Thought For The Week: Out with the old (enforcement cases) and in with the new
16 October 2023
Therese Chambers and Steve Smart have been in role as the FCA's joint Executive Directors of Enforcement for nearly four months (Smart commenced his role on 21 June 2023) and we are now starting to see early signs as to their strategic direction.
In particular, there has been a notable uptick in the number of cases closed. In response to a freedom of information request, the FCA stated that it had closed 37 enforcement cases in the second quarter of this calendar year. By comparison, the FCA closed 107 cases in the financial year 2022/23. Should the FCA maintain its current rate of case closure, it will close nearly 40% more enforcement cases during this financial year.
At the FCA’s Annual Public Meeting earlier this month, Chambers was clear that Enforcement is actively seeking to close cases more quickly: “One of the things that we will be really keen to do is get to that point of closure of those cases that have no future more quickly than we have so far been able to do. So, in that sense, yes, there will be more closures, but they will be closures of cases that were always destined to close”.
It is likely that there are two main reasons for this change in strategic focus.
Firstly, in Chambers' inaugural speech in role, she emphasised her desire to achieve strong alignment between the FCA's enforcement work and the FCA's wider strategy. Closing 'legacy' cases will facilitate this by freeing up capacity to pursue new priority areas (including the Consumer Duty and non-financial misconduct).
Secondly, to bring down the length of time it is taking the FCA to complete investigations. According to this year's Annual Report (covering 2022/23), it took an average of 40 months for the FCA to complete the investigation stage in regulatory cases. This figure is more than double the average case length in 2014/15 when the previous Executive Director, Mark Steward, began his tenure. Earlier this year, the Upper Tribunal criticised the length of the FCA’s investigation into three individuals, commenting that the length of its five-year investigation was "unacceptable". The Upper Tribunal added that "it is for the Authority to give serious consideration as to whether it is appropriate to continue with an investigation which it does not have the resources to complete within a reasonable period of time and where it has decided that its priorities for its limited resource lie elsewhere".
The FCA's recent increase in case closures offers the first clue as to its intention to slim down its caseload. However, in order to realise its ambitions to pursue new areas of misconduct, and restore its credibility in the wake of recent criticism, more will need to be done to reduce the time it takes to investigate. This should include utilising data and technology more efficiently, and closely reviewing its investigation and decision-making processes.
Authors: Adam Jamieson, Eleanor Robinson and Travis Quinn
