FSA Enforcement Ian Mason Head of Department, Wholesale Group Enforcement Division June 2005

1. FSA EnforcementIan MasonHead of Department, Wholesale GroupEnforcement DivisionJune 2005

2. Enforcement in the FSA context • FSA is not Enforcement led • Small proportion (12%) of total budget • Selective risk-based approach

3. Risk-based enforcement: selection of cases for investigation • Risk means risk to FSA’s four statutory objectives • Market confidence • Public understanding • Protection of consumers • Financial crime • Risk based approach operates at two main levels • Strategic planning and resourcing • Individual case resourcing

4. FSA Enforcement Division • About 250 staff • Forensic investigators, lawyers and support staff • Wholesale and Retail Groups • Reports directly to CEO • Currently about 150 cases open

5. FSA Enforcement – key priorities • Senior management responsibility • Market abuse and insider dealing • Breaches of the Listing Rules • Conflicts of interest • Mis-selling, complaints handling • Financial promotions, financial resources • Perimeter cases

6. Investigatory Powers • FSMA part IX, sections 165–177 • Powers to require information • Appointment and powers of investigators – s167 and 168 • Skilled persons • Search warrants

8. Enforcement: An Overview of the process Urgent Action FSA decide to use projects - planning, control urgent urgent civil administrative enforcement tools and organisation action action investigations: gathering information and appointment documents of a skilled person appointment of third deciding to take parties further action Regulatory Decisions handling specific issues Committee insolvency Financial Services and unauthorised proceedings and Markets Tribunal business orders against debt avoidance civil proceedings international collective enforcement investment issues schemes criminal proceedings publicity

9. RDC / Tribunal Process • Warning Notice • Written & Oral Representations • Decision Notice • Referral to Tribunal • Final Notice • Publicity • Settlement / mediation available throughout

10. Sanctions • Factors include • Seriousness • Deliberate or reckless behaviour • Financial resources • Conduct after contravention • Disciplinary record and compliance history

11. 2004 Outcomes • 76 cases through RDC • 38 references to Tribunal • 4 Tribunal decisions • 11 Tribunal cases struck out / withdrawn • 101 Final Notices • Over £21 million in fines • Over 280 international requests

12. International Co-operation & Information Sharing • International co-operation between regulators – crucial in the context of regulating an increasingly global market • Advance warning of problems through pro-active sharing of intelligence • Assistance with investigations involving cross-border elements e.g. obtaining documents and testimony

13. Number of requests

14. Requests for Assistance Incoming Requests • What do incoming overseas requests relate to? • Transaction data • Good standing information • Regulatory information from FSA’s files • The exercise of statutory powers e.g. “sitting in” • MLAT requests

15. Requests for Assistance

16. FSA’s power to co-operate – statutory provisions • Section 354: General duty to co-operate • The FSA must take such steps as it considers appropriate to co-operate with other persons … who have functions • similar to those of the FSA; or • in relation to the prevention and detection of crime • Section 169: Assistance to overseas regulators • Information gathering and document production (section 165) • Appointing investigators (section 168(3)) • A direction permitting a representative of an overseas regulator to attend and take part in interviews (section 169(7)) • Powers are backed by contempt sanctions (section 177)

17. Considerations in giving assistance • Reciprocity of assistance • Whether the assertion of jurisdiction has a close parallel in the UK • Seriousness of the case and its importance to persons in the UK • Whether in the public interest • Contribution to cost • Such considerations do not apply if we consider that the exercise of investigative powers isnecessary to comply with a Community obligation

18. Disclosing Information to ORs • Sections 348 and 349: a general prohibition on disclosure of “confidential information” which • relates to the business or other affairs of any person • is received by the FSA in discharge of its functions • is not available in the public domain • is not summary information • Treasury Regulations provide “gateways” enabling disclosure • Improper disclosure constitutes a criminal offence

19. Considerations in disclosing informationto non-EEA regulators • Where “Directive information” is to be disclosed to a non-EEA regulator there must be a “co-operation agreement” • Information must be subject to guarantees of equivalent confidentiality protection • Overseas regulator’s self-certification that equivalence can be met • FSA’s consideration of relevant factors including overseas regulator’s self-certification, consideration of legislation in relevant jurisdiction and our knowledge of the applicable regime • If it concerns personal data, considerations under the Data Protection Act will also apply

20. Requests for assistanceWhat should requests contain? • Description of underlying facts • Connection with your jurisdiction & suspected breaches of your legislation • Responsibility for enforcing that legislation • Information/assistance that you require • Information useful in identifying relevant persons and documents • How that information/assistance will assist your enforcement functions • Intended use • Time within which assistance required • Preferred form in which information is required • Related requests and other UK bodies contacted • Special precautions (sensitivity/confidentiality) • Contact information