The Association of British Insurers (ABI) is urging the Financial Services Authority (FSA) to improve its enforcement procedures to provide "greater transparency, objectivity and certainty."
In the issues paper, David Strachan set out the legislation under which the FSA must operate – including the warning notice, decision notice and tribunal framework – but said the FSA had no plans to change primary legislation as a result of the consultation. The FSA said the decision making process on enforcement had to be fair, efficient and effective and that it was launching the consultation to determine whether this assertion was still valid.
The ABI has responded by suggesting the enforcement process could be improved in three ways. It suggests the FSA should make more effective use of its normal supervision of firms before embarking on specific enforcement action in line with the Government’s recent Hampton Review. The ABI says the relevant supervision team should be involved in FSA discussions throughout this process.
It also calls for the FSA to improve the quality of its investigatory work, saying the regulator’s enforcement staff should have the best possible knowledge of the industry and its issues.And the ABI claims that in order to be seen to be fair the FSA should provide firms under investigation with the evidence that has been presented about them to the Regulatory Decisions Committee and be given adequate opportunity to respond.
The ABI says there is a perception that FSA enforcement staff are often intent of delivering a particular message and that they seek to build a case against a firm or individual to support that message.
Peter Vipond, director of financial regulation and taxation at the ABI, adds: “FSA enforcement procedures need to command greater confidence within the regulated community. So the FSA will need to address specific industry concerns about its tendency to build a general case on the basis of a very small number of cases and its willingness to apply some standards retrospectively.”
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