Is it time for firms to reconsider their approach to settling enforcement action?

Abstract

The ongoing reform of the regulatory regime for the UK financial services industry is wide ranging and substantial. Whilst much of the attention has been grabbed by the introduction of the headline-inducing criminal offence of “reckless management” of a failed financial institution, much of the real impact of the changes will be felt as a result of other provisions. Two such provisions relate to the new power given to the Financial Conduct Authority (FCA) to publish information about enforcement action at a far earlier stage, and the reversed burden of proof for “Senior Managers” under the new regime. It is in the detail of such provisions, however, where the full ramifications, and unintended consequences, of change may have been underestimated. One such consequence may be the impact which these two provisions may have on the attitude and approach of firms to settlement of significant enforcement actions taken against them by the FCA (and by the Prudential Regulatory Authority).