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DEPP 5.1 Settlement decision makers

Introduction

DEPP 5.1.1 G

  1. (1)

    1A person subject to enforcement action may agree to a financial penalty or other outcome rather than contest formal action by the FCA.4

    Alternatively, they may enter into a focused resolution agreement and in this way partly contest the proposed action (see DEPP 5.1.8AG to DEPP 5.1.8DG).5

    4
  2. (1A)

    5Further, even if the person subject to enforcement action wishes to fully contest the proposed enforcement action, they may choose to do so by (i) agreeing to the FCA issuing the required statutory notices and (ii) then making an expedited reference of the matter to the Tribunal (see DEPP 5.1.8EG to DEPP 5.1.8JG).

  3. (2)

    The fact that a person5does any of these things 5will not usually obviate the need for statutory notices5 recording the FCA's4 proposal and 5 decision to take action. As set out in this chapter, senior FCA staff have a role to play in giving the requisite statutory notices:5

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    1. (a)

      5where a person enters into a settlement agreement (other than a focused resolution agreement), senior FCA staff will give both the warning notice and decision notice;

    2. (b)

      5where a person enters into a focused resolution agreement, senior FCA staff will give the warning notice and the RDC will decide whether to give a decision notice and the terms of any notice given; and

    3. (c)

      5where a person elects to make an expedited reference to the Tribunal before a warning notice has been issued, senior FCA staff will then give the warning notice and decision notice.

  4. (3)

    These decisions by senior FCA staff 5 will be taken jointly by two members of the FCA's4 senior management, one of whom will be3 of at least director of division level (which may include an acting director)2 and the other of whom will be of at least head of department level3 (the "settlement decision makers").

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  5. (4)

    At least one of the settlement decision makers will not be from the Enforcement and Financial Crime Division.3 The other settlement decision maker3 will usually be, but need not be, from the Enforcement and Financial Crime Division. A4settlement decision maker will not have been directly involved in establishing the evidence on which the decision is based.3

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  6. (5)

    "Statutory notice" for these purposes:

    1. (a)

      means any statutory notice the giving of which would otherwise require a decision by the RDC;

    2. (b)

      includes a statutory notice associated decision.

Procedure: general

DEPP 5.1.2 G

A person who is or may be subject to enforcement action may wish to discuss the proposed action with FCA4 staff through settlement discussions.

4
DEPP 5.1.3 G

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 FCA4 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.

4
DEPP 5.1.4 G

FCA 4staff and the person concerned may agree that neither the FCA4 nor the person concerned would seek to rely against the other on any admissions or statements made in the course of their settlement discussions if the matter is considered subsequently by the RDC or the Tribunal.

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Procedure: participation of decision makers in discussions

DEPP 5.1.5 G

  1. (1)

    The settlement decision makers may, but need not, participate in the discussions exploring possible settlement.

  2. (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 FCA4 staff or the person concerned in order to assist in the consideration of the proposed settlement.

    4
DEPP 5.1.6 G

The terms of any proposed settlement:

  1. (1)

    will be put in writing and be agreed by FCA4 staff and the person concerned;

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  2. (2)

    may refer to a draft of the proposed statutory notices setting out the facts of the matter and the FCA's4 conclusions;

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  3. (3)

    may, depending upon the stage in the enforcement process at which agreement is reached, include an agreement by the person concerned to:

    1. (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 FCA4 and any secondary material which might undermine the FCA4 decision to give the statutory notice;

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    2. (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;

    3. (c)

      not object to the giving of a decision notice before the expiry of the 144 day period after the giving of a warning notice specified under section 387 of the Act;

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    4. (d)

      not dispute with the FCA4 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.

      4
DEPP 5.1.7 G

The settlement decision makers may:

  1. (1)

    accept the proposed settlement by deciding to give a statutory notice based on the terms of the settlement; or

  2. (2)

    decline the proposed settlement;

whether or not the settlement decision makers have met with the relevant FCA4 staff or the person concerned.

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DEPP 5.1.8 G

  1. (1)

    Where the settlement decision makers decline to issue a statutory notice despite the proposed settlement, they may invite FCA4 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.

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  2. (2)

    However, if the proposed action by the FCA4 has been submitted to the RDC for consideration, it will be for the RDC to decide:

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    1. (a)

      whether to extend the period for representations in response to a warning notice or first supervisory notice; or

    2. (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.

Procedure: focused resolution agreements

DEPP 5.1.8A G

5The issues which may be agreed under a focused resolution agreement include, but are not limited to:

  1. (1)

    questions of fact;

  2. (2)

    whether specified facts amount to a breach (or more than one breach);

  3. (3)

    whether action for a financial penalty and/or public censure is warranted;

  4. (4)

    the appropriate level of a financial penalty;

  5. (5)

    whether action for a suspension, restriction, condition or limitation (as defined for the purposes of DEPP 6A) is warranted;

  6. (6)

    the appropriate length of a suspension, restriction, condition or limitation (as defined for the purposes of DEPP 6A);

  7. (7)

    whether a prohibition order is warranted; and/or

  8. (8)

    the appropriate scope of such a prohibition order.

DEPP 5.1.8B G

5The terms of any proposed focused resolution agreement:

  1. (1)

    will be put in writing and be agreed by FCA staff and the person concerned;

  2. (2)

    may refer to a draft of the proposed warning notice; and

  3. (3)

    may, depending upon the stage in the enforcement process at which agreement is reached, include an agreement by the person concerned to:

    1. (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 FCA and any secondary material which might undermine the FCA decision to give the statutory notice, except in relation to material that is relevant to issues which remain in dispute; and

    2. (b)

      not dispute the issues agreed with the FCA when:

      1. (i)

        making representations to the RDC in respect of a warning notice (whether in exercise of rights under section 387 of the Act or otherwise); or

      2. (ii)

        on any subsequent reference of the matter to the Tribunal under (except where the Tribunal decides of its own motion to reopen an issue or issues).

DEPP 5.1.8C G

5Where the proposed settlement is on the basis of a focused resolution agreement, the role of the settlement decision makers shall be as follows:

  1. (1)

    The settlement decision makers will decide whether or not to give a warning notice. (For the avoidance of doubt, the settlement decision makers may meet the relevant FCA staff or the person concerned in accordance with DEPP 5.1.5G and any such meeting shall not affect the settlement decision makers’ ability to decide whether or not to give a warning notice).

  2. (2)

    If the settlement decision makers decline to give a warning notice based on the proposed focused resolution agreement, they may invite FCA 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.

  3. (3)

    If the settlement decision makers are satisfied with the proposed focused resolution agreement, they shall give a warning notice based on the proposed resolution agreement which records the agreed position on the agreed issues and the position of the FCA on those issues which remain in dispute.

  4. (4)

    Where the settlement decision makers give a warning notice, the notice will specify the time allowed for making representations. This will not be less than 14 days.

  5. (5)

    The settlement decision makers will promptly inform the RDC that a warning notice has been given. The FCA will then specify a time within which the recipient of the notice is required to indicate whether they wish to make oral representations.

  6. (6)

    It will then be for the RDC to decide whether to give a decision notice under the procedure set out in DEPP 3.2.16G to DEPP 3.2.25G.

DEPP 5.1.8D G

5For the avoidance of doubt, the decision whether to agree a proposed focused resolution agreement is entirely within the discretion of the settlement decision makers.

Procedure: expedited references to the Tribunal

DEPP 5.1.8E G
  1. (1)

    5The purpose of this section is to define a procedure (the “expedited reference procedure”) enabling a person subject to enforcement action to challenge the proposed action before the Tribunal without engaging with the FCA’s internal decision-making process.

  2. (2)

    DEPP 5.1.8FG to DEPP 5.1.8IG set out the circumstances in which the expedited reference procedure is available, the steps a person must take to make use of the procedure, and how the procedure operates, depending on whether it is invoked before or after the warning notice is given.

DEPP 5.1.8F G

5The expedited reference procedure is available only if:

  1. (1)

    the proposed action requires the FCA to issue a warning notice;

  2. (2)

    the FCA considers that it has a sufficient understanding of the nature and gravity of the breach to make a reasonable assessment of the appropriate penalty or other outcome; and

  3. (3)

    the FCA has communicated that assessment to the person concerned.

DEPP 5.1.8G G

5To use the expedited reference procedure, the person subject to enforcement action must notify the FCA that they:

  1. (1)

    wish to make an expedited reference to the Tribunal; and

  2. (2)

    waive and will not exercise any rights under section 387(2) of the Act in respect of the warning notice given (or to be given) in relation to the proposed action.

DEPP 5.1.8H G

5To use the expedited reference procedure before a warning notice has been given:

  1. (1)

    the notification set out in DEPP 5.1.8GG must be given to FCA staff;

  2. (2)

    the decision to issue a warning notice will then be taken by the settlement decision makers; and

  3. (3)

    the decision to issue a decision notice will also be taken by the settlement decision makers, taking into consideration any representations by any third party under section 393 of the Act or any interested party under section 63 or 67 of the Act.

DEPP 5.1.8I G

5To use the expedited reference procedure after a warning notice has been given:

  1. (1)

    the notification set out in DEPP 5.1.8GG must be given to the RDC; and

  2. (2)

    the decision to issue a decision notice will then be taken by the RDC in light of any representations by any third party under section 393 of the Act and any interested party under section 63 or 67 of the Act.

DEPP 5.1.8J G

5Once a decision notice has been given as part of the expedited reference procedure (whether by the settlement decision makers or the RDC), it is the responsibility of the person subject to enforcement action to seek to refer the matter to the Tribunal under the Act if they so wish. If the matter is not referred to the Tribunal within the time required under section 390(1) of the Act, the FCA will, on taking the action to which the decision notice relates, give a final notice.

Procedure: warning notice statements

DEPP 5.1.8K G

5If FCA staff consider that it is appropriate to publish information about the matter to which a warning notice falling within section 391(1ZB) of the Act relates and is given by the settlement decision makers, they will make a recommendation to the settlement decision makers that such information should be published.

DEPP 5.1.8L G

5The settlement decision makers will then consider whether it is appropriate in all the circumstances to publish information about the matter to which the warning notice falling within section 391(1ZB) of the Act relates. The FCA's policy on publishing such information is set out in EG 6.

DEPP 5.1.8M G

5If the settlement decision makers propose that the FCA should publish information about the matter to which a warning notice falling within section 391(1ZB) of the Act relates:

  1. (1)

    the settlement decision makers will settle the wording of the statement it proposes the FCA should publish (warning notice statement);

  2. (2)

    the FCA staff will make appropriate arrangements for the warning notice statement that the settlement decisions makers propose the FCA should publish to be given to the persons to whom the warning notice was given or copied;

  3. (3)

    the proposed warning notice statement will specify the time allowed for the recipient to respond in writing to the settlement decision makers. This will normally be 14 days;

  4. (4)

    the recipient of a proposed warning notice statement may request the settlement decision makers to grant an extension of the time allowed for its response. Such a request must normally be made within seven days of the proposed warning notice statement being given; and

  5. (5)

    the settlement decision makers will not normally grant a request by a person to whom the warning notice statement was given to make their response in person.

DEPP 5.1.8N G

5If no response to the proposed warning notice statement is received, the FCA will make appropriate arrangements to publish the warning notice statement.

DEPP 5.1.8O G

5If the settlement decision makers receive a response from the person to whom the proposed warning notice statement was given, the settlement decision makers will consider their response and decide whether it is appropriate in all the circumstances to publish information about the matter to which the warning notice relates.

DEPP 5.1.8P G

5If the settlement decision makers decide that the FCA should publish a warning notice statement:

  1. (1)

    the settlement decision makers will notify the relevant parties (including the relevant FCA staff) in writing of that decision;

  2. (2)

    the settlement decision makers will settle the wording of the warning notice statement; and

  3. (3)

    the FCA will make appropriate arrangements for the warning notice statement to be published.

DEPP 5.1.8Q G

5If the settlement decision makers decide that the FCA should not publish a warning notice statement they will notify the relevant parties (including the relevant FCA staff) in writing of that decision.

Settlement by mediation

DEPP 5.1.9 G

The FCA4 and other parties may agree to mediation as a way of facilitating settlement in appropriate cases.

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Third party rights

DEPP 5.1.10 G

  1. (1)

    DEPP 2.4 sets out the FCA's4 approach to giving third parties copies of statutory notices pursuant to section 393 (Third party rights) of the Act.

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  2. (2)

    The decision to give a warning notice or a decision notice to a third party is a statutory notice associated decision.

  3. (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