There are a number of principles underlying the FSA's approach to the exercise of its enforcement powers:
The effectiveness of the regulatory regime depends to a significant extent on the maintenance of an open and cooperative relationship between the FSA and those whom it regulates.
The FSA will seek to exercise its enforcement powers in a manner that is transparent, proportionate and consistent with its publicly stated policies.
The FSA will seek to ensure fair treatment when exercising its enforcement powers. For example, the FSA's decision making process for regulatory enforcement cases generally gives an opportunity for both written and oral representations to be made, and also provides a facility for mediation (where settlement discussions are unlikely to lead to an agreed settlement1) in certain disciplinary cases (see DEC App 1).
The FSA has a range of enforcement powers and, in any particular enforcement situation, the FSA may need to consider which power to use and whether to use one or more powers. So in any particular case, it may often be necessary to refer to a number of chapters of the Enforcement manual. For example, in market abuse cases, it may be necessary to refer to ENF 2 (Information gathering and investigation powers), ENF 6 (Injunctions), ENF 9 (Restitution), ENF 14 (Sanctions for market abuse) and ENF 15 (Prosecution of criminal offences), as well as the Code of Market Conduct (see MAR 1). Appropriate cross-references have been included in each chapter to help the reader use this manual.
The FSA has a range of regulatory tools to help it meet its regulatory objectives. The powers to conduct investigations which may lead to formal disciplinary action, together with powers to take intervention action and obtain restitution, are an important part of the FSA's toolkit, but there are many other regulatory tools that the FSA can use. The requirement for authorisation of firms and approval of persons in controlled functions aims to allow only those who satisfy the necessary criteria (including honesty, competence and financial soundness) to engage in regulated activity. Supervision enables the FSA to monitor and influence the behaviour of firms and approved persons.
Where a firm or other person has failed to comply with the requirements of the Act, the rules, or other relevant legislation (such as the Criminal Justice Act 1993, and the Money Laundering Regulations 1993), it may be appropriate to deal with this without the need for formal disciplinary or other enforcement action. The proactive supervision and monitoring of firms, and an open and cooperative relationship between firms and their supervisors, will, in some cases where a contravention has taken place, lead the FSA to decide against taking formal disciplinary action. However, in those cases, the FSA will expect the firm to act promptly to take the necessary remedial action agreed with its supervisors to deal with the FSA's concerns. If the firm does not do this, the FSA may take disciplinary or other enforcement action in respect of the original contravention.
The FSA's enforcement powers are exercised in, and reviewed by, the criminal courts, the civil courts and the Tribunal. For example, the FSA has power to prosecute particular offences in the criminal courts, it may seek to obtain injunctions in the civil courts, and its powers to impose disciplinary sanctions are subject to referral to the Tribunal.