10 Aug 2018

The new Enforcement Decision Making Committee

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On 3 August 2018, the Bank of England (the "Bank") published the Policy Statement "PS/EDMC2018" to establish the Enforcement Decision Making Committee (the "EDMC"). The EDMC, created in response to a recommendation from HM Treasury, strengthens the Prudential Regulation Authority's ("PRA") approach to its enforcement processes.

Role of the EDMC

The EDMC will act as an independent decision-making body for contested enforcement cases within the statutory regimes operated by the Bank in relation to Prudential Regulation, Financial Market Infrastructures, Resolution and certain Scottish and Northern Ireland Notes issuance cases.

Following the initial investigation stage, a contested case will be a case in which no settlement agreement is concluded between the Bank and the person or firm under investigation. This may occur when parties are unable to agree the terms of such an agreement within a suitable timeframe, or if either party does not wish to enter into a settlement agreement or may not deem a settlement agreement to be an appropriate form of action.

The EDMC is currently made up of six individuals – a chair, deputy chair and four members - although up to nine members may be appointed and typically three would be legally qualified. Members of the EDMC are not employees of the Bank and they are independent of the Bank's current executive. This ensures functional independence between the Bank's decision makers on a contested enforcement case and the Bank's investigation team.

Remit and procedure  

Should the EDMC panel, consisting of at least three EDMC members, decide that action should be taken against a person or firm under investigation, a number of statutory decisions are available to the EDMC. Such decisions include prohibition orders, closure orders, financial penalties, public censures, disciplinary action, the suspension or limiting of permissions of an authorised person and management disqualification.

The procedure when issuing a warning and / or decision notice is as follows:

EDMC diagram

Relationship with the Financial Conduct Authority

The establishment of the EDMC brings the PRA's decision making processes in line with those used by the Regulatory Decision Committee in Financial Conduct Authority ("FCA") enforcement cases. The PRA, acting as a regulator under the Bank, monitors and enforces prudential regulation, whereas the FCA regulates the conduct of firms and prudentially supervises firms that do not fall within the scope of the PRA.

A situation may arise where both the PRA and the FCA identify misconduct by an individual or firm which requires further investigation. In such circumstances, the regulators may decide to carry out a separate but coordinated joint investigation into different aspects of the same misconduct, or it may be deemed more appropriate for one regulator to carry out the investigation. If a joint investigation is undertaken, the regulators must try to coordinate their decision making processes, both for contested and settled enforcement cases. The regulators have stated that further guidance on joint investigations and FCA / PRA cooperation will be provided in due course.

Implications

With the introduction of the Senior Managers Regime (for further information please see our previous alert), it is expected that the PRA will look to bring more cases against individuals. In May 2018, the first such enforcement action was undertaken jointly by the PRA and FCA against Jes Staley, the CEO of Barclays Group.

Although most enforcement cases reach a settlement, an increase in the number of enforcement cases may in turn lead to more cases being contested before the EDMC.

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Tony Woodcock

Tony Woodcock
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