The FSA has a general power to require persons to answer questions, provide information and to provide documents and an explanation of these documents in connection with carrying out its functions under the Act. The FSA uses this power in its supervision and enforcement work prior to the appointment of investigators.Notes: [s165]
Under section 167 the FSA can appoint persons to carry out general investigations (e.g. where there are concerns but no specific breach of a requirement) and under section 168 the FSA can appoint persons to carry out investigations in particular cases (e.g. where a specific contravention or offence is thought to have occurred). Investigators are usually members of the FSA’s staff. The FSA also has the power to require a firm to provide it with a report by a skilled person on any matter in relation to which the FSA has required or could require the provision of documents or information under its general information gathering power, section 165. The skilled person must be nominated or approved by the FSA. This power is likely to be used where expert analysis or recommendations for remedial action are required.
The FSA will use the results of their investigations to decide what enforcement measures, if any, may be necessary.Notes: [s167 and s168]
When dealing with the insolvency of a regulated activity or an authorised person the official receiver may find it useful to contact the FSA who may have received complaints or other information about the insolvent’s conduct. The FSA will also have information on any investigations they have carried out.
The FSA has a statutory obligation to enforce the provisions of the Act. Where the FSA proposes to exercise its enforcement powers, it is obliged to give a warning notice and decision notice to the person in question. A warning notice gives that person details about the action which the FSA proposes to take and a decision notice gives the FSA’s reasons for the decisions to take the action to which the notice relates.Notes: [s387 and s388]
The FSA has two powers to take immediate enforcement action in urgent cases. They are:
Apply to court for an injunction to prevent a person from carrying on a regulated activity under the Act; or
Vary a firm’s permission to carry on regulated activities (see part 4).
Where there has been a breach, or likely breach, of the Act, the FSA can apply to the court for an injunction against any person, whether authorised or not. The court will only grant an injunction if it is satisfied that there has been, or is reasonably likely to be, a contravention of a relevant requirement imposed by the Act or imposed by or under any other Act and whose contravention constitutes an offence which the FSA has power to prosecute under the Act, e.g. insider dealing.
If the FSA is to vary a firm’s permission in carrying out a regulated activity, then the FSA must give notice of its intention to the firm. A firm has a right to refer such a variation to the Financial Services and Markets Tribunal (see paragraph 80.39) for review.Notes: [s380] [s380 and s381]
The FSA’s approach to disciplinary proceedings is set out in the FSA’s Enforcement Manual. The following remedies are available to the FSA as a result of disciplinary action:
Public statements and censures.
Public statements are regarded as less serious than a financial penalty. A public statement may be issued where a person is guilty of misconduct or has engaged in market abuse or there has been a contravention of the listing rules. A public censure may be issued where a firm has contravened a requirement imposed on it under the Act. Financial penalties may be imposed by the FSA in the same circumstances.
Where the FSA decide that formal disciplinary measures are not appropriate, but there are concerns regarding the behaviour of a firm or approved person, the FSA may issue a private warning. Private warnings together with any comments received in response will form part of the firm’s or approved person’s compliance history. The FSA may also issue private warnings to individuals who are not authorised.Notes: [Enforcement manual Instrument 2001]
If a firm’s continuing ability to meet the threshold conditions (see paragraph 80.9), or an approved person’s fitness and propriety, is under question the following other measures are available to the FSA:
Variation or cancellation of permission and the withdrawal of a firm’s authorisation;
Withdrawal of an individual’s status as an approved person; and
Prohibition of an individual firm from performing regulated activities.
The FSA can also take disciplinary action in conjunction with the above enforcement action.Notes: [Enforcement Manual Instrument 2001, 11.2.3G]
The FSA also has the power to apply to court for a restitution order where a person, authorised or not, has breached a requirement of the Act, or has been knowingly concerned in such a breach and profits have accrued to him/her as a result of the contravention or one or more persons have suffered a loss or been otherwise adversely affected as a result of the contravention. The FSA can also require restitution by a firm which has contravened a requirement of the Act and where a person, authorised or not, has engaged in market abuse.
The above powers are basically used to obtain redress for consumers.Notes: [s382, s383 and s384]
The FSA has insolvency powers with regard to current or previously authorised individuals or firms, current or previous appointed representatives and those who are carrying on, or who have carried on, a regulated activity in contravention of the general prohibition.
The FSA has insolvency powers to;
The FSA also has powers to;
Before considering insolvency proceedings as a means of enforcement the FSA will firstly consider all other enforcement powers available to it.Notes: [s359] [s367] [s365] [s372] [s356 and 357] [s375] [s361] [s362, 363, 371 and 374]
The FSA can prosecute criminal offences arising under the Act. The FSA can also prosecute insider dealing under the Criminal Justice Act 1993, Part V, and also breaches of money-laundering regulations. The FSA may take civil proceedings in conjunction with criminal proceedings.
Notes: [Criminal Justice Act 1993, Part V, Money Laundering Regulations 1993, s402]
It is a criminal offence for anyone to make a false or misleading statement with the intention of inducing someone to enter into an investment agreement or to refrain from entering into an investment agreement or to exercise or refrain from exercising any rights conferred by an investment or for anyone to engage in any act or course of conduct which deliberately creates a false or misleading impression of the price or value of an investment. A person guilty of an offence under this section is liable to imprisonment, a fine or both.
The FSA also has powers to disqualify auditors and actuaries appointed by firms. An auditor can be disqualified under section 249 for breaching the rules of a unit trust scheme. Under section 345, if an auditor or actuary has failed to comply with a duty imposed on him under the Act, the FSA may disqualify him from being the auditor of, or from acting as an actuary for, any authorised person or any particular class of authorised person.
Notes: [s249 and s345]
Members of designated professional bodies, e.g. The Law Society, are permitted to carry on certain regulated activities under the supervision and regulation of that body and under section 327 may be entitled to an exemption from the general prohibition. If it appears to the FSA that the person concerned is not a fit and proper person to carry on regulated activities under the exemption, the FSA has the power, under section 329 to disapply this exemption.
Notes: [s327 and s329]