More investigations into firms are inevitable as the regulator shifts from its post-financial crisis approach towards a longer term strategy of responding to conduct risk, its director of investigations has said.
Speaking at an industry forum Jamie Symington said the regulator's approach to investigations had evolved in line with its recently published mission statement.
He said the new approach meant the Financial Conduct Authority (FCA) was keen to get to the heart of a potential problem by looking at all aspects of the case before considering a variety of remedies.
Symington said: "As we move forward from the crisis response towards the longer term strategy for the response to conduct risk, the FCA is transitioning to a new phase of its life.
"We need to state clearly what we expect of firms. We need to improve how markets operate. We must work to prevent harm occurring. And we must help to put things right when they go wrong.
"It is inevitable that the implementation of this approach will lead to more investigations being opened."
Seeking the right response
The FCA decides on the supervisory and enforcement measures it implements on a case by case basis, with senior staff from both divisions consulted on the issue.
Generally, where the suspected misconduct is considered to be serious, and potential harm is sufficiently significant to warrant investigation, it would expect to open an investigation.
This does not mean the FCA will investigate every case that technically crosses the threshold which would give it powers to investigate, however.
It also does not mean the regulator is keen to start enforcement proceedings against firms in all cases. Instead, it is increasingly looking towards the use of remedial tools as alternatives to disciplinary enforcement action.
"The use of investigations should be seen as one of the options available to the FCA in the diagnostic phase of regulation. Our investigation powers provide us with the ability to uncover the facts and issues," Symington said.
"There are multiple responses that might be appropriate other than imposing sanctions on or prosecuting people.
"One way or another, the response should be one that is proportionate to and appropriately addresses the harm that we gauge has resulted from the matter investigated."
For instance, in its recent case against Tesco plc and Tesco Stores, where market abuse was detected, the FCA ordered Tesco to pay compensation to investors who purchased Tesco shares and bonds. "This was the right thing for the company to do and the right outcome for investors," said Symington.
The FCA also this week confirmed it was reviewing the defined benefit pension transfer business at several firms. So far at least three firms have been asked to temporarily suspend such business but no enforcement action has yet been taken.
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