This section sets out the FSA's3 policy and procedures in relation to financial penalties for late submission of reports. It applies to reporting by firms required under all rules (not including the listing rules) which require firms to report to the FSA on a periodic basis. It also applies to periodic reporting by firms required by the provisions specified in (6) and (7). The following is a list of the main periodic reporting rules (the list may not be comprehensive) and those other provisions:1
IPRU(FSOC) 3.1(7) R (Management and control), IPRU(FSOC) 5.1(2)R, IPRU(FSOC) 5.2(2) R, IPRU(FSOC) 5.2(3)R (Prudential reporting) and IPRU(FSOC) 6.3(1) (Statistical information relating to EEA branches and services operations);41
1the reporting requirements in the pensions review provisions and FSAVC review provisions; that is, the provisions of the deemed scheme under the Financial Services and Markets Act 2000 (Transitional Provisions) (Review of Pensions Business) Order 2001 (SI 2001/2512); 2
References in ENF 13.5 to 'reports' include all the various types of reports and other documents, including annual controllers reports, annual close links reports, compliance reports, financial reports, persistency reports, accounts and balance sheets, and actuary and auditor reports that must be submitted to the FSA in accordance with the rules and other provisions specified in (1) to (8).21
The FSA attaches considerable importance to the timely submission by firms of the reports referred to in ENF 13.5.1 G. This is because the information that they contain is essential to the FSA's assessment of whether a firm is complying with the requirements and standards of the regulatory system and to the FSA's understanding of that firm's business.
In general, the FSA's approach to disciplinary action arising from the late submission of a report will depend upon the length of time after the due date that the report in question is submitted. Where the period of delay is no more than 28 business days, the FSA considers that in the majority of cases it will be appropriate to limit the sanction imposed on the firm concerned to a financial penalty fixed by reference to the indicative scale of penalties at ENF 13 Annex 1 G.
There may, however, be exceptional circumstances in which the FSA considers that it is appropriate not to seek a penalty, or to impose a lower penalty than the one indicated by the scale. This may be appropriate if the firm is an individual. If the person concerned is an individual, it is open to him to make representations to the FSA as to why he should not be the subject of a financial penalty, or why a lower penalty should be imposed. If he does so, the matters to which the FSA will have regard will include the matters set out in ENF 13.3.3 G (3)1.It should be noted that an administrative difficulty such as pressure of work does not, in itself, constitute an exceptional circumstance for this purpose.
Equally, the FSA may impose a higher penalty than the one indicated by the scale at ENF 13 Annex 1 G having regard to the seriousness of the contravention and the extent to which the contravention was deliberate or reckless. This may include, for example, a case where a firm repeatedly fails to submit its reports on time or where there is information that suggests that such a delay was deliberate.
The FSA will also have regard to the submission frequency of the late report when assessing the seriousness of the contravention. For example, a short delay in submitting a weekly or monthly report can have serious implications for the supervision of the firm inquestion. Such a delay may therefore be subject to a higher penalty than the one suggested by the indicative scale.
Reference to an indicative scale of penalties for breaches of this nature represents an exception to the FSA's general policy described in ENF 13.3.1 G. The FSA considers that it is appropriate to treat this type of breach differently from other regulatory breaches on the basis that the nature of the facts establishing the breach is likely to be similar in each case and that the scale will ensure consistency in the treatment of the firms in question.
Where a report is submitted more than 28 business days after the due date, and there are no exceptional circumstances justifying the failure to submit on time, the financial penalty imposed is likely to exceed the amount indicated by the scale at ENF 13 Annex 1 G for 21 to 28 business days delay. The FSA will determine the precise level of the financial penalty to be imposed in accordance with the approach discussed in ENF 13.3.3 G.
In addition, in appropriate cases, the FSA may bring disciplinary action against the approved person or persons within the firm's management who are ultimately responsible for ensuring that the firm's reports are completed and returned to the FSA (see ENF 11.5 (Action against approved persons)).
1In applying the guidance in ENF 13.5, the FSA may treat a report which is materially incomplete or inaccurate as not received until it has been submitted in a form which is materially complete and accurate. For the purposes of the guidance, the FSA may also treat a report as not received where the method by which it is submitted to the FSA does not comply with the prescribed method of submission.
In most late reporting cases, it will not be necessary for the FSA to appoint an investigator under its powers discussed in ENF 2since the fact of the breach will be clear. It follows that the FSA will not usually send the firm concerned a preliminary findings letter (see ENF 2.5.12 G)) for late-reporting disciplinary action.
The FSA will use the decision making procedure set out in DEC 4.5.2 G to DEC 4.5.6 G to decide whether to impose a financial penalty for the late submission of a report. It will use this procedure whether the period of delay is more than or less than 28 business days, including if no submission has been made at all.1
Once a final notice has been issued relating to a financial penalty and any other relevant sanction for a late report, the FSA will consider whether it is unfair to the firm or prejudicial to the interests of consumers to publish information relating to the decision. The FSA anticipates that in most cases where reports have been submitted late, no such unfairness or prejudice will exist. If so, it will enter details of the decision in the FSA Register.
The FSA may also publicise the sanctions on a wider basis where the contravention is considered to be particularly serious. Examples of situations that may result in wider publicity include where the period of delay exceeds 28 business days and/or where the firm in question has previously failed to submit its reports on time to the FSA or to any previous regulator.