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EG 5.5 2The settlement discount scheme

EG 5.5.1

2The settlement discount scheme allows a reduction in a financial penalty or period of suspension, restriction or condition1 that would otherwise be imposed on a person according to the stage at which the agreement is reached. Full details of the scheme are set out in DEPP 6.7.

EG 5.5.2

2Normally, where the outcome is potentially a financial penalty, the FCA will send a letter at an early point in the enforcement process to the subject of the investigation. This is what the FCA refers to as a stage 1 letter.

EG 5.5.3

2The does not apply to civil or criminal proceedings brought in the courts, or to public censure, prohibition orders, withdrawal of authorisation or approval, limitations of the period for which any approval is to have effect,1 or the payment of compensation or redress.

EG 5.5.4

2There is no set form for a stage 1 letter though it will always explain the nature of the misconduct, the FCA's view on penalty, and the period within which the FCA expects any settlement discussions to be concluded. In some cases, a draft statutory notice setting out the alleged rule breaches and the proposed penalty may form part of the letter, to convey the substance of the case team’s concerns and reasons for arriving at a particular penalty figure.

EG 5.5.5

2The timing of the stage 1 letter will vary from case to case. Sufficient investigative work must have taken place for the FCA to be able to satisfy itself that the settlement is the right regulatory outcome. In many cases, the FCA can send out the stage 1 letter substantially before the person concerned is provided with the FCA's preliminary investigation report (see paragraphs 4.13.1 to 4.13.4). The latest point the FCA will send a stage 1 letter is when the person is provided with the preliminary investigation report.

EG 5.5.6

2The FCA considers that 28 days following a stage 1 letter will normally be the ‘reasonable opportunity to reach agreement as to the amount of penalty’ before the expiry of stage 1 contemplated by DEPP 6.7.3. Extensions to this period will be granted in exceptional circumstances only.

EG 5.5.7

2The procedure for the settlement discount scheme where the outcome is potentially a financial penalty, described in paragraphs 5.5.1 to 5.5.6, will also apply where the outcome is potentially a suspension, restriction or condition1.