DEPP 1
Application and Purpose
DEPP 1.1
Application and Purpose
- 28/08/2007
Application
DEPP 1.1.1
See Notes
This
manual (DEPP) is relevant to firms, approved
persons and other persons,
whether or not they are regulated by the
FSA. It sets out:
(1) the
FSA's
decision-making procedure for giving statutory
notices. These are warning
notices, decision notices and supervisory notices (DEPP 1.2 to DEPP 5);
(2) the
FSA's
policy with respect to the imposition and amount of penalties
under the Act (see DEPP 6);
(2A)
the
FSA's
policy
with respect to the imposition of suspensions or restrictions, and the period
for which those suspensions or restrictions are to have effect, under the Act (see DEPP 6A);
(3) the
FSA's
policy with respect to the conduct of interviews by investigators
appointed in response to a request from an overseas regulator or an EEA regulator (DEPP 7).
- 01/11/2012
- Past version of DEPP 1.1.1 before 01/11/2012
Purpose
DEPP 1.1.2
See Notes
The purpose of DEPP is
to satisfy the requirements of sections 63C(1), 69(1), 93(1), 124(1), 131FA, 131J(1), 169(9), 210(1) and 395 of the Act that
the
FSA
publish
the statements of procedure or policy referred to in DEPP 1.1.1 G.
- 01/11/2012
- Past version of DEPP 1.1.2 before 01/11/2012
DEPP 1.2
Introduction to statutory notices
- 28/08/2007
Statutory and related notices
DEPP 1.2.1
See Notes
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 procedure must be designed to secure, among other
things, that the decision which gives rise to the obligation to give a statutory notice is taken by a person not
directly involved in establishing the evidence on which that decision is based. The
types of statutory notices and
related notices, and the principal references to them in the Act and DEPP are
set out in DEPP 1.2.2 G.
- 28/08/2007
DEPP 1.2.2
See Notes
Table: Summary of statutory and
related notices
| Notice | Description | Act reference | Further information |
| Warning notice | Gives the recipient details about action that the FSA proposes to take and about the right to make representations. | Section 387 |
DEPP 2.2
|
| Decision notice | Gives the recipient details about action that the FSA has decided to take. The FSA may also give a further decision notice if the recipient of the original decision notice consents. | Section 388 | DEPP 2.3 |
| Notice of discontinuance | Identifies proceedings set out in a warning notice or decision notice and which are not being taken or are being discontinued. | Section 389 | DEPP 1.2.4 G and DEPP 3.2.26 G |
| Final notice | Sets out the terms of the action that the FSA is taking. | Section 390 | DEPP 1.2.4 G |
| Supervisory notice | Gives the recipient details about action that the FSA has taken or proposes to take, for example to vary a Part IV permission. | Section 395(13) | DEPP 2.2 and DEPP 2.3 |
- 28/08/2007
DEPP 1.2.3
See Notes
In DEPP 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".
- 28/08/2007
DEPP 1.2.4
See Notes
The requirement in section 395
of the Act to publish a procedure
for the giving of notices does not extend to the giving of a notice of discontinuance or a final notice. Neither of these notices is
a statutory notice for the
purposes of DEPP; nor is the
decision to give such a notice a statutory
notice associated decision.
- 28/08/2007
The decision makers
DEPP 1.2.5
See Notes
Decisions on whether to give a statutory notice will be taken by a 'decision
maker'. The
FSA's
assessment
of who is the appropriate decision maker is subject to the requirements of
section 395 of the Act and will
depend upon the nature of the decision, including its complexity, importance
and urgency. References to the 'decision maker' in DEPP are
to:
- 28/08/2007
DEPP 1.2.6
See Notes
The decision maker will also take
decisions associated with a statutory notice (a
'statutory notice associated decision'). Statutory notice associated decisions include
decisions:
(1) to set or extend the period for
making representations;
(2) on whether the
FSA
is required to give a copy of
the statutory notice to any
third party and, if so, the period for the third party to make representations;
and
(3) on whether to refuse access to
FSA
material,
relevant to the relevant statutory notice,
under section 394 of the Act.
- 28/08/2007
DEPP 1.2.6A
See Notes
Statutory notice associated decisions do
not include decisions relating to the publication of a statutory
notice.
- 06/03/2011
DEPP 1.2.7
See Notes
In each case, the decision maker
will make decisions by applying the relevant statutory tests, having regard
to the context and nature of the matter, that is, the relevant facts, law,
and
FSA
priorities
and policies (including on matters of legal interpretation).
- 28/08/2007
DEPP 1.2.8
See Notes
The
FSA
will make and retain appropriate records of those decisions,
including records of meetings and the representations (if any) and materials
considered by the decision makers.
- 28/08/2007
DEPP 1.2.9
See Notes
- 28/08/2007
Export chapter as
DEPP 2
Statutory notices and the allocation of decision making
DEPP 2.1
Statutory notices
- 28/08/2007
When statutory notices are required
DEPP 2.1.1
See Notes
The circumstances in which the warning notice and decision notice procedure apply are set out in DEPP 2 Annex 1.
- 28/08/2007
DEPP 2.1.2
See Notes
The circumstances in which the supervisory notice procedure apply are set out in DEPP 2 Annex 2.
- 28/08/2007
DEPP 2.1.3
See Notes
DEPP 2 Annex 1 and DEPP 2 Annex 2 identify the provisions of the Act or other enactment giving rise to the need for the relevant notice, and whether the decision maker is the RDC or
FSA
staff under executive procedures in each case.
- 28/08/2007
Consistent decision making
DEPP 2.1.4
See Notes
FSA
staff responsible for the taking of a statutory notice decision under executive procedures may refer the matter to the RDC for the RDC to decide whether to give the statutory notice if:
(1) the RDC is already considering, or is shortly to consider, a closely related matter; and
(2) the relevant
FSA
staff believe, having regard to all the circumstances, that the RDC should have responsibility for the decision. The relevant considerations might include:
(a) the desirability of consistency in
FSA
decision making;
(b) potential savings in the time and cost of reaching a decision;
(c) the factors identified in DEPP 3.3.2 G as relevant to an assessment of whether a decision should be regarded as straightforward.
- 28/08/2007
DEPP 2.2
Warning notices and first supervisory notices
- 28/08/2007
DEPP 2.2.2
See Notes
For first supervisory notices, the
FSA
staff will recommend whether the action should take effect immediately, on a specified date, or when the matter is no longer open to review (see DEPP 2.2.5 G).
- 28/08/2007
DEPP 2.2.3
See Notes
The decision maker will:
(1) consider whether the material on which the recommendation is based is adequate to support it; the decision maker may seek additional information about or clarification of the recommendation, which may necessitate additional work by the relevant
FSA
staff;
(2) satisfy itself that the action recommended is appropriate in all the circumstances;
(3) decide whether to give the notice and the terms of any notice given.
- 28/08/2007
DEPP 2.2.4
See Notes
- 28/08/2007
DEPP 2.2.5
See Notes
A matter is open to review (as defined in section 391(8) (Publication) of the Act) (in relation to a supervisory notice which does not take effect immediately or on a specified date) when:
(2) the matter has been referred to the Tribunal but has not been dealt with; or
(3) the matter has been referred to the Tribunal and dealt with but the period during which an appeal may be brought against the Tribunal's decision is still running; or
(4) such an appeal has been brought but has not been determined.
- 28/08/2007
DEPP 2.3
Decision notices and second supervisory notices
- 28/08/2007
Approach of decision maker
DEPP 2.3.1
See Notes
If a decision maker is asked to decide whether to give a decision notice or second supervisory notice, it will:
(1) review the material before it;
(2) consider any representations made (whether written, oral or both) and any comments by
FSA
staff or others in respect of those representations;
(3) decide whether to give the notice and the terms of any notice given.
- 28/08/2007
Default procedures
DEPP 2.3.2
See Notes
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 that notice and 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.
- 28/08/2007
DEPP 2.3.3
See Notes
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 relevant 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.
- 28/08/2007
DEPP 2.3.4
See Notes
In exceptional cases, the decision maker may permit representations from a person who has received a decision notice (or a second supervisory notice) or against whom action, detailed in a first supervisory notice, has taken effect, 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 further decision notice (or a written notice or a supervisory notice).
- 28/08/2007
Further decision notice
DEPP 2.3.5
See Notes
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 its 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 the person 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.
- 28/08/2007
DEPP 2.3.6
See Notes
For the purpose of establishing whether the person receiving the further decision notice gives its consent, the
FSA
will normally require consent in writing.
- 28/08/2007
DEPP 2.4
Third party rights and access to FSA material
- 28/08/2007
DEPP 2.4.1
See Notes
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 DEPP 2 Annex 1 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.
- 28/08/2007
DEPP 2.5
Provision for certain categories of decision
- 28/08/2007
Purpose
DEPP 2.5.1
See Notes
Some of the decisions referred to in DEPP 2 Annex 1 and DEPP 2 Annex 2 share similar characteristics. For convenience, DEPP 2.5 sets out some of these and the particular features they have.
- 28/08/2007
Different decision makers
DEPP 2.5.2
See Notes
The decision to give a warning notice and a decision notice in a particular matter will often not be taken by the same decision maker. Certain types of action require that the warning notice decision be taken by
FSA
staff under executive procedures and the decision notice decision be taken by the RDC. Similarly, in enforcement cases the RDC might take the decision to give a
warning notice, but the decision to give a decision notice could be taken by the settlement decision makers on the basis that the person concerned does not contest the action proposed (see DEPP 5).
- 01/07/2011
- Past version of DEPP 2.5.2 before 01/07/2011
Decisions relating to applications for authorisation or approval
DEPP 2.5.3
See Notes
FSA
staff under executive procedures will take the decision to give a warning notice if the
FSA
proposes to:
(1) refuse an application for a
Part IV permission
or to refuse an application to cancel a
Part IV permission
;
(2) 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
;
(3) 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 a requirement which was not applied for or by specifying a narrower description of regulated activity than that applied for);
(4) refuse approved person status;
(5) refuse an application for a small e-money issuer certificate (see ELM 8 (Small e-money issuers));
(6) refuse an application for variation or rescission of a requirement imposed on an incoming EEA firm.
- 28/08/2007
DEPP 2.5.4
See Notes
If no representations are made in response to a warning notice proposing the action set out at DEPP 2.5.3 G within the period specified, a decision notice will be given accordingly: see DEPP 2.3.2 G (Default procedures).
- 28/08/2007
DEPP 2.5.5
See Notes
If representations are made in response to a warning notice proposing the action set out at DEPP 2.5.3G (1), DEPP 2.5.3G (4) or DEPP 2.5.3G (5), then the RDC will take the decision to give a decision notice.
- 28/08/2007
DEPP 2.5.6
See Notes
If representations are made in response to a warning notice proposing the action set out at
DEPP 2.5.3 G
DEPP 2.5.3G (2), DEPP 2.5.3G (3) or DEPP 2.5.3G (6), then the RDC will take the decision to give a decision notice if the action involves a fundamental change(see DEPP 2.5.8 G) to the nature of a permission. Otherwise, the decision to give the decision notice will be taken by
FSA
staff under executive procedures.
- 28/08/2007
FSA's own-initiative power
DEPP 2.5.7
See Notes
The RDC will take the decision to give a supervisory notice exercising the
FSA's
own initiative power (by removing a regulated activity, by imposing a limitation or requirement or by specifying a narrower description of regulated activity) if the action involves a fundamental change (see DEPP 2.5.8 G) to the nature of a permission. Otherwise, the decision to give the
decision notice
will be taken by
FSA
staff under executive procedures.
- 28/08/2007
DEPP 2.5.7A
See Notes
Notwithstanding DEPP 2.5.7 G,
FSA
staff under executive procedures will be the decision maker whenever a firm agrees not to contest the
FSA's
exercise of its own initiative power, including where the
FSA's
action involves a fundamental change to the nature of a permission.
- 06/03/2011
DEPP 2.5.8
See Notes
A fundamental change to the nature of a permission means:
(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.
- 28/08/2007
Decisions relating to listing of securities
DEPP 2.5.9
See Notes
FSA
staff under executive procedures will take the following statutory notice decisions:
(1) the refusal of an application for listing of securities;
(3) [deleted]
(4) the discontinuance of listing of securities at the issuer's request;
(5) the exercise of any of the powers in sections 87K or 87L of the Act in respect of a breach of any applicable provision; and
(6) [deleted]
- 11/12/2008
- Past version of DEPP 2.5.9 before 11/12/2008
DEPP 2.5.10
See Notes
The RDC will take statutory notice decisions relating to the discontinuance of listing of securities on the
FSA's
own initiative.
- 28/08/2007
DEPP 2.5.11
See Notes
- 28/08/2007
Modified procedures in collective investment scheme and certain other cases
DEPP 2.5.12
See Notes
FSA
staff will usually inform or discuss with the person concerned any action they contemplate before they recommend to the RDC that the
FSA
takes formal action. The
FSA
may also be invited to exercise certain powers by the persons who would be affected by the exercise of those powers. In these circumstances if the person concerned has agreed to or accepted the action proposed then the decisions referred to in DEPP 2.5.13 G will be taken by
FSA
staff under executive procedures rather than by the RDC.
- 28/08/2007
DEPP 2.5.13
See Notes
The decisions referred to in DEPP 2.5.12 G are:
(1) the decision to give a supervisory notice pursuant to section 259(3), (8) or 9(b) (directions on authorised unit trust schemes); section 268(3), 7(a) or 9(a) (directions in respect of recognised overseas schemes); or section 282(3), (6) or (7)(b) (directions in respect of relevant recognised schemes) of the Act;
(2) the decision to give a warning notice or decision notice pursuant to section 280(1) or (2)(a) (revocation of recognised investment scheme) of the Act;
(3) the decision to give a supervisory notice in accordance with regulation 27(3), (8) or 9(b) of the OEIC Regulations;
(4) the decision to give a warning notice or decision notice pursuant to regulation 24 or regulation 28 of the OEIC Regulations;
(5) the decision to give a direction under section 42B(1) of the Building Societies Act 1986 that a building society transfers all its engagements to one or more other building societies or that it transfers its business to an existing company (under section 94 or section 97 respectively of the Building Societies Act 1986); and
(6) the decision to give a decision notice under section 93(6) of the Building Societies Act 1986 (permission for successor society on amalgamation) where the terms of the permission have been agreed with the successor building society.
- 28/08/2007
DEPP 2.5.14
See Notes
- 28/08/2007
DEPP 2.5.15
See Notes
A decision to give a warning notice or decision notice refusing an application for an authorisation order declaring a unit trust scheme to be an AUT or ICVC will be taken by the RDC only if the application is by an authorised fund manager who is not the operator of an existing AUT or ICVC. Otherwise, the decision to give the warning notice or decision notice will be taken by
FSA
staff under
executive procedures.
DEPP 2.5.16
See Notes
A notice under paragraph 15A(4) of Schedule 3 to the Actrelating to the application by an EEA firm for approval to manage a UCITS scheme is not a warning notice, but the
FSA
will operate a procedure for this notice which will be similar to the procedure for a warning notice.
Notices under the Building Societies Act 1986 and other enactments
DEPP 2.5.17
See Notes
The
FSA
expects to adopt a procedure in respect of notices under enactments other than the Act which is similar to that for statutory notices under the Act, but which recognises any differences in the legislative framework and requirements. DEPP 2 Annex 1 and DEPP 2 Annex 2 therefore identify notices to be given pursuant to other enactments and the relevant
FSA
decision maker.
- 28/08/2007
DEPP 2.5.18
See Notes
Some of the distinguishing features of notices given under enactments other than the
Act
are as follows:
(1) Building Societies Act 1986, section 36A: 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.
(2) Building Societies Act 1986, section 93(6): 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.
(3) Friendly Societies Act 1992, section 58A: The warning notice and decision notice must set out the terms of the direction which the
FSA
proposes or has decided to give and any specification of when the friendly society is to comply with it. A decision notice given under section 58A(3) must give an indication of the society's right, given by section 58A(5), to have the matter referred to the Tribunal. A decision notice under section 58A(3) may only relate to action under the same section of the Friendly Societies Act 1992 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 58A(1) and a decision notice given under section 58A(3).
DEPP 2 Annex 1
Warning notices and decision notices under the Act and certain other enactments
- 28/08/2007
DEPP 2 Annex 2
Supervisory notices
- 28/08/2007
See Notes
| 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's Part IV permission | SUP 7 |
RDC or executive procedures See DEPP 2.5.7 G |
| 78(2)/(5) | when the FSA is proposing to discontinue or discontinues the listing of a security | LR 5 |
RDC or executive procedures See DEPP 2.5.9G (4) and DEPP 2.5.10 G |
| 78(2)/(5) | when the FSA is proposing to suspend or suspends the listing of a security | LR 5 | Executive procedures |
| 78A(2)/(8)(b) | when the FSA discontinues or suspends the listing of a security on the application of the issuer of the security | LR 5 | Executive procedures |
| 87O(2)/(5) | when the FSA is proposing or 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 |
| 96C | when the FSA is proposing to suspend or suspends trading in a financial instrument | DTR | Executive procedures |
| 191B(1) | when the FSA gives a restriction notice under section 191B | Executive procedures | |
| 197(3)/(6)/(7)(b) | when the FSA is exercising its power of intervention in respect of an incoming firm |
SUP 14
|
RDC or executive procedures See DEPP 2.5.7 G and 2.5.7A G |
| 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 | COLL | RDC |
| 268(3)/ (7)(a) or (9)(a) (as a result of (8)(b)/(13)) | when the FSA is proposing or deciding to give or, on its own initiative, to vary a direction to the operator of a recognised scheme | COLL | 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 | COLL | RDC |
| 301J(1) | when the FSA gives a restriction notice under section 301J | Executive procedures | |
| 321(2)/(5) | when the FSA is exercising its power to impose a requirement on a former underwriting member of Lloyd's | 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 | COLL | RDC |
DEPP 3
The nature and procedure of the RDC
DEPP 3.1
The Regulatory Decisions Committee
- 28/08/2007
DEPP 3.1.1
See Notes
- 28/08/2007
DEPP 3.1.2
See Notes
- 28/08/2007
DEPP 3.1.3
See Notes
- 28/08/2007
DEPP 3.2
The operation of the RDC
- 28/08/2007
RDC meetings and composition of panels
DEPP 3.2.1
See Notes
- 28/08/2007
DEPP 3.2.2
See Notes
- 28/08/2007
DEPP 3.2.3
See Notes
The composition and size of panels of the RDC may vary depending on the nature of the particular matter under consideration. In cases in which representations are made, it will be usual for the panel that is to consider the representations and decide whether to give a decision notice to include additional members of the RDC who have not previously considered the matter.
- 28/08/2007
Conflicts of interest
DEPP 3.2.4
See Notes
The RDC will seek not to invite a member to join a panel to consider a matter in which he has a potential conflict of interest.
- 28/08/2007
DEPP 3.2.5
See Notes
(1) If a member of the RDC has a potential conflict of interest in any matter in which he is asked to participate he will disclose the conflict to the RDC Office, and disclose it:
(b) in the case of a Deputy Chairman of the RDC, to the Chairman of the RDC, or if he is unavailable to the Chairman or Deputy Chairman of the
FSA
; or
(c) in the case of any other member, to the Chairman or a Deputy Chairman of the RDC.
(2) If the person to whom a conflict has been disclosed in accordance with (1)(a) to (c) considers it reasonable and appropriate, he will require the member of the RDC to stand down from consideration of that matter. He may ask another member of the RDC to assist him in considering the potential conflict.
- 28/08/2007
DEPP 3.2.6
See Notes
The RDC Office will record and document all disclosures of potential conflicts of interest and the steps taken to manage them.
- 28/08/2007
Procedure: general
DEPP 3.2.7
See Notes
- 28/08/2007
DEPP 3.2.8
See Notes
- 28/08/2007
DEPP 3.2.9
See Notes
- 28/08/2007
DEPP 3.2.10
See Notes
If the RDC considers it relevant to its consideration, it may ask
FSA
staff to explain or provide any or all of the following:
(1) additional information about the matter (which
FSA
staff may seek by further investigation); or
(2) further explanation of any aspect of the
FSA
staff recommendation or accompanying papers; or
- 28/08/2007
DEPP 3.2.11
See Notes
- 28/08/2007
Procedure: warning notices and first supervisory notices
DEPP 3.2.12
See Notes
If
FSA
staff consider that action is appropriate in a matter for which the RDC is the decision maker, they will make a recommendation to the RDC that a warning notice or a supervisory notice should be given.
- 28/08/2007
DEPP 3.2.13
See Notes
- 28/08/2007
DEPP 3.2.14
See Notes
If the RDC decides that the
FSA
should give a warning notice or a first supervisory notice:
(1) the RDC will settle the wording of the warning notice or first supervisory notice, and will ensure that the notice complies with the relevant provisions of the Act;
(3) the RDC staff will make appropriate arrangements for the notice to be given; and
- 28/08/2007
Procedure: representations
DEPP 3.2.15
See Notes
(1) A warning notice or a first supervisory notice will (as required by the Act) specify the time allowed for making representations. This will not be less than 28days.
(2) The
FSA
will also, when giving a warning notice or a first supervisory notice, specify a time within which the recipient is required to indicate whether he wishes to make oral representations.
- 28/08/2007
DEPP 3.2.16
See Notes
(1) The recipient of a warning notice or a first supervisory notice may request an extension of the time allowed for making representations. Such a request must normally be made within 14days of the notice being given.
(2) If a request is made, the Chairman or a Deputy Chairman of the RDC will decide whether to allow an extension, and, if so, how much additional time is to be allowed for making representations. In reaching his decision he may take account of any relevant comments from the
FSA
staff responsible for the matter.
- 28/08/2007
DEPP 3.2.17
See Notes
(1) If the recipient of a warning notice or a first supervisory notice indicates that he wishes to make oral representations, the RDC staff, in conjunction with the Chairman or a Deputy Chairman of the RDC, will fix a date or dates for a meeting at which the relevant RDC members will receive those representations.
- 28/08/2007
DEPP 3.2.18
See Notes
The chairman of the relevant meeting will ensure that the meeting is conducted so as to enable:
but the chairman may ask the recipient of the notice or FSA staff to limit their representations or response in length or to particular issues arising from the warning notice or first supervisory notice.
(2) the relevant
FSA
staff to respond to those representations;
(3) the RDC members to raise with those present any points or questions about the matter (whether in response to particular representations or more generally about the matter); and
but the chairman may ask the recipient of the notice or FSA staff to limit their representations or response in length or to particular issues arising from the warning notice or first supervisory notice.
- 28/08/2007
DEPP 3.2.19
See Notes
The recipient of the warning notice or supervisory notice may wish to be legally represented at the meeting, but this is not a requirement.
- 28/08/2007
DEPP 3.2.20
See Notes
In appropriate cases, the chairman of a meeting for oral representations may ask those present to provide additional information in writing after the meeting. If he does so, he will specify the time within which that information is to be provided.
- 28/08/2007
DEPP 3.2.21
See Notes
The RDC will not, after the
FSA
has given a warning notice or a first supervisory notice, meet with or discuss the matter whilst it is still ongoing with the
FSA
staff responsible for the case without other relevant parties being present or otherwise having the opportunity to respond.
- 28/08/2007
Procedure: decision notices and second supervisory notices
DEPP 3.2.22
See Notes
If no representations are made in response to the warning notice or first supervisory notice, the
FSA
will regard as undisputed the allegations or matters set out in the notice and the default procedure will apply: see DEPP 2.3.2 G to DEPP 2.3.4 G.
- 28/08/2007
DEPP 3.2.23
See Notes
However, if representations are made, in accordance with DEPP 2.3.1 G the RDC will consider whether it is right in all the circumstances to give the decision notice or a second supervisory notice (as appropriate).
- 28/08/2007
DEPP 3.2.24
See Notes
If the RDC decides that the
FSA
should give a decision notice or a second supervisory notice:
(1) the RDC will settle the wording of the notice which will include a brief summary of the key representations made and how they have been dealt with, and will ensure that the notice complies with the relevant provisions of the Act;
(2) the RDC will make any relevant statutory notice associated decisions, including whether the
FSA
is required to give a copy of the notice to a third party; and
(3) the RDC staff will make appropriate arrangements for the notice to be given.
- 28/08/2007
DEPP 3.2.25
See Notes
If the RDC decides that the
FSA
should not give a decision notice or a second supervisory notice the RDC staff will notify the relevant parties (including the relevant
FSA
staff) in writing of that decision.
- 28/08/2007
Discontinuance of FSA action
DEPP 3.2.26
See Notes
FSA
staff responsible for recommending action to the RDC will continue to assess the appropriateness of the proposed action in the light of new information or representations they receive and any material change in the facts or circumstances relating to a particular matter. It may be therefore that they decide to give a notice of discontinuance to a person to whom a warning notice or decision notice has been given. The decision to give a notice of discontinuance does not require the agreement of the RDC, but
FSA
staff will inform the RDC of the discontinuance of the proceedings.
- 28/08/2007
Tribunal proceedings
DEPP 3.2.27
See Notes
A decision by the RDC to give a decision notice or supervisory notice may lead to a reference to the Tribunal under the Act. The conduct of proceedings before the Tribunal is not however a matter for the RDC.
- 28/08/2007
DEPP 3.3
Straightforward decisions
- 28/08/2007
DEPP 3.3.1
See Notes
In statutory notice cases for which the RDC is the decision-maker, the Chairman or a Deputy Chairman of the RDC may take a straightforward decision to give the statutory notice.
- 28/08/2007
DEPP 3.3.2
See Notes
The Chairman or, if he is unavailable, a Deputy Chairman will decide whether a decision is straightforward. In doing so he will have regard to all the circumstances. These may include:
(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, including whether representations have been made;
(4) the range of alternative options;
(5) the extent to which the facts relating to the decision are or may be disputed.
- 28/08/2007
DEPP 3.3.3
See Notes
The RDC Chairman or a Deputy Chairman may, notwithstanding the fact that a decision is straightforward, take the decision to give the statutory notice jointly with one or more other members of the RDC if he considers it appropriate to do so.
- 28/08/2007
DEPP 3.4
Urgent supervisory notice cases
- 28/08/2007
DEPP 3.4.1
See Notes
In urgent supervisory notice cases for which the RDC is the decision maker, the decision to give the supervisory notice may be taken by the RDC Chairman or, if he is unavailable, a Deputy Chairman, and, if it is practicable, one or more other RDC members.
- 28/08/2007
DEPP 3.4.2
See Notes
- 28/08/2007
DEPP 3.4.3
See Notes
In an exceptionally urgent case the decision to give a supervisory notice may be taken by a member of the FSA's executive of at least director of division level if:
(1) FSA staff consider that the action should be taken before a recommendation to the Chairman or a Deputy Chairman of the RDC can be made; and
(2) an urgent decision on the proposed action is necessary to protect the interests of consumers.
- 28/08/2007
DEPP 3.4.4
See Notes
In the circumstances described in DEPP 3.4.3 G, the
FSA
considers that it may be necessary for an
FSA
director of division to take the decision to give the supervisory notice even if he has been involved in establishing the evidence on which the decision is based, as permitted by section 395(3) of the Act. Where practicable, however,
FSA
staff will seek to ensure that the
FSA
director has not been so involved.
- 28/08/2007
DEPP 4
Decisions by
FSA staff under executive procedures
DEPP 4.1
Executive decision maker
- 28/08/2007
Who takes the decision
DEPP 4.1.1
See Notes
All statutory notice decisions under executive procedures will
be taken either by a senior staff committee or
by an individual
FSA
staff
member.
- 28/08/2007
DEPP 4.1.2
See Notes
- 28/08/2007
Decisions by senior staff committee
DEPP 4.1.3
See Notes
The
FSA's
senior executive committee will from time to time determine that
particular categories of statutory notice
decision to be taken under executive
procedures will be taken by a senior staff committee.
- 28/08/2007
DEPP 4.1.4
See Notes
A senior
staff 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. A senior staff committee is accountable for
its decisions to the
FSA's
senior executive committee and, through it, to the
FSA
Board.
- 28/08/2007
DEPP 4.1.5
See Notes
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.
- 28/08/2007
DEPP 4.1.6
See Notes
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.
- 28/08/2007
Decisions by individual FSA staff members
DEPP 4.1.7
See Notes
Statutory
notice decisions to be taken under
executive
procedures, and not falling within the responsibility of a senior
staff committee, will be taken by an individual
FSA
staff member. 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.
- 28/08/2007
DEPP 4.1.8
See Notes
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.
- 28/08/2007
DEPP 4.1.9
See Notes
An
FSA
staff member who considers that a statutory
notice 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.
- 28/08/2007
DEPP 4.1.10
See Notes
If an individual responsible for
a decision under 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.
- 28/08/2007
Conflicts of interest
DEPP 4.1.11
See Notes
(1) 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 subject to a conflict of interest must declare that interest to the person to whom they are immediately responsible for a decision.
(2) If a member of a senior staff committee has a potential conflict of interest in any matter in which he is asked to participate he will disclose the conflict to the secretariat of the senior staff committee, and disclose it:
(a) in the case of the chairman of the senior staff committee, to a 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 Chairman of the FSA;
(b) in the case of the deputy chairman of the senior staff committee, to the chairman of the committee, or if he is unavailable, to a member of the FSA's senior executive committee;
(c) in the case of any other member to the chairman or deputy chairman of the senior staff committee.
(3) If the person to whom the conflict has been disclosed in accordance with DEPP 4.1.11 G (2) considers it reasonable and appropriate, he will require the member of the senior staff committee to stand down from consideration of the matter.
- 28/08/2007
DEPP 4.1.12
See Notes
The secretariat to the senior staff committee will record and document
all disclosures of potential conflicts of interest and the steps taken to
manage them.
- 28/08/2007
Procedure
DEPP 4.1.13
See Notes
The procedure for taking decisions under executive procedures will generally be less formal and structured than that for decisions by the RDC. Broadly, however, FSA staff responsible for taking statutory notice decisions under executive procedures will follow a procedure similar to that described at DEPP 3.2.7 G to DEPP 3.2.27 G for the RDC except that:
(1) in a case where the decision will be taken by a senior staff committee:
(a) the chairman or deputy chairman of the senior staff committee will perform the role of the Chairman of the RDC; and
(b) the secretariat to the senior staff committee will perform the role of the RDC staff;
(2) in a case where the decision will be taken by individual members of FSA staff, the distinction between the role of the RDC, its Chairman and the RDC staff has no application;
(3) the FSA staff responsible for taking the statutory notice decision may be advised by legal advisers who have also advised FSA staff recommending action by the FSA;
(4) the FSA will not normally disclose the communications between the FSA staff recommending that action be taken and those responsible for the decision to give the statutory notice unless the FSA has stated publicly that it will adopt a practice of disclosing such communications, or a class of communications, in respect of particular categories of decision taken by FSA staff under executive procedures; and
(5) DEPP 3.2.11 G and DEPP 3.2.21 G will not apply.
- 28/08/2007
DEPP 4.2
Urgent statutory notice cases
- 28/08/2007
DEPP 4.2.1
See Notes
If
FSA
staff recommend that action be taken and they consider that the
decision falls within the responsibility of a senior
staff committee:
(2) in urgent statutory
notice cases for which a senior
staff committee is responsible, the decision to give the statutory notice may be taken by the chairman
or, if he is unavailable, a deputy chairman of the senior
staff committee, and, if it is practicable, one or more other
members of the committee;
(3) the chairman or deputy chairman
of the senior staff committee will take such a decision only if satisfied
that the action proposed should occur before it is practicable to convene
a meeting of the senior staff committee;
(4) in an exceptionally urgent statutory notice 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 decision may be taken by a
member of the
FSA's
executive
of at least director of division level (which may include an acting director)or, in the case of a senior staff committee which reports directly
to the
FSA's
senior
executive committee, by a member of that committee.- 06/03/2011
- Past version of DEPP 4.2.1 before 06/03/2011
DEPP 4.2.2
See Notes
In the circumstances described
in DEPP 4.2.1 G (4) the
FSA
considers
that it may be necessary for an
FSA
director of division or member of a senior
staff committee to take the decision to give a supervisory notice even if he has been involved
in establishing the evidence on which the decision is based, as permitted
by section 395(3) of the Act.
Where practicable, however,
FSA
staff will seek to ensure that the
FSA
director or committee member has not been so involved.
- 28/08/2007
DEPP 5
Settlement decision procedure
DEPP 5.1
Settlement decision makers
- 28/08/2007
Introduction
DEPP 5.1.1
See Notes
(1) A person subject to enforcement action may agree to a financial penalty or other outcome rather than contest formal action by the FSA.
(2) The fact that he does so will not usually obviate the need for a statutory notice recording the FSA's decision to take that action. Where, however, the person subject to enforcement action agrees not to contest the content of a proposed statutory notice, the decision 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 senior management, one of whom will be of at least director of division level (which may include an acting director) and the other of whom will be of at least head of department level (the "settlement decision makers").
(4) At least one of the settlement decision makers will not be from the Enforcement and Financial Crime Division. The other settlement decision maker will usually be, but need not be, from the Enforcement and Financial Crime Division. Consistent with section 395(2) of the Act, a settlement decision maker will not have been directly involved in establishing the evidence on which the decision is based.
(5) "Statutory notice" for these purposes:
(a) means any statutory notice the giving of which would otherwise require a decision by the RDC;
(b) includes a statutory notice associated decision.
- 06/02/2012
- Past version of DEPP 5.1.1 before 06/02/2012
Procedure: general
DEPP 5.1.2
See Notes
- 28/08/2007
DEPP 5.1.3
See Notes
Settlement discussions may take
place at any time during the enforcement process if both parties agree. This
might be before the giving of a warning notice,
before a decision notice, or
even after referral of the matter to the Tribunal.
But the
FSA
would
not normally agree to detailed settlement discussions until it has a sufficient
understanding of the nature and gravity of the suspected misconduct or issue
to make a reasonable assessment of the appropriate outcome. Settlement after
a decision notice will be rare.
- 28/08/2007
DEPP 5.1.4
See Notes
- 28/08/2007
Procedure: participation of decision makers in discussions
DEPP 5.1.5
See Notes
(1) The settlement
decision makers may, but need not, participate in the discussions
exploring possible settlement.
(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.
- 28/08/2007
DEPP 5.1.6
See Notes
The terms of any proposed settlement:
(2) may refer to a draft of the proposed statutory notices setting out the facts
of the matter and the
FSA's
conclusions;
(3) may, depending upon the stage in
the enforcement process at which agreement is reached, include an agreement
by the person concerned to:
(a) waive and not exercise any rights
under sections 387 (Warning notices) and 394 (Access to Authority material)
of the Act to notice of, or access
to, material relied upon by the
FSA
and any secondary material which might undermine the
FSA
decision to give the statutory notice;
(b) waive and not exercise any rights
under section 387 of the Act or
otherwise to make representations to the RDC in
respect of a warning notice or
first supervisory notice;
(c) not object to the giving of a decision notice before the expiry of the 28 day period after the giving of
a warning notice specified
under section 387 of the Act;
(d) not dispute with the
FSA
the facts and matters set out in a warning
notice, decision notice, supervisory notice or final
notice and to waive and not exercise any right under section
208 (Decision notice) of the Act to
refer the matter to the Tribunal.
- 28/08/2007
DEPP 5.1.7
See Notes
The settlement
decision makers may:
whether or not the settlement decision makers have met with the relevant FSA staff or the person concerned.
(1) accept the proposed settlement
by deciding to give a statutory notice 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.
- 28/08/2007
DEPP 5.1.8
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 first supervisory
notice; or
(b) if representations have been made
in response to a warning notice or first supervisory notice, whether to proceed to
give a decision notice or second supervisory notice.
- 28/08/2007
Settlement by mediation
DEPP 5.1.9
See Notes
The
FSA
and other parties may agree to mediation as a way of facilitating
settlement in appropriate cases.
- 28/08/2007
Third party rights
DEPP 5.1.10
See Notes
(1) DEPP 2.4 sets out the FSA's approach to giving third parties copies of statutory notices pursuant to section 393 (Third party rights) 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
- 28/08/2007
DEPP 6
Penalties
DEPP 6.1
Introduction
- 28/08/2007
DEPP 6.1.1
See Notes
- 06/08/2010
- Past version of DEPP 6.1.1 before 06/08/2010
DEPP 6.1.2
See Notes
The principal purpose of imposing a financial penalty or issuing a public censure is to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches, helping to deter other persons from committing similar breaches, and demonstrating generally the benefits of compliant behaviour. Financial penalties and public censures are therefore tools that the
FSA
may employ to help it to achieve its
regulatory objectives
.
- 28/08/2007
DEPP 6.2
Deciding whether to take action
- 28/08/2007
DEPP 6.2.2
See Notes
When deciding whether to take action for market abuse or requiring or encouraging, the
FSA
may consider the following additional factors:
(1) The degree of sophistication of the users of the market in question, the size and liquidity of the market, and the susceptibility of the market to market abuse.
(2) The impact, having regard to the nature of the behaviour, that any financial penalty or public censure may have on the financial markets or on the interests of consumers:
(a) a penalty may show that high standards of market conduct are being enforced in the financial markets, and may bolster market confidence;
(b) a penalty may protect the interests of consumers by deterring future market abuse and improving standards of conduct in a market;
(c) in the context of a takeover bid, the
FSA
may consider that the impact of the use of its powers is likely to have an adverse effect on the timing or outcome of that bid, and therefore it would not be in the interests of financial markets or consumers to take action for market abuse during the takeover bid. If the
FSA
considers that the proposed use of its powers may have that effect, it will consult the Takeover Panel and give due weight to its views.
- 28/08/2007
DEPP 6.2.2A
See Notes
The factors to which the
FSA
will have regard when deciding whether to impose a penalty under regulation 34 of the RCB Regulations are set out in RCB 4.2.3 G.
- 11/12/2008
Discipline for breaches of FSA rules on systems and controls against money laundering
DEPP 6.2.3
See Notes
The
FSA's
rules on systems and controls against money laundering are set out in SYSC 3.2 and SYSC 6.3. The
FSA
, when considering whether to take action for a financial penalty or censure in respect of a breach of those rules, will have regard to whether a firm has followed relevant provisions in the Guidance for the UK financial sector issued by the Joint Money Laundering Steering Group.
- 28/08/2007
Action against approved persons under section 66 of the Act
DEPP 6.2.4
See Notes
The primary responsibility for ensuring compliance with a firm's regulatory obligations rests with the firm itself. However, the
FSA
may take disciplinary action against an approved person where there is evidence of personal culpability on the part of that approved person. Personal culpability arises where the behaviour was deliberate or where the approved person's standard of behaviour was below that which would be reasonable in all the circumstances at the time of the conduct concerned.
- 28/08/2007
DEPP 6.2.5
See Notes
In some cases it may not be appropriate to take disciplinary measures against a firm for the actions of an approved person (an example might be where the firm can show that it took all reasonable steps to prevent the breach). In other cases, it may be appropriate for the
FSA
to take action against both the firm and the approved person. For example, a firm may have breached the rule requiring it to take reasonable care to establish and maintain such systems and controls as are appropriate to its business (SYSC 3.1.1 R or SYSC 4.1.10 R), and an approved person may have taken advantage of those deficiencies to front run orders or misappropriate assets.
- 28/08/2007
DEPP 6.2.6
See Notes
In addition to the general factors outlined in DEPP 6.2.1 G, there are some additional considerations that may be relevant when deciding whether to take action against an approved person pursuant to section 66 of the Act. This list of those considerations is non-exhaustive. Not all considerations below may be relevant in every case, and there may be other considerations, not listed, that are relevant.
(1) The approved person's position and responsibilities. The
FSA
may take into account the responsibility of those exercising significant influence functions in the firm for the conduct of the firm. The more senior the approved person responsible for the misconduct, the more seriously the
FSA
is likely to view the misconduct, and therefore the more likely it is to take action against the approved person.
(2) Whether disciplinary action against the firm rather than the approved person would be a more appropriate regulatory response.
(3) Whether disciplinary action would be a proportionate response to the nature and seriousness of the breach by the approved person.
- 28/08/2007
DEPP 6.2.7
See Notes
The
FSA
will not discipline approved persons on the basis of vicarious liability (that is, holding them responsible for the acts of others), provided appropriate delegation and supervision has taken place (see APER 4.6.13 G and APER 4.6.14 G). In particular, disciplinary action will not be taken against an approved person performing a significant influence function simply because a regulatory failure has occurred in an area of business for which he is responsible. The
FSA
will consider that an approved person performing a significant influence function may have breached Statements of Principle 5 to 7 only if his conduct was below the standard which would be reasonable in all the circumstances at the time of the conduct concerned (see also APER 3.1.8 G).
- 28/08/2007
DEPP 6.2.8
See Notes
An approved person will not be in breach if he has exercised due and reasonable care when assessing information, has reached a reasonable conclusion and has acted on it.
- 28/08/2007
DEPP 6.2.9
See Notes
Where disciplinary action is taken against an approved person the onus will be on the
FSA
to show that the approved person has been guilty of misconduct.
- 28/08/2007
Action under section 63A of the Act against persons that perform a controlled function without approval
DEPP 6.2.9A
See Notes
In addition to the general factors outlined in DEPP 6.2.1 G, there are some additional considerations that the
FSA
will have regard to when deciding whether to take action against a person that performs a controlled function without approval contrary to section 63A of the Act.
(1) The conduct of the person. The
FSA
will take into consideration whether, while performing controlled functions without approval, the person committed misconduct in respect of which, if he had been approved, the
FSA
could have taken action pursuant to section 66 of the Act and, if so, the seriousness of that misconduct.
(2) The extent to which the person could reasonably be expected to have known that he was performing a controlled function without approval. The circumstances in which the
FSA
would expect to be satisfied that a person could reasonably be expected to have known that he was performing a controlled function without approval include:
(a) the person had previously performed a similar role at the same or another firm for which he had been approved;
(b) the person'sfirm or another firm had previously applied for approval for the person to perform the same or a similar controlled function;
(c) the person's seniority or experience was such that he could reasonably be expected to have known that he was performing a controlled function without approval; and
(3) The length of the period during which the person performed a controlled function without approval.
(4) Whether the person is an individual.
(5) The appropriateness of taking action against the person instead of, or in addition to, taking action against an authorised person. In assessing this, the
FSA
will take into consideration the extent of the culpability of an authorised person for the person performing a controlled function without approval. For example, a relevant factor may be that an authorised person decided that the person did not need to obtain approval and it was reasonable for the person to rely on the authorised person's judgment.
(6) The person's position and responsibilities. The more senior the person that performs a controlled function without approval, the more seriously the
FSA
is likely to view his behaviour, and therefore the more likely it is to take action against the person.
- 06/08/2010
Action against directors, former directors and persons discharging managerial responsibilities for breaches under Part VI of the Act
DEPP 6.2.10
See Notes
The primary responsibility for ensuring compliance with Part VI of the Act, the Part 6 rules, the prospectus rules or a provision otherwise made in accordance with the Prospectus Directive or a requirement imposed under such provision rests with the persons identified in section 91(1) and section 91(1A) (Penalties for breach of Part 6 rules) of the Act respectively. Normally therefore, any disciplinary action taken by the
FSA
for contraventions of these obligations will in the first instance be against those persons.
- 28/08/2007
DEPP 6.2.11
See Notes
However, in the case of a contravention by a person referred to in section 91(1)(a) or section 91(1)(b)(i) or section 91(1A) of the Act ("P"), where the
FSA
considers that another person who was at the material time a director of P was knowingly concerned in the contravention, the
FSA
may take disciplinary action against that person. In circumstances where the
FSA
does not consider it appropriate to seek a disciplinary sanction against P (notwithstanding a breach of relevant requirements by such person), the
FSA
may nonetheless seek a disciplinary sanction against any other person who was at the material time a director of P and was knowingly concerned in the contravention.
- 28/08/2007
DEPP 6.2.12
See Notes
Persons discharging managerial responsibilities within an issuer and their connected persons, who have requested or approved the admission of a financial instrument to trading on a regulated market, and connected persons have their own responsibilities under the disclosure rules, as set out in DTR 3, for which they are primarily responsible. Accordingly, disciplinary action for a breach of the disclosure rules will not necessarily involve the issuer.
[Note: In paragraph 6.2.12, 'connected person' has the meaning in relation to a person discharging managerial responsibilities within an issuer attributed to it in subsection (5) of the definition of 'connected person' in the Handbook Glossary.]
- 28/08/2007
DEPP 6.2.13
See Notes
In deciding whether to take action, the
FSA
will consider the full circumstances of each case. Factors that may be relevant for this purpose include, but are not limited to, the factors at DEPP 6.2.1 G.
- 28/08/2007
Discipline for breaches of the Principles for Businesses
DEPP 6.2.14
See Notes
The Principles are set out in PRIN 2.1.1 R. The Principles are a general statement of the fundamental obligations of firms under the regulatory system. The Principles derive their authority from the
FSA's
rule-making powers set out in section 138(General rule-making power) of the Act. A breach of a Principle will make a firm liable to disciplinary action. Where the
FSA
considers this is appropriate, it will discipline a firm on the basis of the Principles alone.
- 28/08/2007
DEPP 6.2.15
See Notes
In determining whether a Principle has been breached, it is necessary to look to the standard of conduct required by the Principle in question at the time. Under each of the Principles, the onus will be on the
FSA
to show that a firm has been at fault in some way.
- 28/08/2007
Discipline for breaches of the Listing Principles
DEPP 6.2.16
See Notes
The Listing Principles are set out in LR 7. The Listing Principles are a general statement of the fundamental obligations of
listed companies. The Listing Principles derive their authority from the
FSA's
rule making powers set out in section 73A(1) (Part 6 Rules) of the Act. A breach of a Listing Principle will make a listed company liable to disciplinary action by the
FSA
.
- 28/08/2007
DEPP 6.2.17
See Notes
In determining whether a Listing Principle has been broken, it is necessary to look to the standard of conduct required by the Listing Principle in question. Under each of the Listing Principles, the onus will be on the
FSA
to show that a listed company has been at fault in some way. This requirement will differ depending upon the Listing Principle.
- 28/08/2007
DEPP 6.2.18
See Notes
In certain cases, it may be appropriate to discipline a listed company on the basis of the Listing Principles alone. Examples include the following:
(1) where there is no detailed listing rule which prohibits the behaviour in question, but the behaviour clearly contravenes a Listing Principle;
(2) where a listed company has committed a number of breaches of detailed rules which individually may not merit disciplinary action, but the cumulative effect of which indicates the breach of a Listing Principle.
- 28/08/2007
Action involving other regulatory authorities or enforcement agencies
DEPP 6.2.19
See Notes
- 28/08/2007
DEPP 6.2.20
See Notes
When deciding how to proceed in such cases, the
FSA
will examine the circumstances of the case, and consider, in the light of the relevant investigation, disciplinary and enforcement powers, whether it is appropriate for the
FSA
or another authority to take action to address the breach. The
FSA
will have regard to all the circumstances of the case including whether the other authority has adequate powers to address the breach in question.
- 28/08/2007
DEPP 6.2.21
See Notes
In some cases, it may be appropriate for both the
FSA
and another authority to be involved, and for both to take action in a particular case arising from the same facts. For example, a breach of RIE rules may be so serious as to justify the
FSA
varying or cancelling the firm's Part IV permission, or withdrawing approval from approved persons, as well as action taken by the RIE. In such cases, the
FSA
will work with the relevant authority to ensure that cases are dealt with efficiently and fairly, under operating arrangements in place (if any) between the
FSA
and the relevant authority.
- 28/08/2007
DEPP 6.2.22
See Notes
In relation to behaviour which may have happened or be happening in the context of a takeover bid, the
FSA
will refer to the Takeover Panel and give due weight to its views. Where the Takeover Code has procedures for complaint about any behaviour, the
FSA
expects parties to exhaust those procedures. The
FSA
will not, save in exceptional circumstances, take action under any of section 123 (FSA'spower to impose penalties), section 129 (Power of court to impose penalties), section 381 (Injunctions), sections 383 or 384 (Restitution) in respect of behaviour to which the Takeover Code is relevant before the conclusion of the procedures available under the Takeover Code.
DEPP 6.2.23
See Notes
The
FSA
will not take action against a person over behaviour which (a) conforms with the Takeover Code or rules of an RIE and (b) falls within the terms of any provision of the Code of Market Conduct which states that behaviour so conforming does not amount to market abuse. The
FSA
will seek the Takeover Panel's or relevant RIE's views on whether behaviour complies with the Takeover Code or RIE rules and will attach considerable weight to its views.
- 28/08/2007
DEPP 6.2.24
See Notes
If any of the circumstances in DEPP 6.2.26 G apply, and the
FSA
considers that the use of its disciplinary powers under section 123 or section 129, or of its injunctive powers under section 381 or of its powers relating to restitution under section 383 or 384 is appropriate, it will not take action during an offer to which the Takeover Code applies except in the circumstances set out in DEPP 6.2.27 G.
- 28/08/2007
DEPP 6.2.25
See Notes
In any case where the
FSA
considers that the use of its powers under any of sections 123, 129, 381, 383 or 384 of the Act may be appropriate, if that use may affect the timetable or outcome of a takeover bid or where it is appropriate in the context of any exercise by the Takeover Panel of its powers and authority, the
FSA
will consult the Takeover Panel before using any of those powers.
- 28/08/2007
DEPP 6.2.26
See Notes
Where the behaviour of a person which amounts to market abuse is behaviour to which the Takeover Code is relevant, the use of the Takeover Panel's powers will often be sufficient to address the relevant concerns. In cases where this is not so, the
FSA
will need to consider whether it is appropriate to use any of its own powers under the market abuse regime. The principal circumstances in which the
FSA
is likely to consider such exercise are:
(2) where the
FSA's
approach in previous similar cases (which may have happened otherwise than in the context of a takeover bid) suggests that a financial penalty should be imposed;
(3) where the behaviour extends to securities or a class of securities which may be outside the Takeover Panel's jurisdiction;
(5) where for any other reason the Takeover Panel asks the
FSA
to consider the use of any of its powers referred to in DEPP 6.2.22 G.
- 28/08/2007
DEPP 6.2.27
See Notes
The exceptional circumstances in which the
FSA
will consider the use of powers during a takeover bid are listed in DEPP 6.2.26G (1), DEPP 6.2.26G (3) and DEPP 6.2.26G (4), and, depending on the circumstances, DEPP 6.2.26G (5).
- 28/08/2007
DEPP 6.3
Penalties for market abuse
- 28/08/2007
DEPP 6.3.1
See Notes
Section 123(2) of the Act states that the
FSA
may not impose a penalty on a person if there are reasonable grounds to be satisfied that:
(1) the person concerned believed, on reasonable grounds, that his behaviour did not amount to market abuse or requiring or encouraging; or
(2) the person concerned took all reasonable precautions and exercised all due diligence to avoid engaging in market abuse or requiring or encouraging.
- 28/08/2007
DEPP 6.3.2
See Notes
The factors which the
FSA
may take into account when deciding whether either of the two conditions in DEPP 6.3.1 G are met include, but are not limited to:
(1) whether, and if so to what extent, the behaviour in question was or was not analogous to behaviour described in the Code of Market Conduct (see MAR 1) as amounting or not amounting to market abuse or requiring or encouraging;
(2) whether the
FSA
has published any guidance or other materials on the behaviour in question and if so, the extent to which the person sought to follow that guidance or take account of those materials (see the Reader's Guide to the Handbook regarding the status of guidance.) The
FSA
will consider the nature and accessibility of any guidance or other published materials when deciding whether it is relevant in this context and, if so, what weight it should be given;
(3) whether, and if so to what extent, the behaviour complied with the rules of any relevant prescribed market or any other relevant market or other regulatory requirements (including the Takeover Code) or any relevant codes of conduct or best practice;
(4) the level of knowledge, skill and experience to be expected of the person concerned;
(5) whether, and if so to what extent, the person can demonstrate that the behaviour was engaged in for a legitimate purpose and in a proper way;
(6) whether, and if so to what extent, the person followed internal consultation and escalation procedures in relation to the behaviour (for example, did the person discuss the behaviour with internal line management and/or internal legal or compliance departments);
(7) whether, and if so the extent to which, the person sought any appropriate expert legal or other expert professional advice and followed that advice; and
(8) whether, and if so to what extent, the person sought advice from the market authorities of any relevant prescribed market or, where relevant, consulted the Takeover Panel, and followed the advice received.
- 28/08/2007
DEPP 6.4
Financial penalty or public censure
- 28/08/2007
DEPP 6.4.1
See Notes
The
FSA
will consider all the relevant circumstances of the case when deciding whether to impose a penalty or issue a public censure. As such, the factors set out in DEPP 6.4.2 G are not exhaustive. Not all of the factors may be relevant in a particular case and there may be other factors, not listed, that are relevant.
- 28/08/2007
DEPP 6.4.2
See Notes
The criteria for determining whether it is appropriate to issue a public censure rather than impose a financial penalty include those factors that the
FSA
will consider in determining the amount of penalty set out in
DEPP 6.5 A to DEPP 6.5 D. Some particular considerations that may be relevant when the
FSA
determines whether to issue a public censure rather than impose a financial penalty are:
(1) whether or not deterrence may be effectively achieved by issuing a public censure;
(2) if the person has made a profit or avoided a loss as a result of the breach, this may be a factor in favour of a financial penalty, on the basis that a person should not be permitted to benefit from its breach;
(3) if the breach is more serious in nature or degree, this may be a factor in favour of a financial penalty, on the basis that the sanction should reflect the seriousness of the breach; other things being equal, the more serious the breach, the more likely the
FSA
is to impose a financial penalty;
(4) if the person has brought the breach to the attention of the
FSA
, this may be a factor in favour of a public censure, depending upon the nature and seriousness of the breach;
(5) if the person has admitted the breach and provides full and immediate co-operation to the
FSA
, and takes steps to ensure that those who have suffered loss due to the breach are fully compensated for those losses, this may be a factor in favour of a public censure, rather than a financial penalty, depending upon the nature and seriousness of the breach;
(6) if the person has a poor disciplinary record or compliance history (for example, where the
FSA
has previously brought disciplinary action resulting in adverse findings in relation to the same or similar behaviour), this may be a factor in favour of a financial penalty, on the basis that it may be particularly important to deter future cases;
(7) the
FSA's
approach in similar previous cases: the
FSA
will seek to achieve a consistent approach to its decisions on whether to impose a financial penalty or issue a public censure; and
(8) the impact on the person concerned. It would only be in an exceptional case that the
FSA
would be prepared to agree to issue a public censure rather than impose a financial penalty if a financial penalty would otherwise be the appropriate sanction. Examples of such exceptional cases could include:
(a) where the application of the
FSA's
policy on serious financial hardship (set out in DEPP 6.5D) results in a financial penalty being reduced to zero;
(b) where there is verifiable evidence that the person would be unable to meet other regulatory requirements, particularly financial resource requirements, if the
FSA
imposed a financial penalty at an appropriate level; or
(c) in Part VI cases in which the FSA may impose a financial penalty, where there is the likelihood of a severe adverse impact on a person's shareholders or a consequential impact on market confidence or market stability if a financial penalty was imposed. However, this does not exclude the imposition of a financial penalty even though this may have an impact on a person's shareholders.
- 06/03/2010
- Past version of DEPP 6.4.2 before 06/03/2010
DEPP 6.5
Determining the appropriate level of financial penalty
- 28/08/2007
DEPP 6.5.1
See Notes
For the purpose of DEPP 6.5 to DEPP 6.5D and DEPP 6.6.2 G, the term "firm" means firms and those unauthorised persons who are not individuals.
- 06/03/2010
- Past version of DEPP 6.5.1 before 06/03/2010
DEPP 6.5.2
See Notes
- 06/03/2010
- Past version of DEPP 6.5.2 before 06/03/2010
DEPP 6.5.3
See Notes
- (1) The total amount payable by a person subject to enforcement action may be made up of two elements: (i) disgorgement of the benefit received as a result of the breach; and (ii) a financial penalty reflecting the seriousness of the breach. These elements are incorporated in a five-step framework, which can be summarised as follows:
- (a) Step 1: the removal of any financial benefit derived directly from the breach;
- (b) Step 2: the determination of a figure which reflects the seriousness of the breach;
- (c) Step 3: an adjustment made to the Step 2 figure to take account of any aggravating and mitigating circumstances;
- (d) Step 4: an upwards adjustment made to the amount arrived at after Steps 2 and 3, where appropriate, to ensure that the penalty has an appropriate deterrent effect; and
- (e) Step 5: if applicable, a settlement discount will be applied. This discount does not apply to disgorgement of any financial benefit derived directly from the breach.
- (2) These steps will apply in all cases, although the details of Steps 1 to 4 will differ for cases against firms (DEPP 6.5A), cases against individuals (DEPP 6.5B) and market abuse cases against individuals (DEPP 6.5C).
- (3) The FSA recognises that a penalty must be proportionate to the breach. The FSA may decrease the level of the penalty arrived at after applying Step 2 of the framework if it considers that the penalty is disproportionately high for the breach concerned. For cases against firms, the FSA will have regard to whether the firm is also an individual (for example, a sole trader) in determining whether the figure arrived at after applying Step 2 is disproportionate.
- (4) The lists of factors and circumstances in DEPP 6.5A to DEPP 6.5D are not exhaustive. Not all of the factors or circumstances listed will necessarily be relevant in a particular case and there may be other factors or circumstances not listed which are relevant.
- (5) The FSA may decide to impose a financial penalty on a mutual (such as a building society), even though this may have a direct impact on that mutual's customers. This reflects the fact that a significant proportion of a mutual's customers are shareholder-members; to that extent, their position involves an assumption of risk that is not assumed by customers of a firm that is not a mutual. Whether a firm is a mutual will not, by itself, increase or decrease the level of a financial penalty.
- (6) Part III (Penalties and Fees) of Schedule 1 to the Act specifically provides that the FSA may not, in determining its policy with respect to the amount of penalties, take account of expenses which it incurs, or expects to incur, in discharging its functions.
- 06/03/2010
- Past version of DEPP 6.5.3 before 06/03/2010
DEPP 6.5A
The five steps for penalties imposed on firms
- 06/03/2010
Step 1 - disgorgement
DEPP 6.5A.1
See Notes
(1) The FSA will seek to deprive a firm of the financial benefit derived directly from the breach (which may include the profit made or loss avoided) where it is practicable to quantify this. The FSA will ordinarily also charge interest on the benefit.
(2) Where the success of a firm's entire business model is dependent on breaching FSA rules or other requirements of the regulatory system and the breach is at the core of the firm's regulated activities, the FSA will seek to deprive the firm of all the financial benefit derived from such activities. Where a firm agrees to carry out a redress programme to compensate those who have suffered loss as a result of the breach, or where the FSA decides to impose a redress programme, the FSA will take this into consideration. In such cases the final penalty might not include a disgorgement element, or the disgorgement element might be reduced.
[Note: For the purposes of DEPP 6.5A, "firm" has the special meaning given to it in DEPP 6.5.1 G]
- 06/03/2010
Step 2 - the seriousness of the breach
DEPP 6.5A.2
See Notes
(1) The FSA will determine a figure that reflects the seriousness of the breach. In many cases, the amount of revenue generated by a firm from a particular product line or business area is indicative of the harm or potential harm that its breach may cause, and in such cases the FSA will determine a figure which will be based on a percentage of the firm's revenue from the relevant products or business areas. The FSA also believes that the amount of revenue generated by a firm from a particular product or business area is relevant in terms of the size of the financial penalty necessary to act as a credible deterrent. However, the FSA recognises that there may be cases where revenue is not an appropriate indicator of the harm or potential harm that a firm's breach may cause, and in those cases the FSA will use an appropriate alternative.
(2) In those cases where the FSA considers that revenue is an appropriate indicator of the harm or potential harm that a firm's breach may cause, the FSA will determine a figure which will be based on a percentage of the firm's "relevant revenue". "Relevant revenue" will be the revenue derived by the firm during the period of the breach from the products or business areas to which the breach relates. Where the breach lasted less than 12 months, or was a one-off event, the relevant revenue will be that derived by the firm in the 12 months preceding the end of the breach. Where the firm was in existence for less than 12 months, its relevant revenue will be calculated on a pro rata basis to the equivalent of 12 months' relevant revenue.
(3) Having determined the relevant revenue, the FSA will then decide on the percentage of that revenue which will form the basis of the penalty. In making this determination the FSA will consider the seriousness of the breach and choose a percentage between 0% and 20%. This range is divided into five fixed levels which represent, on a sliding scale, the seriousness of the breach. The more serious the breach, the higher the level. For penalties imposed on firms there are the following five levels:
(a) level 1 - 0%;
(b) level 2 - 5%;
(c) level 3 - 10%;
(d) level 4 - 15%; and
(e) level 5 - 20%.
(4) The FSA will assess the seriousness of a breach to determine which level is most appropriate to the case.
(5) In deciding which level is most appropriate to a case involving a firm, the FSA will take into account various factors, which will usually fall into the following four categories:
(a) factors relating to the impact of the breach;
(b) factors relating to the nature of the breach;
(c) factors tending to show whether the breach was deliberate; and
(d) factors tending to show whether the breach was reckless.
(6) Factors relating to the impact of a breach committed by a firm include:
(a) the level of benefit gained or loss avoided, or intended to be gained or avoided, by the firm from the breach, either directly or indirectly;
(b) the loss or risk of loss, as a whole, caused to consumers, investors or other market users in general;
(c) the loss or risk of loss caused to individual consumers, investors or other market users;
(d) whether the breach had an effect on particularly vulnerable people, whether intentionally or otherwise;
(e) the inconvenience or distress caused to consumers; and
(f) whether the breach had an adverse effect on markets and, if so, how serious that effect was. This may include having regard to whether the orderliness of, or confidence in, the markets in question has been damaged or put at risk.
(7) Factors relating to the nature of a breach by a firm include:
(a) the nature of the rules, requirements or provisions breached;
(b) the frequency of the breach;
(c) whether the breach revealed serious or systemic weaknesses in the firm's procedures or in the management systems or internal controls relating to all or part of the firm's business;
(d) whether the firm's senior management were aware of the breach;
(e) the nature and extent of any financial crime facilitated, occasioned or otherwise attributable to the breach;
(f) the scope for any potential financial crime to be facilitated, occasioned or otherwise occur as a result of the breach;
(g) whether the firm failed to conduct its business with integrity;
(8) Factors tending to show the breach was deliberate include:
(a) the breach was intentional, in that the firm's senior management, or a responsible individual, intended or foresaw that the likely or actual consequences of their actions or inaction would result in a breach;
(b) the firm's senior management, or a responsible individual, knew that their actions were not in accordance with the firm's internal procedures;
(c) the firm's senior management, or a responsible individual, sought to conceal their misconduct;
(d) the firm's senior management, or a responsible individual, committed the breach in such a way as to avoid or reduce the risk that the breach would be discovered;
(e) the firm's senior management, or a responsible individual, were influenced to commit the breach by the belief that it would be difficult to detect;
(f) the breach was repeated; and
(g) in the context of a contravention of any rule or requirement imposed by or under Part VI of the Act, the firm obtained reasonable professional advice before the contravention occurred and failed to follow that advice. Obtaining professional advice does not remove a person's responsibility for compliance with applicable rules and requirements.
(9) Factors tending to show the breach was reckless include:
(a) the firm's senior management, or a responsible individual, appreciated there was a risk that their actions or inaction could result in a breach and failed adequately to mitigate that risk; and
(b) the firm's senior management, or a responsible individual, were aware there was a risk that their actions or inaction could result in a breach but failed to check if they were acting in accordance with the firm's internal procedures.
(10) Additional factors to which the FSA will have regard when determining the appropriate level of financial penalty to be imposed under regulation 34 of the RCB Regulations are set out in RCB 4.2.5 G.
(11) In following this approach factors which are likely to be considered 'level 4 factors' or 'level 5 factors' include:
(a) the breach caused a significant loss or risk of loss to individual consumers, investors or other market users;
(b) the breach revealed serious or systemic weaknesses in the firm's procedures or in the management systems or internal controls relating to all or part of the firm's business;
(c) financial crime was facilitated, occasioned or otherwise attributable to the breach;
(d) the breach created a significant risk that financial crime would be facilitated, occasioned or otherwise occur;
(e) the firm failed to conduct its business with integrity; and
(f) the breach was committed deliberately or recklessly.
(12) Factors which are likely to be considered 'level 1 factors', 'level 2 factors' or 'level 3 factors' include:
(a) little, or no, profits were made or losses avoided as a result of the breach, either directly or indirectly;
(b) there was no or little loss or risk of loss to consumers, investors or other market users individually and in general;
(c) there was no, or limited, actual or potential effect on the orderliness of, or confidence in, markets as a result of the breach;
(d) there is no evidence that the breach indicates a widespread problem or weakness at the firm; and
(e) the breach was committed negligently or inadvertently.
(13) In those cases where revenue is not an appropriate indicator of the harm or potential harm that a firm's breach may cause, the FSA will adopt a similar approach, and so will determine the appropriate Step 2 amount for a particular breach by taking into account relevant factors, including those listed above. In these cases the FSA may not use the percentage levels that are applied in those cases in which revenue is an appropriate indicator of the harm or potential harm that a firm's breach may cause.
- 06/03/2010
Step 3 - mitigating and aggravating factors
DEPP 6.5A.3
See Notes
(1) The
FSA
may increase or decrease the amount of the financial penalty arrived at after Step 2, but not including any amount to be disgorged as set out in Step 1, to take into account factors which aggravate or mitigate the breach. Any such adjustments will be made by way of a percentage adjustment to the figure determined at Step 2.
(2) The following list of factors may have the effect of aggravating or mitigating the breach:
(a) the conduct of the firm in bringing (or failing to bring) quickly, effectively and completely the breach to the
FSA's
attention (or the attention of other regulatory authorities, where relevant);
(b) the degree of cooperation the firm showed during the investigation of the breach by the
FSA
, or any other regulatory authority allowed to share information with the
FSA
;
(c) where the firm's senior management were aware of the breach or of the potential for a breach, whether they took any steps to stop the breach, and when these steps were taken;
(d) any remedial steps taken since the breach was identified, including whether these were taken on the firm's own initiative or that of the
FSA
or another regulatory authority; for example, identifying whether consumers or investors or other market users suffered loss and compensating them where they have; correcting any misleading statement or impression; taking disciplinary action against staff involved (if appropriate); and taking steps to ensure that similar problems cannot arise in the future. The size and resources of the firm may be relevant to assessing the reasonableness of the steps taken;
(e) whether the firm has arranged its resources in such a way as to allow or avoid disgorgement and/or payment of a financial penalty;
(f) whether the firm had previously been told about the
FSA's
concerns in relation to the issue, either by means of a private warning or in supervisory correspondence;
(g) whether the firm had previously undertaken not to perform a particular act or engage in particular behaviour;
(h) whether the firm concerned has complied with any requirements or rulings of another regulatory authority relating to the breach;
(i) the previous disciplinary record and general compliance history of the firm;
(j) action taken against the firm by other domestic or international regulatory authorities that is relevant to the breach in question;
- 06/03/2010
Step 4 - adjustment for deterrence
DEPP 6.5A.4
See Notes
(1) If the
FSA
considers the figure arrived at after Step 3 is insufficient to deter the firm who committed the breach, or others, from committing further or similar breaches then the
FSA
may increase the penalty. Circumstances where the
FSA
may do this include:
(a) where the
FSA
considers the absolute value of the penalty too small in relation to the breach to meet its objective of credible deterrence;
(b) where previous
FSA
action in respect of similar breaches has failed to improve industry standards. This may include similar breaches relating to different products (for example, action for mis-selling or claims handling failures in respect of 'x' product may be relevant to a case for mis-selling or claims handling failures in respect of 'y' product);
- 06/03/2010
Step 5 - settlement discount
DEPP 6.5A.5
See Notes
The
FSA
and the firm on whom a penalty is to be imposed may seek to agree the amount of any financial penalty and other terms. In recognition of the benefits of such agreements, DEPP 6.7 provides that the amount of the financial penalty which might otherwise have been payable will be reduced to reflect the stage at which the
FSA
and the firm concerned reached an agreement. The settlement discount does not apply to the disgorgement of any benefit calculated at Step 1.
- 06/03/2010
DEPP 6.5B
The five steps for penalties imposed on individuals in non-market abuse cases
- 06/03/2010
Step 1 - disgorgement
DEPP 6.5B.1
See Notes
The
FSA
will seek to deprive an individual of the financial benefit derived directly from the breach (which may include the profit made or loss avoided) where it is practicable to quantify this. The
FSA
will ordinarily also charge interest on the benefit. Where the success of a firm's entire business model is dependent on breaching
FSA
rules or other requirements of the regulatory system and the individual's breach is at the core of the firm's regulated activities, the
FSA
will seek to deprive the individual of all the financial benefit he has derived from such activities.
[Note: For the purposes of DEPP 6.5B, "firm" has the special meaning given to it in DEPP 6.5.1 G.]
[Note: For the purposes of DEPP 6.5B, "firm" has the special meaning given to it in DEPP 6.5.1 G.]
- 06/03/2010
Step 2 - the seriousness of the breach
DEPP 6.5B.2
See Notes
(1) The FSA will determine a figure which will be based on a percentage of an individual's "relevant income". "Relevant income" will be the gross amount of all benefits received by the individual from the employment in connection with which the breach occurred (the "relevant employment"), and for the period of the breach. In determining an individual's relevant income, "benefits" includes, but is not limited to, salary, bonus, pension contributions, share options and share schemes; and "employment" includes, but is not limited to, employment as an adviser, director, partner or contractor.
(2) Where the breach lasted less than 12 months, or was a one-off event, the relevant income will be that earned by the individual in the 12 months preceding the end of the breach. Where the individual was in the relevant employment for less than 12 months, his relevant income will be calculated on a pro rata basis to the equivalent of 12 months' relevant income.
(3) This approach reflects the FSA's view that an individual receives remuneration commensurate with his responsibilities, and so it is reasonable to base the amount of penalty for failure to discharge his duties properly on his remuneration. The FSA also believes that the extent of the financial benefit earned by an individual is relevant in terms of the size of the financial penalty necessary to act as a credible deterrent. The FSA recognises that in some cases an individual may be approved for only a small part of the work he carries out on a day-to-day basis. However, in these circumstances the FSA still considers it appropriate to base the relevant income figure on all of the benefit that an individual gains from the relevant employment, even if his employment is not totally related to a controlled function.
(4) Having determined the relevant income the FSA will then decide on the percentage of that income which will form the basis of the penalty. In making this determination the FSA will consider the seriousness of the breach and choose a percentage between 0% and 40%.
(5) This range is divided into five fixed levels which reflect, on a sliding scale, the seriousness of the breach. The more serious the breach, the higher the level. For penalties imposed on individuals there are the following five levels:
(a) level 1 - 0%;
(b) level 2 - 10%;
(c) level 3 - 20%;
(d) level 4 - 30%; and
(e) level 5 - 40%.
(6) The FSA will assess the seriousness of a breach to determine which level is most appropriate to the case.
(7) In deciding which level is most appropriate to a case against an individual, the FSA will take into account various factors which will usually fall into the following four categories:
(a) factors relating to the impact of the breach;
(b) factors relating to the nature of the breach;
(c) factors tending to show whether the breach was deliberate; and
(d) factors tending to show whether the breach was reckless.
(8) Factors relating to the impact of a breach committed by an individual include:
(a) the level of benefit gained or loss avoided, or intended to be gained or avoided, by the individual from the breach, either directly or indirectly;
(b) the loss or risk of loss, as a whole, caused to consumers, investors or other market users in general;
(c) the loss or risk of loss caused to individual consumers, investors or other market users;
(d) whether the breach had an effect on particularly vulnerable people, whether intentionally or otherwise;
(e) the inconvenience or distress caused to consumers; and
(f) whether the breach had an adverse effect on markets and, if so, how serious that effect was. This may include having regard to whether the orderliness of, or confidence in, the markets in question has been damaged or put at risk.
(9) Factors relating to the nature of a breach by an individual include:
(a) the nature of the rules, requirements or provisions breached;
(b) the frequency of the breach;
(c) the nature and extent of any financial crime facilitated, occasioned or otherwise attributable to the breach;
(d) the scope for any potential financial crime to be facilitated, occasioned or otherwise occur as a result of the breach;
(e) whether the individual failed to act with integrity;
(f) whether the individual abused a position of trust;
(g) whether the individual committed a breach of any professional code of conduct;
(h) whether the individual caused or encouraged other individuals to commit breaches;
(i) whether the individual held a prominent position within the industry;
(j) whether the individual is an experienced industry professional;
(k) whether the individual held a senior position with the firm;
(l) the extent of the responsibility of the individual for the product or business areas affected by the breach, and for the particular matter that was the subject of the breach;
(m) whether the individual acted under duress;
(n) whether the individual took any steps to comply with FSA rules, and the adequacy of those steps;
(o) in the context of contraventions of Part VI of the Act, the extent to which the behaviour which constitutes the contravention departs from current market practice;
(p) in relation to a contravention of section 63A of the Act, whether the individual's only misconduct was to perform a controlled function without approval;
(q) in relation to a contravention of section 63A of the Act, whether the individual performed controlled functions without approval and, while doing so, committed misconduct in respect of which, if the individual had been an approved person, the FSA would have been empowered to take action pursuant to section 66 of the Act; and
(r) in relation to a contravention of section 63A of the Act, the extent to which the individual could reasonably be expected to have known that he was performing a controlled function without approval. The circumstances in which the FSA would expect to be satisfied that a person could reasonably be expected to have known that he was performing a controlled function without approval include:
(i) the person had previously performed a similar role at the same or another firm for which he had been approved;
(ii) the person'sfirm or another firm had previously applied for approval for the person to perform the same or a similar controlled function;
(iii) the person's seniority or experience was such that he could reasonably be expected to have known that he was performing a controlled function without approval; and
(10) Factors tending to show the breach was deliberate include:
(a) the breach was intentional, in that the individual intended or foresaw that the likely or actual consequences of his actions or inaction would result in a breach;
(b) the individual intended to benefit financially from the breach, either directly or indirectly;
(c) the individual knew that his actions were not in accordance with his firm's internal procedures;
(d) the individual sought to conceal his misconduct;
(e) the individual committed the breach in such a way as to avoid or reduce the risk that the breach would be discovered;
(f) the individual was influenced to commit the breach by the belief that it would be difficult to detect;
(g) the individual knowingly took decisions relating to the breach beyond his field of competence; and
(h) the individual's actions were repeated.
(11) Factors tending to show the breach was reckless include:
(a) the individual appreciated there was a risk that his actions or inaction could result in a breach and failed adequately to mitigate that risk; and
(b) the individual was aware there was a risk that his actions or inaction could result in a breach but failed to check if he was acting in accordance with internal procedures.
(12) In following this approach factors which are likely to be considered 'level 4 factors' or 'level 5 factors' include:
(a) the breach caused a significant loss or risk of loss to individual consumers, investors or other market users;
(b) financial crime was facilitated, occasioned or otherwise attributable to the breach;
(c) the breach created a significant risk that financial crime would be facilitated, occasioned or otherwise occur;
(d) the individual failed to act with integrity;
(e) the individual abused a position of trust;
(f) the individual held a prominent position within the industry; and
(g) the breach was committed deliberately or recklessly.
(13) Factors which are likely to be considered 'level 1 factors', 'level 2 factors' or 'level 3 factors' include:
(a) little, or no, profits were made or losses avoided as a result of the breach, either directly or indirectly;
(b) there was no or little loss or risk of loss to consumers, investors or other market users individually and in general;
(c) there was no, or limited, actual or potential effect on the orderliness of, or confidence in, markets as a result of the breach;
(d) the breach was committed negligently or inadvertently; and
(e) in relation to a contravention of section 63A of the Act, the individual's only misconduct was to perform a controlled function without approval.
Step 3 - mitigating and aggravating factors
DEPP 6.5B.3
See Notes
(1) The FSA may increase or decrease the amount of the financial penalty arrived at after Step 2, but not including any amount to be disgorged as set out in Step 1, to take into account factors which aggravate or mitigate the breach. Any such adjustments will be made by way of a percentage adjustment to the figure determined at Step 2.
(2) The following list of factors may have the effect of aggravating or mitigating the breach:
(a) the conduct of the individual in bringing (or failing to bring) quickly, effectively and completely the breach to the FSA's attention (or the attention of other regulatory authorities, where relevant);
(b) the degree of cooperation the individual showed during the investigation of the breach by the FSA , or any other regulatory authority allowed to share information with the FSA ;
(c) whether the individual took any steps to stop the breach, and when these steps were taken;
(d) any remedial steps taken since the breach was identified, including whether these were taken on the individual's own initiative or that of the FSA or another regulatory authority;
(e) whether the individual has arranged his resources in such a way as to allow or avoid disgorgement and/or payment of a financial penalty;
(f) whether the individual had previously been told about the FSA's concerns in relation to the issue, either by means of a private warning or in supervisory correspondence;
(g) whether the individual had previously undertaken not to perform a particular act or engage in particular behaviour;
(h) whether the individual has complied with any requirements or rulings of another regulatory authority relating to the breach;
(i) the previous disciplinary record and general compliance history of the individual;
(j) action taken against the individual by other domestic or international regulatory authorities that is relevant to the breach in question;
(k) whether FSA guidance or other published materials had already raised relevant concerns, and the nature and accessibility of such materials;
(l) whether the FSA publicly called for an improvement in standards in relation to the behaviour constituting the breach or similar behaviour before or during the occurrence of the breach;
(m) whether the individual agreed to undertake training subsequent to the breach; and
Step 4 - adjustment for deterrence
DEPP 6.5B.4
See Notes
(1) If the
FSA
considers the figure arrived at after Step 3 is insufficient to deter the individual who committed the breach, or others, from committing further or similar breaches then the
FSA
may increase the penalty. Circumstances where the
FSA
may do this include:
(a) where the
FSA
considers the absolute value of the penalty too small in relation to the breach to meet its objective of credible deterrence;
(b) where previous
FSA
action in respect of similar breaches has failed to improve industry standards. This may include similar breaches relating to different products (for example, action for mis-selling or claims handling failures in respect of 'x' product may be relevant to a case for mis-selling or claims handling failures in respect of 'y' product);
(c) where the
FSA
considers it is likely that similar breaches will be committed by the individual or by other individuals in the future;
(e) where a penalty based on an individual's income may not act as a deterrent, for example, if an individual has a small or zero income but owns assets of high value.
- 06/03/2010
Step 5 - settlement discount
DEPP 6.5B.5
See Notes
The
FSA
and the individual on whom a penalty is to be imposed may seek to agree the amount of any financial penalty and other terms. In recognition of the benefits of such agreements, DEPP 6.7 provides that the amount of the financial penalty which might otherwise have been payable will be reduced to reflect the stage at which the
FSA
and the individual concerned reached an agreement. The settlement discount does not apply to the disgorgement of any benefit calculated at Step 1.
- 06/03/2010
DEPP 6.5C
The five steps for penalties imposed on individuals in market abuse cases
- 06/03/2010
Step 1 - disgorgement
DEPP 6.5C.1
See Notes
The
FSA
will seek to deprive an individual of the financial benefit derived as a direct result of the market abuse (which may include the profit made or loss avoided) where it is practicable to quantify this. The
FSA
will ordinarily also charge interest on the benefit.
- 06/03/2010
Step 2 - the seriousness of the market abuse
DEPP 6.5C.2
See Notes
- (1) The FSA will determine a figure dependent on the seriousness of the market abuse and whether or not it was referable to the individual's employment. This reflects the FSA's view that where an individual has been put into a position where he can commit market abuse because of his employment the fine imposed should reflect this by reference to the gross amount of all benefits derived from that employment.
- (2) In cases where the market abuse was referable to the individual's employment, the figure for the purpose of Step 2 will be the greater of:
- (a) a figure based on a percentage of the individual's "relevant income". The percentage of relevant income which will apply is explained in paragraphs (6) and (8) to (16) below;
- (b) a multiple of the profit made or loss avoided by the individual for his own benefit, or for the benefit of other individuals where the individual has been instrumental in achieving that benefit, as a direct result of the market abuse (the "profit multiple"). The profit multiple which will apply is explained in paragraphs (6) and (8) to (16) below; and
- (c) for market abuse cases which the FSA assesses to be seriousness level 4 or 5, £100,000. How the FSA will assess the seriousness level of the market abuse is explained in paragraphs (9) to (16) below. The FSA usually expects to assess market abuse committed deliberately as seriousness level 4 or 5.
- (3) In cases where the market abuse was not referable to the individual's employment, the figure for the purpose of Step 2 will be the greater of:
- (a) a multiple of the profit made or loss avoided by the individual for his own benefit, or for the benefit of other individuals where the individual has been instrumental in achieving that benefit, as a direct result of the market abuse (the "profit multiple"). The profit multiple which will apply is explained in paragraphs (7) to (16) below; and
- (b) for market abuse cases which the FSA assesses to be seriousness level 4 or 5, £100,000. How the FSA will assess the seriousness level of the market abuse is explained in paragraphs (9) to (16) below. The FSA usually expects to assess market abuse committed deliberately as seriousness level 4 or 5.
- (4) An individual's "relevant income" will be the gross amount of all benefits received by the individual from the employment in connection with which the market abuse occurred (the "relevant employment") for the period of the market abuse. In determining an individual's relevant income, "benefits" includes, but is not limited to, salary, bonus, pension contributions, share options and share schemes; and "employment" includes, but is not limited to, employment as an adviser, director, partner or contractor.
- (5) Where the market abuse lasted less than 12 months, or was a one-off event, the relevant income will be that earned by the individual in the 12 months preceding the final market abuse. Where the individual was in the relevant employment for less than 12 months, his relevant income will be calculated on a pro rata basis to the equivalent of 12 months' relevant income.
- (6) In cases where the market abuse was referable to the individual's employment:
- (a) the FSA will determine the percentage of relevant income which will apply by considering the seriousness of the market abuse and choosing a percentage between 0% and 40%; and
- (b) the FSA will determine the profit multiple which will apply by considering the seriousness of the market abuse and choosing a multiple between 0 and 4.
- (7) In cases where the market abuse was not referable to the individual's employment the FSA will determine the profit multiple which will apply by considering the seriousness of the market abuse and choosing a multiple between 0 and 4.
- (8) The percentage range (where the market abuse was referable to the individual's employment) and profit multiple range (in all cases) are divided into five fixed levels which reflect, on a sliding scale, the seriousness of the market abuse. The more serious the market abuse, the higher the level. For penalties imposed on individuals for market abuse there are the following five levels (the percentage figures only apply where the market abuse was referable to the individual's employment):
- (a) level 1 - 0%, profit multiple of 0;
- (b) level 2 - 10%, profit multiple of 1;
- (c) level 3 - 20%, profit multiple of 2;
- (d) level 4 - 30%, profit multiple of 3; and
- (e) level 5 - 40%, profit multiple of 4.
- (9) The FSA will assess the seriousness of the market abuse to determine which level is most appropriate to the case.
- (10) In deciding which level is most appropriate to a market abuse case, the FSA will take into account various factors which will usually fall into the following four categories:
- (a) factors relating to the impact of the market abuse;
- (b) factors relating to the nature of the market abuse;
- (c) factors tending to show whether the market abuse was deliberate; and
- (d) factors tending to show whether the market abuse was reckless.
- (11) Factors relating to the impact of the market abuse include:
- (a) the level of benefit gained or loss avoided, or intended to be gained or avoided, by the individual from the market abuse, either directly or indirectly;
- (b) whether the market abuse had an adverse effect on markets and, if so, how serious that effect was. This may include having regard to whether the orderliness of, or confidence in, the markets in question has been damaged or put at risk; and
- (c) whether the market abuse had a significant impact on the price of shares or other investments.
- (12) Factors relating to the nature of the market abuse include:
- (a) the frequency of the market abuse;
- (b) whether the individual abused a position of trust;
- (c) whether the individual caused or encouraged other individuals to commit market abuse;
- (d) whether the individual has a prominent position in the market;
- (e) whether the individual is an experienced industry professional;
- (f) whether the individual held a senior position with the firm; and
- (g) whether the individual acted under duress.
- (13) Factors tending to show the market abuse was deliberate include:
- (a) the market abuse was intentional, in that the individual intended or foresaw that the likely or actual consequences of his actions would result in market abuse;
- (b) the individual intended to benefit financially from the market abuse, either directly or indirectly;
- (c) the individual knew that his actions were not in accordance with exchange rules, share dealing rules and/or the firm's internal procedures;
- (d) the individual sought to conceal his misconduct;
- (e) the individual committed the market abuse in such a way as to avoid or reduce the risk that the market abuse would be discovered;
- (f) the individual was influenced to commit the market abuse by the belief that it would be difficult to detect;
- (g) the individual's actions were repeated;
- (h) for market abuse falling within section 118(2) of the Act, the individual knew or recognised that the information on which the dealing was based was inside information; and
- (i) for market abuse falling within section 118(4) of the Act, the individual's behaviour was based on information which he knew or recognised was not generally available to those using the market, and the individual regarded the information as relevant when deciding the terms on which transactions in qualifying investments should be effected.
- (14) Factors tending to show the market abuse was reckless include:
- (a) the individual appreciated there was a risk that his actions could result in market abuse and failed adequately to mitigate that risk; and
- (b) the individual was aware there was a risk that his actions could result in market abuse but failed to check if he was acting in accordance with internal procedures.
- (15) In following this approach factors which are likely to be considered 'level 4 factors' or 'level 5 factors' include:
- (a) the level of benefit gained or loss avoided, or intended to be gained or avoided, directly by the individual from the market abuse was significant;
- (b) the market abuse had a serious adverse effect on the orderliness of, or confidence in, markets;
- (c) the market abuse was committed on multiple occasions;
- (d) the individual breached a position of trust;
- (e) the individual has a prominent position in the market; and
- (f) the market abuse was committed deliberately or recklessly.
- (16) In following this approach factors which are likely to be considered 'level 1 factors', 'level 2 factors' or 'level 3 factors' include:
- (a) little, or no, profits were made or losses avoided as a result of the market abuse, either directly or indirectly;
- (b) there was no, or limited, actual or potential effect on the orderliness of, or confidence in, markets as a result of the market abuse; and
- (c) the market abuse was committed negligently or inadvertently.
[Note: For the purposes of DEPP 6.5C, "firm" has the special meaning given to it in DEPP 6.5.1 G.]
- 06/03/2010
Step 3 - mitigating and aggravating factors
DEPP 6.5C.3
See Notes
(1) The
FSA
may increase or decrease the amount of the financial penalty arrived at after Step 2, but not including any amount to be disgorged as set out in Step 1, to take into account factors which aggravate or mitigate the market abuse. Any such adjustments will be made by way of a percentage adjustment to the figure determined at Step 2.
(2) The following list of factors may have the effect of aggravating or mitigating the market abuse:
(a) the conduct of the individual in bringing (or failing to bring) quickly, effectively and completely the market abuse to the
FSA's
attention (or the attention of other regulatory authorities, where relevant);
(b) the degree of cooperation the individual showed during the investigation of the market abuse by the
FSA
, or any other regulatory authority allowed to share information with the
FSA
;
(c) whether the individual assists the
FSA
in action taken against other individuals for market abuse and/or in criminal proceedings;
(d) whether the individual has arranged his resources in such a way as to allow or avoid disgorgement and/or payment of a financial penalty;
(e) whether the individual had previously been told about the
FSA's
concerns in relation to the issue, either by means of a private warning or in supervisory correspondence;
(f) the previous disciplinary record and general compliance history of the individual;
(g) action taken against the individual by other domestic or international regulatory authorities that is relevant to the market abuse in question;
(h) whether
FSA
guidance or other published materials had already raised relevant concerns, and the nature and accessibility of such materials; and
(i) whether the individual agreed to undertake training subsequent to the market abuse.
- 06/03/2010
Step 4 - adjustment for deterrence
DEPP 6.5C.4
See Notes
(1) If the
FSA
considers the figure arrived at after Step 3 is insufficient to deter the individual who committed the market abuse, or others, from committing further or similar abuse then the
FSA
may increase the penalty. Circumstances where the
FSA
may do this include:
(a) where the
FSA
considers the absolute value of the penalty too small in relation to the market abuse to meet its objective of credible deterrence;
(b) where previous
FSA
action in respect of similar market abuse has failed to improve industry standards; and
(c) where the penalty may not act as a deterrent in light of the size of the individual's income or net assets.
- 06/03/2010
Step 5 - settlement discount
DEPP 6.5C.5
See Notes
The
FSA
and the individual on whom a penalty is to be imposed may seek to agree the amount of any financial penalty and other terms. In recognition of the benefits of such agreements, DEPP 6.7 provides that the amount of the financial penalty which might otherwise have been payable will be reduced to reflect the stage at which the
FSA
and the individual concerned reached an agreement. The settlement discount does not apply to the disgorgement of any benefit calculated at Step 1.
- 06/03/2010
DEPP 6.5D
Serious financial hardship
- 06/03/2010
DEPP 6.5D.1
See Notes
(1) The FSA's approach to determining penalties described in DEPP 6.5 to DEPP 6.5C is intended to ensure that financial penalties are proportionate to the breach. The FSA recognises that penalties may affect persons differently, and that the FSA should consider whether a reduction in the proposed penalty is appropriate if the penalty would cause the subject of enforcement action serious financial hardship.
(2) Where an individual or firm claims that payment of the penalty proposed by the FSA will cause them serious financial hardship, the FSA will consider whether to reduce the proposed penalty only if:
(a) the individual or firm provides verifiable evidence that payment of the penalty will cause them serious financial hardship; and
(b) the individual or firm provides full, frank and timely disclosure of the verifiable evidence, and cooperates fully in answering any questions asked by the FSA about their financial position.
(3) The onus is on the individual or firm to satisfy the FSA that payment of the penalty will cause them serious financial hardship.
[Note: For the purposes of DEPP 6.5D, "firm" has the special meaning given to it in DEPP 6.5.1 G.]- 06/03/2010
Individuals
DEPP 6.5D.2
See Notes
(1) In assessing whether a penalty would cause an individual serious financial hardship, the
FSA
will consider the individual's ability to pay the penalty over a reasonable period (normally no greater than three years). The
FSA's
starting point is that an individual will suffer serious financial hardship only if during that period his net annual income will fall below £14,000 and his capital will fall below £16,000 as a result of payment of the penalty. Unless the
FSA
believes that both the individual's income and capital will fall below these respective thresholds as a result of payment of the penalty, the
FSA
is unlikely to be satisfied that the penalty will result in serious financial hardship.
(2) The
FSA
will consider all relevant circumstances in determining whether the income and capital threshold levels should be increased in a particular case.
(3) The
FSA
will consider agreeing to payment of the penalty by instalments where the individual requires time to realise his assets, for example by waiting for payment of a salary or by selling property.
(4) For the purposes of considering whether an individual will suffer serious financial hardship, the
FSA
will consider as capital anything that could provide the individual with a source of income, including savings, property (including personal possessions), investments and land. The
FSA
will normally consider as capital the equity that an individual has in the home in which he lives, but will consider any representations by the individual about this; for example, as to the exceptionally severe impact a sale of the property might have upon other occupants of the property or the impracticability of re-mortgaging or selling the property within a reasonable period.
(5) The
FSA
may also consider the extent to which the individual has access to other means of financial support in determining whether he is able to pay the penalty without being caused serious financial hardship.
(6) Where a penalty is reduced it will be reduced to an amount which the individual can pay without going below the threshold levels that apply in that case. If an individual has no income, any reduction in the penalty will be to an amount that the individual can pay without going below the capital threshold.
(7) There may be cases where, even though the individual has satisfied the
FSA
that payment of the financial penalty would cause him serious financial hardship, the
FSA
considers the breach to be so serious that it is not appropriate to reduce the penalty. The
FSA
will consider all the circumstances of the case in determining whether this course of action is appropriate, including whether:
(a) the individual directly derived a financial benefit from the breach and, if so, the extent of that financial benefit;
(b) the individual acted fraudulently or dishonestly with a view to personal gain;
- 06/03/2010
Prohibition orders and withdrawal of approval
DEPP 6.5D.3
See Notes
In cases against individuals, including market abuse cases, the
FSA
may make a prohibition order under section 56 of the Act or withdraw an individual's approval under section 63 of the Act, as well as impose a financial penalty. Such action by the
FSA
reflects the
FSA's
assessment of the individual's fitness to perform regulated activity or suitability for a particular role, and does not affect the
FSA's
assessment of the appropriate financial penalty in relation to a breach. However, the fact that the
FSA
has made a prohibition order against an individual or withdrawn his approval, as a result of which the individual may have less earning potential, may be relevant in assessing whether the penalty will cause the individual serious financial hardship.
- 06/03/2010
Firms
DEPP 6.5D.4
See Notes
(1) The
FSA
will consider reducing the amount of a penalty if a firm will suffer serious financial hardship as a result of having to pay the entire penalty. In deciding whether it is appropriate to reduce the penalty, the
FSA
will take into consideration the firm's financial circumstances, including whether the penalty would render the firm insolvent or threaten the firm's solvency. The
FSA
will also take into account its regulatory objectives, for example in situations where consumers would be harmed or market confidence would suffer, the
FSA
may consider it appropriate to reduce a penalty in order to allow a firm to continue in business and/or pay redress.
(2) There may be cases where, even though the firm has satisfied the
FSA
that payment of the financial penalty would cause it serious financial hardship, the
FSA
considers the breach to be so serious that it is not appropriate to reduce the penalty. The
FSA
will consider all the circumstances of the case in determining whether this course of action is appropriate, including whether:
(a) the firm directly derived a financial benefit from the breach and, if so, the extent of that financial benefit;
(b) the firm acted fraudulently or dishonestly in order to benefit financially;
- 06/03/2010
Withdrawal of authorisation
DEPP 6.5D.4A
See Notes
The
FSA
may withdraw a firm's authorisation under section 33 of the Act, as well as impose a financial penalty. Such action by the
FSA
does not affect the
FSA's
assessment of the appropriate financial penalty in relation to a breach. However, the fact that the
FSA
has withdrawn a firm's authorisation, as a result of which the firm may have less earning potential, may be relevant in assessing whether the penalty will cause the firm serious financial hardship.
- 06/03/2011
Transfers of assets
DEPP 6.5D.5
See Notes
Where the
FSA
considers that, following commencement of an
FSA
investigation, an individual or firm has reduced their solvency in order to reduce the amount of any disgorgement or financial penalty payable, for example by transferring assets to third parties, the
FSA
will normally take account of those assets when determining whether the individual or firm would suffer serious financial hardship as a result of the disgorgement and financial penalty.
- 06/03/2010
DEPP 6.6
Financial penalties for late and incomplete submission of reports
- 28/08/2007
DEPP 6.6.1
See Notes
(1) The FSA attaches considerable importance to the timely submission by firms of reports. This is because the information that they contain is essential to the FSA's assessment of whether a firm is complying with the requirements and standards of the regulatory system and to the FSA's understanding of that firm's business.
(2) DEPP 6.6.1 G to DEPP 6.6.5 G set out the FSA's policy in relation to financial penalties for late submission of reports and is in addition to the FSA's policy relating to financial penalties as set out in DEPP 6.5 to DEPP 6.5D.
- 06/03/2010
- Past version of DEPP 6.6.1 before 06/03/2010
DEPP 6.6.2
See Notes
In addition to the factors considered in Step 2 for cases against firms (DEPP 6.5A) and cases against individuals (DEPP 6.5B), the following considerations are relevant.
(1) In general, the
FSA's
approach to disciplinary action arising from the late submission of a report will depend upon the length of time after the due date that the report in question is submitted.
(2) If the person concerned is an individual, it is open to him to make representations to the
FSA
as to why he should not be the subject of a financial penalty, or why a lower penalty should be imposed. If he does so, the matters to which the
FSA
will have regard will include the matters set out in
DEPP 6.5B
. It should be noted that an administrative difficulty such as pressure of work does not, in itself, constitute a relevant circumstance for this purpose.
(3) The
FSA
will have regard to repeated failures to submit reports on time. In the majority of cases involving such repeated failure, the
FSA
considers that it will be appropriate to seek more serious disciplinary sanctions or other enforcement action, including seeking to apply for the cancellation of the
firm's
permission.
(4) The
FSA
will also have regard to the submission frequency of the late report when assessing the seriousness of the contravention. For example, a short delay in submitting a weekly or monthly report can have serious implications for the supervision of the
firm
in question. Such a delay may therefore be subject to a higher penalty than might otherwise be the case.
[Note: For the purposes of DEPP 6.6.2 G, "firm" has the special meaning given to it in DEPP 6.5.1.]- 06/03/2010
- Past version of DEPP 6.6.2 before 06/03/2010
DEPP 6.6.3
See Notes
In addition, in appropriate cases, the
FSA
may bring disciplinary action against the approved persons within the firm's management who are ultimately responsible for ensuring that the firm's reports are completed and returned to the
FSA
.
- 28/08/2007
DEPP 6.6.4
See Notes
In applying the guidance in this section, the
FSA
may treat a report which is materially incomplete or inaccurate as not received until it has been submitted in a form which is materially complete and accurate. For the purposes of the guidance, the
FSA
may also treat a report as not received where the method by which it is submitted to the
FSA
does not comply with the prescribed method of submission.
- 28/08/2007
DEPP 6.6.5
See Notes
- 28/08/2007
DEPP 6.7
Discount for early settlement
- 28/08/2007
DEPP 6.7.1
See Notes
Persons subject to enforcement action may be prepared to agree the amount of any financial penalty, or the length of any period of suspension or restriction, and other conditions which the
FSA
seeks to impose by way of such action. Such conditions might include, for example, the amount or mechanism for the payment of compensation to consumers. The
FSA
recognises the benefits of such agreements, in that they offer the potential for securing earlier redress or protection for consumers and the saving of cost to the person concerned and the
FSA
itself in contesting the financial penalty, suspension or restriction. The penalty that might otherwise be payable, or the length of the period of suspension or restriction that might otherwise be imposed, in respect of a breach by the person concerned will therefore be reduced to reflect the timing of any settlement agreement.
- 06/03/2011
- Past version of DEPP 6.7.1 before 06/03/2011
The settlement discount scheme applied to financial penalties
DEPP 6.7.2
See Notes
In appropriate cases the
FSA's
approach will be to negotiate with the person concerned to agree in principle the amount of a financial penalty having regard to the
FSA's
statement of policy as set out in DEPP 6.5 to DEPP 6.5D and DEPP 6.6. (This starting figure will take no account of the existence of the settlement discount scheme described in this section.) Such amount ("A") will then be reduced by a percentage of A according to the stage in the process at which agreement is reached. The resulting figure ("B") will be the amount actually payable by the person concerned in respect of the breach. However, where part of a proposed financial penalty specifically equates to the disgorgement of profit accrued or loss avoided then the percentage reduction will not apply to that part of the penalty.
- 06/03/2010
- Past version of DEPP 6.7.2 before 06/03/2010
DEPP 6.7.3
See Notes
(1) The FSA has identified four stages of an action for these purposes:
(a) the period from commencement of an investigation until the FSA has:
(i) a sufficient understanding of the nature and gravity of the breach to make a reasonable assessment of the appropriate penalty; and
(ii) communicated that assessment to the person concerned and allowed a reasonable opportunity to reach agreement as to the amount of the penalty ("stage 1");
(b) the period from the end of stage 1 until the expiry of the period for making written representations or, if sooner, the date on which the written representations are sent in response to the giving of a warning notice ("stage 2");
(c) the period from the end of stage 2 until the giving of a decision notice ("stage 3");
(d) the period after the end of stage 3, including proceedings before the Tribunal and any subsequent appeals ("stage 4").
(2) The communication of the FSA's assessment of the appropriate penalty for the purposes of DEPP 6.7.3G (1)(a) need not be in a prescribed form but will include an indication of the breaches alleged by the FSA . It may include the provision of a draft warning notice.
(3) The reductions in penalty will be as follows:
| Stage at which agreement reached | Percentage reduction |
| Stage 1 | 30 |
| Stage 2 | 20 |
| Stage 3 | 10 |
| Stage 4 | 0 |
- 28/08/2007
DEPP 6.7.4
See Notes
(1) Any settlement agreement between the
FSA
and the person concerned will therefore need to include a statement as to the appropriate penalty discount in accordance with this procedure.
(2) In certain circumstances the person concerned may consider that it would have been possible to reach a settlement at an earlier stage in the action, and argue that it should be entitled to a greater percentage reduction in penalty than is suggested by the table at DEPP 6.7.3G (3). It may be, for example, that the
FSA
no longer wishes to pursue its action in respect of all of the acts or omissions previously alleged to give rise to the breach. In such cases, the person concerned might argue that it would have been prepared to agree an appropriate penalty at an earlier stage and should therefore benefit from the discount which would have been available at that time. Equally,
FSA
staff may consider that greater openness from the person concerned could have resulted in an earlier settlement.
(3) Arguments of this nature risk compromising the goals of greater clarity and transparency in respect of the benefits of early settlement, and invite dispute in each case as to when an agreement might have been possible. It will not usually be appropriate therefore to argue for a greater reduction in the amount of penalty on the basis that settlement could have been achieved earlier.
(4) However, in exceptional cases the
FSA
may accept that there has been a substantial change in the nature or seriousness of the action being taken against the person concerned, and that an agreement would have been possible at an earlier stage if the action had commenced on a different footing. In such cases the
FSA
and person concerned may agree that the amount of the reduction in penalty should reflect the stage at which a settlement might otherwise have been possible.
- 28/08/2007
DEPP 6.7.5
See Notes
In cases in which the settlement discount scheme is applied, the fact of settlement and the level of the discount to the financial penalty imposed by the
FSA
will be set out in the final notice.
- 28/08/2007
The settlement discount scheme applied to suspensions and restrictions
DEPP 6.7.6
See Notes
The settlement discount scheme which applies to the amount of a financial penalty, described in DEPP 6.7.2 G to DEPP 6.7.5 G, also applies to the length of the period of a suspension or restriction, having regard to the
FSA's
statement of policy as set out in DEPP 6A.3.
- 06/03/2011
DEPP 6A
The power to impose a suspension
or restriction
DEPP 6A.1
Introduction
- 06/08/2010
DEPP 6A.1.1
See Notes
- 06/08/2010
DEPP 6A.1.2
See Notes
For the purposes
of DEPP 6A, "suspension"
refers both to the suspension of any permission which
an authorised person has
to carry on a regulated
activity (under section 206A of the Act), and the suspension of any approval of
the performance by an approved
person of any function to which the approval relates (under
section 66 of the Act);
and "restriction" refers both to limitations or other restrictions
in relation to the carrying on of a regulated
activity by an authorised
person (under section 206A of the Act), and to limitations or other restrictions
in relation to the performance by an approved
person of any function to which any approval relates (under
section 66 of the Act).
- 06/08/2010
DEPP 6A.1.3
See Notes
The power to impose a suspension
or a restriction is a disciplinary measure which the
FSA
may use in addition to, or instead of, imposing a financial penalty
or issuing a public censure.
The principal purpose of imposing a suspension or a restriction is to promote
high standards of regulatory and/or market conduct by deterring persons who have committed breaches from
committing further breaches,
helping to deter other persons from
committing similar breaches,
and demonstrating generally the benefits of compliant behaviour. Suspensions
and restrictions are therefore tools that the
FSA
may employ to help it to achieve its
regulatory
objectives
. Examples of restrictions that
we may impose include:
(1) we may limit an authorised
person's carrying on of a regulated
activity so that they can only sell certain products or provide
certain services;
(2) we may restrict an approved person's performance of their controlled functions so that they can only
give advice to consumers or
deal in certain products if they are appropriately supervised.
- 06/08/2010
DEPP 6A.1.4
See Notes
As the power
to impose a suspension or a restriction is a disciplinary measure, where the
FSA
considers it necessary to take action, for example, to protect consumers from an authorised
person, the
FSA
will seek to cancel or vary the authorised
person'spermissions.
If the
FSA
has
concerns with a person's fitness
to be approved, and considers it necessary to take action, the FSA will
seek to prohibit the approved person or
withdraw its approval.
- 06/08/2010
DEPP 6A.2
Deciding whether to take action
- 06/08/2010
DEPP 6A.2.1
See Notes
The
FSA
will consider the full circumstances of each case and determine
whether it is appropriate to impose a suspension or restriction. The
FSA
will
usually make this decision at the same time as it determines whether or not
to impose a financial penalty or a public
censure.
- 06/08/2010
DEPP 6A.2.2
See Notes
- 06/08/2010
DEPP 6A.2.3
See Notes
The
FSA
will consider it appropriate to impose a suspension or restriction
where it believes that such action will be a more effective and persuasive
deterrent than the imposition of a financial penalty alone. This is likely
to be the case where the
FSA
considers that direct and visible action in relation to a particular breach is necessary. Examples of circumstances
where the
FSA
may
consider it appropriate to impose a suspension or restriction include:
(1) where the
FSA
(or any previous regulator)
has taken any previous disciplinary action resulting in adverse findings against
the person;
(2) where the
FSA
has previously taken action in respect of similar breaches and has failed to improve industry
standards;
(3) where the person has
failed properly to carry out an agreed redress package or other agreed remedial
measures;
(4) where the misconduct appears to
be widespread across a number of individuals across a particular business
area (suggesting a poor compliance culture);
- 06/08/2010
DEPP 6A.2.4
See Notes
The
FSA
expects usually to suspend or restrict a person from
carrying out activities directly linked to the breach.
However, in certain circumstances the
FSA
may also suspend or restrict a person from
carrying out activities that are not directly linked to the breach,
for example, where an authorised person's relevant
business area no longer exists or has been restructured.
- 06/08/2010
DEPP 6A.3
Determining the appropriate length of the period of suspension or restriction
- 06/08/2010
DEPP 6A.3.1
See Notes
The
FSA
will consider all the relevant circumstances of a case when it
determines the length of the period of suspension or restriction (if any)
that is appropriate for the breach concerned,
and is also a sufficient deterrent. Set out below is a list of factors that
may be relevant for this purpose. The list is not exhaustive: not all of these
factors may be applicable in a particular case, and there may be other factors,
not listed, that are relevant.
- 06/08/2010
DEPP 6A.3.2
See Notes
The following factors may be relevant
to determining the appropriate length of the period of suspension or restriction
to be imposed on a person under
the Act:
(1) Deterrence
When determining the appropriate length of the period of suspension or restriction, the FSA will have regard to the principal purpose for which it imposes sanctions, namely to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches and helping to deter other persons from committing similar breaches, as well as demonstrating generally the benefits of compliant business.
When determining the appropriate length of the period of suspension or restriction, the FSA will have regard to the principal purpose for which it imposes sanctions, namely to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches and helping to deter other persons from committing similar breaches, as well as demonstrating generally the benefits of compliant business.
(2) The seriousness of the breach
The FSA will have regard to the seriousness of the breach. In assessing this, it will consider the impact and nature of the breach, and whether it was committed deliberately or recklessly. Where the breach was committed by an authorised person, relevant factors may include those listed in DEPP 6.5A.2 G (6) to (9). Where the breach was committed by an approved person, relevant factors may include those listed in DEPP 6.5B.2 G (8) to (11). There may also be other factors, not listed in these sections, that are relevant.
The FSA will have regard to the seriousness of the breach. In assessing this, it will consider the impact and nature of the breach, and whether it was committed deliberately or recklessly. Where the breach was committed by an authorised person, relevant factors may include those listed in DEPP 6.5A.2 G (6) to (9). Where the breach was committed by an approved person, relevant factors may include those listed in DEPP 6.5B.2 G (8) to (11). There may also be other factors, not listed in these sections, that are relevant.
(3) Aggravating and mitigating factors
The FSA will have regard to factors that may aggravate or mitigate a breach. Where the breach was committed by an authorised person, relevant factors may include those listed in DEPP 6.5A.3 G (2). Where the breach was committed by an approved person, relevant factors may include those listed in DEPP 6.5B.3 G (2). There may also be other factors, not listed in these sections, that are relevant.
The FSA will have regard to factors that may aggravate or mitigate a breach. Where the breach was committed by an authorised person, relevant factors may include those listed in DEPP 6.5A.3 G (2). Where the breach was committed by an approved person, relevant factors may include those listed in DEPP 6.5B.3 G (2). There may also be other factors, not listed in these sections, that are relevant.
(4) The impact of suspension or restriction
on the person in breach
The following considerations may be relevant to the assessment of the impact of suspension or restriction on an authorised person:
The following considerations may be relevant to the assessment of the impact of suspension or restriction on an authorised person:
(a) the authorised
person's expected
lost revenue and profits from not being able to carry out the suspended or
restricted activity;
(b) the cost of any measures the authorised person must undertake to comply with the suspension or restriction;
(c) potential economic costs, for example,
the payment of salaries to employees who will not work during the period of
suspension or restriction or the payment of compensation to consumers who
will suffer loss as a result of the suspension or restriction;
(d) the effect on other areas of the authorised person's business; and
(e) whether the suspension or restriction
would cause the authorised person serious financial hardship.
The following considerations may be relevant to the assessment of the impact of suspension or restriction on an approved person:
The following considerations may be relevant to the assessment of the impact of suspension or restriction on an approved person:
(f) the approved
person's expected lost earnings from not being able to carry
out the suspended or restricted activity; and
(g) whether the suspension or restriction
would cause the approved person serious
financial hardship.
(5) The impact of suspension or restriction
on persons other than the person in breach
The following considerations may be relevant to the assessment of the impact of suspension or restriction on persons other than the person in breach:
The following considerations may be relevant to the assessment of the impact of suspension or restriction on persons other than the person in breach:
(a) the extent to which consumers may suffer loss or inconvenience
as a result of the suspension or restriction. For example, if it is difficult
for consumers to switch to a
competitor, a longer period of suspension or restriction is likely to have
more impact; and
(b) the impact of the suspension or
restriction on markets.
- 06/08/2010
DEPP 6A.3.3
See Notes
The
FSA
may delay the commencement of the period of suspension or restriction.
In deciding whether this is appropriate, the
FSA
will take into account all the circumstances of a case. Considerations
that may be relevant in respect of an authorised
person include:
(1) the impact of the suspension or
restriction on consumers;
(2) any practical measures the authorised person needs to take before the period of suspension or restriction
begins, for example, changes to its systems and controls to enable it to stop
or limit the activity in question;
(3) the impact of the suspension or
restriction on other costs incurred by the authorised
person, for
example, cancelling suppliers or suspending employees.
- 06/08/2010
DEPP 6A.3.4
See Notes
The
FSA
and
the person on whom a suspension
or restriction is to be imposed may seek to agree the length of the period
of suspension or restriction and other terms. In recognition of the benefits
of such agreements, DEPP 6.7 provides that the length of a period of suspension or restriction
which might otherwise have been imposed will be reduced to reflect the stage
at which the
FSA
and
the person concerned reached
an agreement.
- 06/03/2011
DEPP 6A.4
The interaction between the power to impose suspensions or restrictions and the power to impose penalties or public censures
- 06/08/2010
DEPP 6A.4.1
See Notes
The deterrent effect and impact
on a person of a suspension
or restriction, by itself or in combination with a financial penalty, may
be greater than where only a financial penalty is imposed. The
FSA
will consider the overall impact and deterrent effect of the
sanctions it imposes when determining the level of penalty and the length
of suspension or restriction.
- 06/08/2010
DEPP 6A.4.2
See Notes
The
FSA
expects usually to take the following approach in respect of
the interaction between a suspension or restriction and a financial penalty
or public censure:
(1) The
FSA
will determine which sanction, or combination of sanctions, is
appropriate for the breach.
(2) If the
FSA
, following the approach set out in DEPP 6.2, considers it appropriate
to impose a financial penalty, it will calculate the appropriate level of
the financial penalty, following the approach set out in DEPP 6.5 to DEPP 6.5D.
(3) If the
FSA
, following the approach set out in DEPP 6A.2,
considers it appropriate to impose a suspension or restriction, it will calculate
the appropriate length of the period of suspension or restriction, following
the approach set out in DEPP
6A.3.
(4) Where the
FSA
considers it appropriate to impose both a financial penalty and
a suspension or restriction, it will decide whether the combined impact on
the person is likely to be disproportionate
in respect to the breach and
the deterrent effect of the sanctions.
(5) If the
FSA
considers the combined impact on the person is
likely to be disproportionate, it will decide whether to reduce the period
of suspension or restriction, the amount of the financial penalty or both,
so that the combined impact of the sanctions is proportionate in relation
to the breach and the deterrent
effect of the sanctions. The
FSA
will decide which sanction to reduce after considering all the
circumstances of the case.
(6) In deciding the final level of
the financial penalty and the length of the period of suspension or restriction,
the
FSA
will
also take into account any representations by the person that
the combined impact will cause them serious financial hardship. The
FSA
will
take the approach set out in DEPP 6.5D in assessing this.
- 06/08/2010
DEPP 6A.4.3
See Notes
The
FSA
may depart from the approach set out in DEPP 6A.4.2 G.
For example, the
FSA
may
at the outset consider that a financial penalty is the only appropriate sanction
for a breach but, having determined
the appropriate level of financial penalty, may consider it appropriate to
reduce the amount of the financial penalty for serious financial hardship
reasons. In such a situation, the
FSA
may consider it appropriate to impose a suspension or restriction
even if the
FSA
at
the outset did not consider such a sanction to be appropriate. The
FSA
will
take into account whether the person would
suffer serious financial hardship in deciding the length of the period of
suspension or restriction, and may decide not to impose a suspension or restriction
if it considers such action would result in serious financial hardship.
- 06/08/2010
DEPP 7
Statement of policy on interviews conducted on behalf of overseas
and EEA regulators
DEPP 7.1
Application and purpose
- 28/08/2007
Application
DEPP 7.1.1
See Notes
DEPP 7 applies when the
FSA
:
(1) has appointed an investigator at
the request of an overseas regulator,
under section 169(1)(b) (Assistance to overseas regulators) or of an EEA regulator under
section 131FA of the Act;
and
(2) has directed, or is considering
directing, the investigator, under section 169(7) or section 131FA of the Act,
to permit a representative of the overseas
regulator or
of the EEA regulator to attend, and take part in, any interview conducted for the
purposes of the investigation.
- 01/11/2012
- Past version of DEPP 7.1.1 before 01/11/2012
DEPP 7.1.2
See Notes
- 01/11/2012
- Past version of DEPP 7.1.2 before 01/11/2012
Purpose
DEPP 7.1.3
See Notes
The purpose of DEPP 7 is to set out the
FSA's statement of policy on the conduct of interviews to which a direction
under section 169(7) or
section 131FA has been given or the
FSA
is considering giving. The
FSA
is required to prepare and publish this statement of policy by
section 169(9) and (11) and
section 131FA of the Act.
As required by section 169(10) and
section 131FA of the Act, the Treasury has approved
the statement of policy.
- 01/11/2012
- Past version of DEPP 7.1.3 before 01/11/2012
DEPP 7.1.4
See Notes
The
FSA
is keen to promote co-operation with overseas
regulators and EEA regulators. It views provision of assistance
to overseas regulators and EEA
regulators as an essential part of the principles
set out in section 2(3)(e) of the Act to
which it must have regard in discharging its general functions.
- 01/11/2012
- Past version of DEPP 7.1.4 before 01/11/2012
DEPP 7.2
Interviews
- 28/08/2007
Appointment of investigator and confidentiality of information
DEPP 7.2.1
See Notes
Under section 169(1)(b) and section 131FA of the Act,
the
FSA
may
appoint an investigator to investigate any matter at the request of an overseas regulator or EEA regulator. The powers of the investigator appointed by the
FSA
(referred to here as the 'FSA's investigator') include the power to require persons to
attend at a specified time and place and answer questions (the compulsory
interview power).
- 01/11/2012
- Past version of DEPP 7.2.1 before 01/11/2012
DEPP 7.2.2
See Notes
Where the
FSA
appoints an investigator in response to a request from an overseas regulator or EEA regulator it may, under section 169(7) or section 131FA of the Act,
direct him to permit a representative of that regulator to attend and take
part in any interviews conducted for the purposes of the investigation. The
FSA
may
only give a direction under section 169(7) or section 131FA if it is satisfied that any information
obtained by an overseas regulator or EEA
regulator as a result of the interview will
be subject to the safeguards equivalent to those contained in Part XXIII (Public
Record, Disclosure of Information and Cooperation) of the Act.
- 01/11/2012
- Past version of DEPP 7.2.2 before 01/11/2012
DEPP 7.2.3
See Notes
Part XXIII of the Act contains restrictions on the disclosure
of confidential information. The restrictions are subject to exceptions contained
in regulations made by the Treasury under section 349.
- 28/08/2007
Policy on use of investigative powers
DEPP 7.2.4
See Notes
The
FSA's
policy on how it will use its investigative powers, including
its power to appoint investigators, in support of overseas
regulators and EEA regulators, is set out in the
FSA's
Enforcement Guide (EG).
- 01/11/2012
- Past version of DEPP 7.2.4 before 01/11/2012
Use of direction powers
DEPP 7.2.5
See Notes
The
FSA
may need to consider whether to use its direction power at two
stages of an investigation:
(1) at the same time that it considers
the request from the overseas regulator or EEA
regulator to appoint investigators;
(2) after it has appointed investigators,
either at the request of the overseas regulator or EEA
regulator or on the recommendation of the
investigators.
- 01/11/2012
- Past version of DEPP 7.2.5 before 01/11/2012
DEPP 7.2.6
See Notes
Before making a direction under
section 169(7) or section
131FA the
FSA
will discuss and determine with the overseas
regulator or EEA regulator how this statement of policy will
apply to the conduct of the interview, taking into account all the circumstances
of the case. Amongst other matters, the
FSA
will at this stage determine the extent to which the representative
of the overseas regulator or EEA
regulator will be able to participate in
the interview. The overseas regulator or EEA
regulator will be notified of this determination
on the issuing of the direction.
- 01/11/2012
- Past version of DEPP 7.2.6 before 01/11/2012
DEPP 7.2.7
See Notes
The direction will contain the
identity of the representative of the overseas
regulator or EEA regulator that is permitted to attend any
interview and the role that he will play in the interview. If the
FSA
envisages that there will be more than one interview in the course
of the investigation, the direction may also specify which interview(s) the representative is allowed to attend.
- 01/11/2012
- Past version of DEPP 7.2.7 before 01/11/2012
Conduct of interview
DEPP 7.2.8
See Notes
In circumstances where an interview
is to be conducted as part of the investigation, the
FSA's
investigator will have conduct of the interview. In general,
the
FSA's
investigators
will be employees of the
FSA
, but in appropriate cases the
FSA
may appoint persons who
are not its employees. In those cases, the
FSA
may choose to require that an
FSA
employee is present at the interview and may choose to appoint
that person as an investigator.
- 28/08/2007
DEPP 7.2.9
See Notes
The
FSA's
investigator will act on behalf of the
FSA
and under its control. He may be instructed to permit the representative
of the overseas regulator or EEA
regulator to assist in the preparation of
the interview. Where the
FSA
considers it appropriate, it may permit the representative to
attend and ask questions of the interviewee in the course of the interview.
The interview will be conducted according to the terms of the direction and
the notification referred to in DEPP 7.2.6 G.
- 01/11/2012
- Past version of DEPP 7.2.9 before 01/11/2012
DEPP 7.2.10
See Notes
If the direction does permit the
representative of an overseas regulator or EEA
regulator to attend the interview and ask
the interviewee questions, the
FSA's
investigator will retain control of the interview throughout.
Control of the interview means the following will apply:
(1) The
FSA's
investigator instigates and concludes the interview, introduces
everyone present and explains the procedure of the interview. He warns the
interviewee of the possible consequences of refusing to answer questions and
the uses to which any answers that are given can and cannot be put. The
FSA's
investigator
will always ask preliminary questions, such as those establishing the identity
of the interviewee.
(2) The
FSA's
investigator determines the duration of the interview and when,
if at all, there should be any breaks in the course of it.
(3) The
FSA's
investigator has responsibility for making a record of the interview.
The record should note the times and duration of any breaks in the interview
and any periods when the representative of the overseas
regulator or EEA regulator was either present or not present.
(4) Where the
FSA's
investigator considers it appropriate, he may either suspend
the interview, ask the overseas representative to leave the interview, or
terminate the interview and reschedule it for another occasion. In making
that decision he will bear in mind the terms of the direction, any agreement
made with the overseas regulator or EEA
regulator as to the conduct of the interview
and the contents of this statement of policy.
DEPP 7.2.11
See Notes
The
FSA
will in general provide written notice of the appointment of
an investigator to the person under
investigation pursuant to the request of an overseas
regulator or EEA regulator. Whether or not the interviewee
is the person under investigation,
the
FSA's
investigator
will inform the interviewee of the provisions under which he has been appointed,
the identity of the requesting authority and general nature of the matter
under investigation. The interviewee will also normally be informed if a representative
of the overseas regulator or EEA
regulator is to attend and take part in
the interview. Notification of any of these matters may not be provided in
advance of the interview if the
FSA
believes that the circumstances are such that notification would
be likely to result in the investigation being frustrated.
DEPP 7.2.12
See Notes
The interviewee will normally be
given a copy of the direction issued under section 169(7) or section 131FA in advance of the interview unless
to do so would be likely to result in the investigation being frustrated.
The interviewee will also be provided with a copy of this statement of policy.
DEPP 7.2.13
See Notes
The
FSA's
investigator will determine the venue and timing of the interview.
The interviewee will be notified of the venue and timing of the interview
in advance and in writing.
- 28/08/2007
DEPP 7.2.14
See Notes
When the
FSA's
investigator has exercised the compulsory interview power, at
the outset of the interview the interviewee will be given an appropriate warning.
The warning, amongst other things, must state that the interviewee is obliged
to answer all questions put to them during the interview, including any put
by the representative of the overseas regulator or EEA
regulator. It will also state that in criminal
proceedings or proceedings for market abuse the
FSA
will
not use as evidence against the interviewee any information obtained under
compulsion during the interview.
DEPP 7.2.15
See Notes
The
FSA's
investigator may decide which documents or other information
may be put to the interviewee, and whether it is appropriate to give the interviewee
sight of the documents before
the interview takes place. Where the overseas
regulator or EEA regulator wishes to ask questions about documents during the interview and the
FSA's
investigator
wishes to inspect those documents before
the interview, he will be given the opportunity to do so. If the
FSA's
investigator wishes to inspect them and has not been able to
do so before the interview, he may suspend the interview until he has had
an opportunity to inspect them.
DEPP 7.2.16
See Notes
When the
FSA's
investigator has exercised the compulsory interview power, the
FSA's
investigator
will require the person attending
the interview to answer questions. Where appropriate, questions may also be
posed by the representative of the overseas
regulator or EEA regulator. The interviewee will also be
required to answer these questions. The
FSA's
investigator may intervene at any stage during questioning by
the representative of the overseas regulator or EEA
regulator.
Language
DEPP 7.2.17
See Notes
Interviews will, in general, be
conducted in English. Where the interviewee's first language is not English,
at the request of the interviewee arrangements will be made for the questions
to be translated into the interviewee's first language and for his answers
to be translated back into English. If a translator is employed at the request
of the representative of the overseas regulator or EEA
regulator then the translation costs will
normally be met by the overseas regulator or EEA
regulator. Where interviews are being conducted
in pursuance of an EU law obligation these costs will be met by the
FSA
. In any event, the meeting of costs in relation to translators
and, where applicable, the translation of documents will
always be agreed in advance with the overseas
regulator or EEA regulator.
Tape-recording
DEPP 7.2.18
See Notes
All compulsory interviews will
be tape-recorded. The method of recording will be decided on and arranged
by the
FSA's
investigator.
Costs will be addressed similarly to that set out in the preceding paragraph.
The
FSA
will
not provide the overseas regulator or EEA
regulator with transcripts of the tapes
of interviews unless specifically agreed to, but copies of the tapes will
normally be provided where requested. The interviewee will be provided with
a copy of tapes of the interview but will only be provided with transcripts
of the tapes or translations of any transcripts if he agrees to meet the cost
of producing them.
Representation
DEPP 7.2.19
See Notes
The interviewee may be accompanied
at the interview by a legal adviser or a non-legally qualified observer of
his choice. The costs of any representation will not be met by the
FSA
. The
presence at the interview of a representative of the overseas
regulator or EEA regulator may mean that the interviewee
wishes to be represented or accompanied by a person either
from or familiar with that regulator's jurisdiction. As far as practical the
arrangements for the interview should accommodate this wish. However, the
FSA
reserves
the right to proceed with the interview if it is not possible to find such
a person within a reasonable
time or no such person is able
to attend at a suitable venue.
DEPP 7.2.20
See Notes
In relation to the publication
of investigations by overseas regulators or EEA
regulators, the
FSA
will pursue a policy similar to the policy that relates to its
own investigations.
Transitional Provisions and Schedules
DEPP TP 1
Transitional provisions applying to the Decision Procedure and Penalties Manual
1. Table DEPP TP 1| (1) |
(2)
Material to which the transitional provision applies | (3) |
(4)
Transitional provision |
(5)
Transitional provision dates in force: |
(6)
Handbook provision coming into force |
| 1 | DEPP | G | GEN contains some transitional provisions that apply throughout the Handbook and which are designed to ensure a smooth transition at commencement. | From commencement | (Various dates) |
| 2 | DEPP 6.7 (Discount for early settlement), | G | These provisions (in summary, relating to the discount scheme) apply only to cases where investigators are appointed on or after 20 October 2005. | From 20 October 2005 | 20 October 2005 |
| 3 | DEPP | G |
DEPP 1 to DEPP 5 take effect on 28 August 2007, save to the extent described below: DEPP 1 to DEPP 5 do not apply to any statutory notice or related notice issued on or after 28 August where a warning notice, first supervisory notice or decision notice was given by the FSA before 28 August in relation to the same matter. The procedure to be followed in respect of such statutory notices or related notices given on or after 28 August will be the same as that described in the Decision making manual (DEC) immediately before DEPP comes into effect. | From 28 August 2007 | 28 August 2007 |
| 4 | DEPP | G |
DEPP 6 takes effect on 28 August 2007, save to the extent described below. The FSA's policy in respect of the imposition and amount of penalty will continue to be as described in the Enforcement manual (ENF) in relation to any statutory notice or related notice given on or after 28 August where a warning notice, first supervisory notice or decision notice was given by the FSA before 28 August in relation to the same matter. | From 28 August 2007 | 28 August 2007 |
- 28/08/2007
DEPP Sch 1
Record keeping requirements
- 06/01/2010
DEPP Sch 1.1
See Notes
| There are no record-keeping requirements in DEPP. |
- 06/01/2010
DEPP Sch 2
Notification requirements
- 06/01/2010
DEPP Sch 2.1
See Notes
| There are no notification requirements in DEPP. |
- 06/01/2010
DEPP Sch 3
Fees and other required payments
- 06/01/2010
DEPP Sch 3.1
See Notes
| There are no requirements for fees in DEPP. |
- 06/01/2010
DEPP Sch 3.2
See Notes
| The FSA's power to impose financial penalties is contained in: | |
| section 131G (Power to impose penalty or issue censure) of the Act | |
| Section 206 (Financial penalties) of the Act | |
| Part III of Schedule 1 (The Financial Services Authority) to the Act | |
| the Money Laundering Regulations | |
| the Transfer of Funds (Information on the Payer) Regulations 2007 (SI 2007/3298) | |
| the RCB Regulations | |
| the Payment Services Regulations | |
| the Cross-Border Payments in Euro Regulations | |
DEPP Sch 4
Powers Exercised
- 06/01/2010
DEPP Sch 4.1
See Notes
| The following powers and related provisions in or under the Act have been exercised by the FSA to make the statements of policy in DEPP: | |
| Section 63C (Statement of policy) | |
| Section 69 (Statement of policy) (including as applied by paragraph 1 of Schedule 5 to the Payment Services Regulations and by paragraph 1 of the Schedule to the Cross-Border Payments in Euro Regulations) | |
| Section 93(1) (Statement of policy) | |
| Section 124(1) (Statement of policy) | |
| Section 131J (Impositions of penalties under section 131G: statement of policy) | |
| Section 157(1) (Guidance) | |
| Section 169(9) (Investigations etc in support of overseas regulator) (including as applied by paragraph 3 of Schedule 5 to the Payment Services Regulations) | |
| Section 192N (Imposition of penalties under section 192K: statement of policy) | |
| Section 210(1) (Statements of policy) (including as applied by regulation 86(6) of the Payment Services Regulations and by paragraph 3 of the Schedule to the Cross-Border Payments in Euro Regulations) | |
| Section 249 (Disciplinary measures) | |
| Section 312J (Statement of policy) | |
| Section 345D (Imposition of penalties on auditors or actuaries: statement of policy) | |
| Section 395 (The Authority's procedures) (including as applied by paragraph 7 of Schedule 5 to the Payment Services Regulations and by paragraph 5 of the Schedule to the Cross-Border Payments in Euro Regulations) | |
| Paragraph 16 (Penalties) of Schedule 1 (The Financial Services Authority) | |
DEPP Sch 4.2
See Notes
| The following additional powers and related provisions have been exercised by the FSA to make the statements of policy in DEPP: | |
| Regulation 42 (Guidance) of the RCB Regulations | |
| Regulation 44 (Warning notices and decision notices) of the RCB Regulations | |
| Regulation 86 (Proposal to take disciplinary measures) of the Payment Services Regulations | |
| Regulation 93 (Guidance) of the Payment Services Regulations | |
| Regulation 14 (Guidance) of the Cross-Border Payments in Euro Regulations | |
DEPP Sch 5
Rights of action for damages
- 06/01/2010
DEPP Sch 5.1
See Notes
| There are no rules in DEPP. |
- 06/01/2010
DEPP Sch 6
Rules that can be waived
- 06/01/2010
DEPP Sch 6.1
See Notes
| There are no rules in DEPP. |
- 06/01/2010