices by the FSA

01/12/2004

Service of Notices Regulations

DEC 5.3.1

The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (SI 2001/1420) govern service of statutory notices and other notices and documents which must be served by the FSA under the Act.

01/12/2004

Methods of service by the FSA and deemed receipt

DEC 5.3.2

The methods by which the FSA may give a notice under the Regulations and the day on which it is deemed to be received, are set out DEC 5.3.3 G.

01/12/2004

DEC 5.3.3

Methods of service of notices by the FSA

Method

Deemed day of receipt

(1) delivery of the notice to the recipient

not applicable: it is received when delivered

(2) leaving the notice at the recipient's proper address (as defined in the Regulations)

the business day after it is left at that address

(3) posting the notice to that address

if the notice is posted to an address in the United Kingdom, the second business day after posting

if the notice is posted to an address in any EEA State (other than the United Kingdom), the fifth business day after posting

(4) transmitting the notice by fax if the recipient has indicated in writing that he is willing to receive the notice by such means and a follow-up copy is sent by another method by the end of the following business day

the business day after the day on which the document is transmitted

(5) transmitting the notice by any other electronic means of communication, if the recipient has indicated in writing that he is willing to receive the notice by such means

the business day after the day on which the document is transmitted

01/12/2004

DEC 5.3.4

The Regulations also make provision for the service of notices on:

(1) the recipient's nominee;

(2) if the recipient is an appointed representative, on his principal; and

(3) if the recipient is not an individual, to particular persons on its behalf.

01/12/2004

Meaning of "business day"

DEC 5.3.5

In the Regulations and DEC 5.3.3 G, "business day" means any day except Saturday, Sunday or a bank holiday, where "bank holiday" includes Christmas Day and Good Friday.

01/12/2004

Export chapter as

Legal Instruments that change this Chapter References to the Tribunal, publication and service of notices

DEC App 1

Settlement procedure and mediation scheme
for FSA enforcement cases

DEC App 1.1

Introduction

01/12/2004

DEC App 1.1.1

A person who is or may be subject to enforcement action may discuss the proposed action with FSA staff through settlement discussions. Settlement discussions may take place on an informal basis at any time during the enforcement process. Where FSA staff have recommended that enforcement action be taken against a person, the mediation scheme will be available to those persons against whom action is proposed where settlement discussions are, in the opinion of either party, unlikely to lead to an agreed settlement. This appendix sets out the procedure for settlement and the framework of the mediation scheme.

01/12/2004
Future version of DEC App 1.1.1 after 20/10/2005

DEC App 1.2

Settlement

01/12/2004

DEC App 1.2.1

If a person who is or may be subject to enforcement action wishes to discuss the proposed action with FSA staff on an informal basis, he may do so at any time during the enforcement process. The FSA and the person concerned should agree that discussions will take place on a "without prejudice" basis, and that neither party may subsequently rely on admissions or statements made in the context of the discussions, or documents recording the discussions.

01/12/2004
Future version of DEC App 1.2.1 after 20/10/2005

DEC App 1.2.2

The terms of any proposed settlement will:

(1) be put in writing and be agreed by FSA staff and the person concerned;

(2) include a statement of the facts and any breaches admitted by the person concerned and the proposed action to be taken; and

(3) be considered by the RDC.

01/12/2004
Future version of DEC App 1.2.2 after 20/10/2005

DEC App 1.2.3

Having considered the terms of the proposed settlement, the RDC may ask to meet the relevant FSA staff or the person concerned in order to assist in its consideration of the proposed settlement. The RDC may:

(1) accept the proposed settlement by issuing a decision notice, second supervisory notice or (where appropriate) notice of discontinuance based on the terms of the settlement; or

(2) decline the proposed settlement;

whether or not the RDC has met with the relevant FSA staff or the person concerned.

01/12/2004
Future version of DEC App 1.2.3 after 20/10/2005

DEC App 1.2.4

Where the RDC declines the proposed settlement, it may invite FSA staff and the person concerned to enter into further discussions to try to achieve a settlement. The RDC may extend the period for representations (if they have not already done so), or, if representations have already been made, the RDC will proceed to give a decisions notice.

01/12/2004
Future version of DEC App 1.2.4 after 20/10/2005

DEC App 1.2.5

If it is not possible to reach an agreed proposed settlement of the case by informal discussions, the person concerned may elect to submit the case to mediation.

01/12/2004

DEC App 1.3

Mediation

01/12/2004

DEC App 1.3.1

Mediation is a confidential without prejudice dispute resolution process in which a neutral mediator assists the parties in trying to settle their differences. The mediator is not a judge or arbitrator and has no power to bind the parties, but rather operates as a facilitator of the discussions.

01/12/2004

DEC App 1.3.2

As mediation will be on a "without prejudice" basis, admissions made by the parties in the course of the mediation and documents prepared for the purposes of the mediation may not be referred to in subsequent proceedings relating to the dispute if the mediation is unsuccessful. However, if the mediation results in a proposed settlement of the dispute which is approved by the RDC , the terms of the proposed settlement will form the basis of a decision notice, and subsequent final notice, or second supervisory notice or (where appropriate) notice of discontinuance, given by the FSA.

01/12/2004
Future version of DEC App 1.3.2 after 20/10/2005

DEC App 1.3.3

Following the issue of a warning notice the person will have access to certain material on which the FSA has relied in deciding to commence disciplinary proceedings (see DEC 2.4.2 G). The period following the issue of the warning notice is therefore a natural point for informal settlement discussions to take place in an attempt to resolve the matter. Mediation is intended to supplement those discussions where the parties consider that the involvement of a neutral mediator is required to facilitate furtherprogress.

01/12/2004
Future version of DEC App 1.3.3 after 20/10/2005

DEC App 1.4

Scope and availability of the mediation scheme

01/12/2004

DEC App 1.4.1

Mediation will not be available in enforcement cases where the FSA is contemplating bringing a criminal prosecution or cases involving disciplinary action for late submission of a report to which ENF 13.5(Financial penalties for late submission of reports) applies.

01/12/2004

DEC App 1.4.2

Mediation will be available in all other enforcement cases falling within the scope of the RDC. In those cases involving allegations of unfitness and impropriety based on judgements about dishonesty or lack of integrity and the exercise of the FSA's own-initiative powers on a variation or cancellation of permission, mediation will be available subject to the FSA's consent.

01/12/2004

DEC App 1.4.3

In a case falling within the scope of the scheme, (see DEC App 1.4.1 G and DEC App 1.4.2 G), mediation will take place where an election to mediate is made after the warning notice has been issued and before the FSA issues a decision notice (the relevant warning notice will state the circumstances in which mediation is available for that matter under the terms of the scheme). Where an election to mediate is made before the issue of a warning notice or after the issue of a decision notice, mediation will be available subject to the FSA's consent.

01/12/2004

DEC App 1.4.4

A person is not obliged to take part in a mediation in the course of the enforcement process.

01/12/2004

DEC App 1.5

Mediation provider

01/12/2004

DEC App 1.5.1

The scheme will be administered by a body (the mediation provider) which:

(1) is independent of the FSA;

(2) provides a panel of experienced mediators who are independent of the FSA; and

(3) has suitable expertise of and experience in the administration of mediation schemes.

01/12/2004

DEC App 1.6

Starting the mediation

01/12/2004

DEC App 1.6.1

If a case is submitted to mediation, the parties will send a joint mediation notice in an agreed form to:

(1) the mediation provider; and

(2) the secretary to the RDC .

01/12/2004
Future version of DEC App 1.6.1 after 20/10/2005

DEC App 1.6.2

The mediation notice will commit each party to use their best endeavours to progress the mediation process in a timely manner.

01/12/2004

DEC App 1.6.3

The person may request in the mediation notice that the time period specified in the warning notice for making oral or written representations (or both) to the RDC be extended by a maximum of 14 days, to allow time for the mediation to be completed. On receipt of a mediation notice requesting such an extension, the RDC will notify the parties and the mediation provider of its agreement to the requested extension or of any other extension that it sees fit.

01/12/2004

DEC App 1.6.4

If required, the person may apply to the RDC for a further extension in order to complete the mediation (see DEC App 1.7.5 G). The total of all extensions to the 28 day time period for making written or oral representations may not exceed 28 days, other than in exceptional circumstances.

01/12/2004

DEC App 1.7

Setting up the mediation

01/12/2004

DEC App 1.7.1

Once the parties have agreed to mediate, and a mediation notice has been sent to the mediation provider, the mediation provider will liaise with the parties in order to deal with the matters set out in DEC App 1.7.2 G to DEC App 1.7.11 G.

01/12/2004

Appointment of mediator

DEC App 1.7.2

(1) The mediation provider will maintain a panel of suitable mediators, and recommend in each case a mediator to the parties. The parties are free to accept or decline the recommendation. If either party declines the recommendation, the mediation provider will seek to obtain agreement on another mediator from the panel.

(2) If the parties cannot agree a mediator within 7 days of the mediation notice being received by the mediation provider, the mediation provider will appoint a mediator.

(3) The mediators on the panel will all be:

(a) experienced commercial mediators; and

(b) accredited by or registered with a recognised mediation organisation.

(4) Experience of and expertise in the financial services sector will not be compulsory for panel mediators, but may be desirable.

(5) Mediators will, in accepting appointments, be required to confirm to the parties that they have no conflicts of interest in doing so.

01/12/2004

Date for mediation

DEC App 1.7.3

The mediation provider will liaise with the parties and the mediator to agree:

(1) a suitable date for the mediation; and

(2) a timetable for the mediation process as a whole, including the date for submission of case summaries and exchange of documents referred to in the case summaries.

01/12/2004

Duration of mediation

DEC App 1.7.4

(1) Most mediations should last no longer than one full day, but in complex cases more time may be necessary. The mediator will assist the parties in deciding how much time to set aside. If the mediation requires more time than allotted to it, the parties may ask the mediation provider to set up a further day or days.

(2) The parties and the mediator will use their best endeavours to complete the mediation as soon as practicable.

01/12/2004

Mediation timetable

DEC App 1.7.5

(1) In complex cases, the agreed timetable may extend beyond the initial extension agreed by the RDC, in which case the parties may request a further extension from the RDC (see DEC App 1.6.4 G).

(2) If the mediation has not started within the allotted timetable, the FSA may decline to mediate, and the matter will be referred to the decision notice stage.

01/12/2004

Venue

DEC App 1.7.6

The mediation may take place at any venue acceptable to the parties and the mediator. This may be at the offices of the mediation provider, the mediator (if different), the FSA or elsewhere.

01/12/2004

Mediation agreement

DEC App 1.7.7

(1) Each mediation will take place in accordance with the terms of a mediation agreement. The agreement will set out the terms on which the mediation will take place, in particular, the agreement will provide that:

(a) the mediation will be on a "without prejudice" basis and confidential; and

(b) the parties who attend the mediation will have authority to agree proposed settlement terms (subject, in relation to the FSA staff, to App 1.7.9G).

(2) The mediation agreement will be signed by the parties, the mediator and the mediation provider.

01/12/2004

Confidentiality

DEC App 1.7.8

(1) Confidentiality is a key element of the mediation process. It means that:

(a) matters disclosed in, and documents created for the purposes of, the mediation cannot be referred to in the public domain; and

(b) matters disclosed by one party to the mediator in confidence will not be disclosed to the other party without consent.

(2) Under the mediation scheme, however, confidentiality will be limited in that:

(a) if any information indicating potentially criminal conduct is disclosed to the mediator, the mediator will not be required to keep that matter confidential (and may choose to terminate the mediation);

(b) the terms of any settlement reached will, if approved by the RDC , be incorporated in a decision notice, and subsequent final notice or second supervisory notice, or (where appropriate) notice of discontinuance which may be made public;

(c) the FSA may publish information regarding the operation of the scheme on an anonymous basis in the FSA's annual report; such information may include, for example, the number of mediations conducted under the scheme and the number of those mediations which have resulted in agreed settlements.

(3) In all other respects, documents prepared for the purposes of, and discussions taking place in the course of, the mediation will retain the confidential status they had during the mediation itself.

01/12/2004
Future version of DEC App 1.7.8 after 20/10/2005

Authority to settle

DEC App 1.7.9

(1) A key feature of mediation is the requirement that those who attend the mediation on behalf of each party have full authority to agree proposed settlement terms. In general, the FSA's decision making procedure for regulatory enforcement cases requires that the RDC approve any decision to take or refrain from taking disciplinary action. (The exception is some cases involving late submission of reports, see DEC 4.5.2 G to DEC 4.5.6 G) Therefore, the RDC must approve any proposed settlement terms agreed at the mediation.

(2) The FSA will be represented during the mediation proceedings and at the mediation itself by the FSA staff who initially recommended that disciplinary action be taken. In order to minimise the risk that the proposed settlement terms agreed at the mediation will not be approved, the FSA will endeavour to ensure that the relevant members of the RDC, or as many of its relevant members as possible, are available for consultation by telephone during the mediation. This is to enable a clear indication to be given to the parties and the mediator whether the RDC will find the proposed settlement terms acceptable.

(3) However, no involvement of the RDC in the mediation will in any way compromise its right subsequently to decline to approve the settlement terms.

(4) If the RDC decides to decline to approve the settlement terms agreed at the mediation, the parties may, with the consent of the RDC, return to the mediation process if they wish to explore further settlement options. If they do, the RDC will ensure that its views are clearly stated as to why the terms previously agreed were not acceptable.

01/12/2004
Future version of DEC App 1.7.9 after 20/10/2005

Paperwork for the mediation

DEC App 1.7.10

(1) Mediation requires the parties to be able to discuss the dispute in an informed way. Therefore, each party attending the mediation will be required to produce:

(a) a short case summary setting out the issues in dispute; and

(b) any documents referred to in the case summary.

(2) These documents must be submitted to the mediation provider in triplicate at least one week before the mediation. The mediation provider will be responsible for the exchange of documents.

(3) The parties and the mediator may agree to dispense with the requirement to produce documentation before the mediation.

01/12/2004

Costs

DEC App 1.7.11

(1) The costs of the mediation provider in administering and conducting the mediation process (including the fee payable to the mediator) will be agreed between the FSA and the mediation provider when the mediation provider is appointed.

(2) For each mediation, the mediation provider will invoice the parties for the anticipated costs of administering and conducting the mediation in advance. The FSA and the person will bear half of these costs each. Any additional costs incurred by the mediation provider will be invoiced after the mediation. These costs will also be shared. The costs referred to in (1) and (2) do not include legal or other costs that the FSA or person may incur in relation to the mediation, which will be the responsibility of the parties.

01/12/2004

DEC App 1.8

Preliminary meeting

01/12/2004

DEC App 1.8.1

Once appointed, the mediator may (in his discretion) call a preliminary meeting with the parties and their advisers (if any). This may be used to ensure that the parties are properly prepared for the mediation, agree the issues for discussion and understand how the process will operate.

01/12/2004

DEC App 1.9

Termination of the mediation

01/12/2004

DEC App 1.9.1

The mediation will take place at the agreed time and place.

01/12/2004

DEC App 1.9.2

If the person withdraws from the mediation process after it has agreed to mediate, it will be responsible for its share of any costs incurred by, or owing to, the mediation provider (see DEC App 1.7.11 G (1)).

01/12/2004

DEC App 1.9.3

The mediation agreement will set out the terms on which a party or the mediator, or both, may terminate the agreement. These will include terms providing that:

(1) either party may withdraw from and terminate the mediation at any stage before or during the mediation (subject to the provisions on costs in DEC App 1.9.2 G, for terminations before the mediation takes place);

(2) either party or the mediator may withdraw if the mediation has not taken place within the agreed timetable; and

(3) the mediator may withdraw from and terminate the mediation if, for example, a criminal offence by or involving a party to the mediation is disclosed to him (see DEC App 1.7.8 G (2)(a)).

01/12/2004

DEC App 1.10

Result of the mediation

01/12/2004

DEC App 1.10.1

Mediation can only give rise to one of two outcomes:

(1) a proposal for settlement agreed between the parties; or

(2) no agreed proposal.

01/12/2004

DEC App 1.10.2

If no agreed proposal is reached, the mediation will be terminated and the case will return to the point it had reached in the enforcement process prior to the mediation.

01/12/2004

DEC App 1.10.3

If a settlement proposal is agreed, it will be considered by the RDC, which will decide whether to approve it. If it is approved, a decision notice, and subsequently a final notice, will be issued reflecting the terms of the agreement reached. If it is not approved, the parties may return to the mediation only with the RDC's consent. If the RDC does not consent, the case will return to the point it had reached in the enforcement process prior to the mediation.

01/12/2004
Future version of DEC App 1.10.3 after 20/10/2005

DEC App 1.10.4

A person may elect to mediate only once during the course of the enforcement process.

01/12/2004

DEC App 1.11

Advisers

01/12/2004

DEC App 1.11.1

The parties may bring legal or other advisers of their choice with them to the mediation, although it is important to preserve the informality of the mediation process.

01/12/2004

DEC App 1.12

Review of mediation procedure

01/12/2004

DEC App 1.12.1

The mediation provider will administer the mediation scheme and the FSA will monitor and review its operation at the end of each year. The FSA proposes to publish core information relating to the operation of the scheme in the FSA's Annual Report.

01/12/2004

Export chapter as

Legal Instruments that change this Chapter Settlement procedure and mediation scheme for FSA enforcement cases

Transitional Provisions and Schedules

DEC TP 1

Transitional provisions

DEC TP 1.1

There are no transitional provisions in DEC. The transitional provisions in GEN are not applicable to DEC.

01/12/2004

DEC Sch 1

Record keeping requirements

01/12/2004

DEC Sch 1.1

There are no record-keeping requirements in DEC.

01/12/2004

DEC Sch 2

Notification requirements

01/12/2004

DEC Sch 2.1

There are no notification or reporting requirements in DEC.

01/12/2004

DEC Sch 3

Fees and other required payments

01/12/2004

DEC Sch 3.1

There are no requirements for fees or other payments in DEC.

01/12/2004

DEC Sch 4

Powers exercised

01/12/2004

DEC Sch 4.1

The following powers in the Act have been exercised by the FSA to issue the statement of procedure and give the guidance in DEC:

(1)

Section 157(1) (Guidance)

(2)

Section 395(5) (The Authority's procedures)

01/12/2004

DEC Sch 5

Rights of action for damages

01/12/2004

DEC Sch 5.1

There are no rules in DEC.

01/12/2004

DEC Sch 6

Rules that can be waived

01/12/2004

DEC Sch 6.1

There are no rules in DEC.

01/12/2004

Export chapter as

Legal Instruments that change this Chapter Transitional Provisions and Schedules

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DEC Decision Making

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Application,Purpose and Introduction

Application and Purpose

Application

Purpose

Introduction

DEC and the other manuals

Statutory notices

Summary of statutory and related notices

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Statutory notice procedure: Warning notice and decision notice procedure

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Statutory notice procedure: Warning notice and decision notice procedure

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Statutory notice procedure: Warning notice and decision notice procedure

Statutory notice procedure: Warning notice and decision notice procedure

Statutory notice procedure: Warning notice and decision notice procedure

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Statutory notice procedure: Supervisorynotice procedure

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Statutory notice procedure: Supervisory notice procedure

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Application,
Purpose and Introduction

Statutory notice procedure: Supervisory
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Settlement procedure and mediation scheme
for FSA enforcement cases