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
See Notes
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, and explains the special procedure for making statutory notice decisions where a settlement
is reached.
- 20/10/2005
DEC App 1.2
Settlement
- 01/12/2004
DEC App 1.2.1
See Notes
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. This might be before the giving of a warning notice, before
a decision notice,
or even after referral of the matter to the Tribunal. 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. Neither FSA staff nor the person concerned may disclose to the RDC any such admissions
or statements made by the other.
- 20/10/2005
DEC App 1.2.2
See Notes
The terms of any proposed settlement
will:
(2) include a statement of the facts and
any breaches admitted by the person concerned
and the proposed action to be taken; and
- 20/10/2005
DEC App 1.2.2A
See Notes
(1)
The fact that
the person subject
to enforcement action agrees to a financial penalty or other outcome will
not usually obviate the need for a statutory
notice recording the FSA's decision
to take that action.
(2) Where,
however, the person subject
to enforcement action agrees not to contest the content of a proposed statutory notice, the
decision whether to give that statutory notice will be taken by senior FSA staff.
(3) The
decision will be taken jointly by two members of the FSA's executive of at least director of division
level (the settlement
decision makers).
(4) One
of the directors taking the decision will usually be, but need not be, the
director of Enforcement. (In exceptional cases, the director of Enforcement
may have been directly involved in establishing the evidence on which the
decision is based and would not therefore be able to participate (see section
395(2) of the Act).)
(5) Statutory
notice for these purposes:
(b) includes
a statutory notice associated
decision.
- 20/10/2005
DEC App 1.2.2B
See Notes
(1)
The settlement decision makers will
often participate in the without prejudice discussions exploring possible
settlement. Their involvement may facilitate agreement between FSA staff and the person concerned and avoid
the delay that might otherwise result from needing to explain the basis for
any settlement reached.
(2) If
the settlement decision
makers have not been involved in the discussions, but an agreement
has been reached, they may ask to meet the relevant FSA staff or the person concerned in order to assist in the
consideration of the proposed settlement.
- 20/10/2005
DEC App 1.2.3
See Notes
The settlement decision makers 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
settlement decision makers have met with the
relevant FSA staff
or the person concerned.- 20/10/2005
DEC App 1.2.4
See Notes
(1)
Where the settlement decision makers decline
to issue a statutory notice despite
the proposed settlement, they may invite FSA staff
and the person concerned
to enter into further discussions to try to achieve an outcome the settlement decision makers would
be prepared to endorse.
(2)
However, if
the proposed action by the FSA has
been submitted to the RDC for
consideration, it will be for the RDC to
decide:
(a) whether to extend
the period for representations in response to a warning notice; or
(b) if representations
have been made in response to a warning
notice, whether to proceed to give a decision notice.
- 20/10/2005
DEC App 1.2.5
See Notes
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
See Notes
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
See Notes
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
settlement decision makers
, 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.
- 20/10/2005
DEC App 1.3.3
See Notes
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
mediation
if the
parties consider that the involvement of a neutral mediator is required to
facilitate progress in any settlement
discussions.
- 20/10/2005
DEC App 1.4
Scope and availability of the mediation scheme
- 01/12/2004
DEC App 1.4.1
See Notes
- 01/12/2004
DEC App 1.4.2
See Notes
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'sown-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
See Notes
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
See Notes
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
See Notes
- 01/12/2004
DEC App 1.6
Starting the mediation
- 01/12/2004
DEC App 1.6.1
See Notes
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)
if
the mediation is between the giving of the warning notice and the decision notice, the
RDC
Office.
- 20/10/2005
DEC App 1.6.2
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
(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
See Notes
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
See Notes
(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
See Notes
(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
See Notes
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
See Notes
(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
See Notes
(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
settlement decision makers
, 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;
(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.
- 20/10/2005
Authority to settle
DEC App 1.7.9
See Notes
(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.
(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.
(3)
One or both
of the settlement decision
makers who would make the decision as to the giving of the statutory notice or notices
in the event of a settlement may also attend. If their attendance is impracticable,
the FSA will
endeavour to ensure that the settlement
decision makers are available for consultation during the mediation.
This is to enable a clear indication to be given to the parties and the meditator
whether the settlement
decision makers will find the proposed settlement terms acceptable.
(4) [deleted]
- 20/10/2005
Paperwork for the mediation
DEC App 1.7.10
See Notes
(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
See Notes
(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
See Notes
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
See Notes
The mediation will take place at the
agreed time and place.
- 01/12/2004
DEC App 1.9.2
See Notes
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
See Notes
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
See Notes
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
See Notes
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
See Notes
If a settlement proposal is agreed, it
will be considered in accordance with the settlement
decision procedure. 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 case will return to the point it
had reached in the enforcement process prior to the mediation.
- 20/10/2005
DEC App 1.10.4
See Notes
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
See Notes
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
See Notes
- 01/12/2004
DEC App 1.13
Position of third parties on settlement
- 20/10/2005
DEC App 1.13.1
See Notes
(1)
DEC
2.4.7 G to DEC 2.4.12 G set
out the FSA's approach
to giving third parties copies of statutory
notices pursuant to section 393 of the Act.
(2) The
decision to give a warning
notice or a decision
notice to a third party is a statutory notice associated decision.
(3) In
cases therefore where the decision to give a warning notice or decision notice is taken by settlement decision makers,
those decision makers will decide whether a copy of the notice should be given
to a third party in accordance with section 393 of the Act. Any representations made by the third
party in response to a warning
notice will be considered by the settlement decision makers.
- 20/10/2005