In Regulatory Roundup 22 mention was made of the FSA being given the power to publish decision notices as well as final notices. An enforcement case consists of a warning notice, followed by a decision notice and then a final notice.
Under the previous regime the FSA only had power to publish a final notice. A decision notice informs the individual of the right to refer the matter to appeal to the Upper Tribunal. The exercise of the right, and assuming that the Tribunal finds in favour of the FSA, would delay the issuance of the final notice with the result that there could be a delay before consumers and industry became aware of the FSA’s reasons for taking action. The enhanced powers mean that the FSA can now publish details of a case at a much earlier stage. Section 6.8 of the FSA’s Enforcement Guide advises that the Regulator will normally publish decision notices if the subject of the enforcement action decides to refer the matter to the Tribunal.
The FSA has, for the first time, published two decision notices (Unwin and Wright) under its enhanced powers. The elements of the two cases have relevance for all authorised firms.
Mr Unwin’s case included failure to ensure that the firm had adequate systems and controls in place to ensure that advice was suitable. What is important here is not that it relates to ‘advice’ but rather there was a failure to have appropriate systems and controls in place to ensure suitability. This is not the first time that the FSA has issued a Notice where a systems and controls failing is cited. SYSC 4.1 sets out the general requirements expected of a firm, including the need to have effective processes to identify, manage, monitor and report the risks it is or might be exposed to.
The case concerning Mr Wright included him effectively undertaking the role of a director without approval, whilst the sole, and FSA approved, director Mrs Wright did not perform any of the functions associated with a CF1 director. As she did not refer her case to the Tribunal the FSA has published a separate final notice for Mrs Wright. There are parallels with the Gerald Casey issue, covered in Regulatory Roundup 21, in that whilst he held the CF4 Partner Controlled Function at his firm, his duties were carried out by another (unapproved) person who ran the day to day business. A similar ‘shadow’ situation was covered in Regulatory Roundup 26.
Learning from these cases firms may wish to ask themselves whether their current systems and controls would meet the expectations of SYSC and whether all persons having a significant influence over their operation are appropriately approved by the FSA (SUP 10 will provide further guidance).
