The City regulator has announced plans to refer more decisions to senior managers rather than the regulatory decisions committee, in an effort to more effectively tackle consumer harm.
But the move has been deemed to be “little short of administrative vandalism” by one law firm, amid concerns that the new decision-making process will make it harder for individuals and new businesses to seek approval from the Financial Conduct Authority (FCA).
“At present, an individual or new business seeking FCA approval has the right to present his or her case orally and in person to the FCA decision maker, on occasion the largely independent regulatory decisions committee,” said Simon Morris, a financial services partner at law firm CMS.
“But this is about to be stripped away despite almost universal opposition from respondents to the FCA’s consultation paper. Instead, decisions will all be taken on paper by FCA officials, leaving a refused applicant with only a slow and costly right of challenge to a public court hearing.”
The FCA said that it has reformed its decision-making process to ensure it can make faster and more effective decisions for consumers, markets and firms.
More contentious cases will continue to be reviewed by the regulatory decisions committee, but senior managers will now be able to take decisions on issues including: a firm’s authorisation or an individual’s approval; action in straightforward cases to cancel a firm’s permissions; starting civil proceedings, such as seeking an injunction; and starting criminal proceedings, such as a prosecution for insider dealing.
“This is a real loss for two reasons,” Morris added.
“First, it is little short of administrative vandalism; the current system works well and the FCA has advanced no sensible reason for change.
“Second, and key to securing an open market in financial services, allowing the decision maker to hear direct from the applicant often clears up misconceptions and satisfies the FCA’s concerns. This is not just a matter of fairness; it is in consumers’ interests that there are more rather than fewer managers and firms serving the market.”
“We are taking a fresh approach to tackling firms and individuals who do not meet the required standards,” said Emily Shepperd, executive director of authorisations.
“Our new streamlined decision-making process will allow us to be more assertive in stopping harm.”
The FCA will carry out a six-month post-implementation review to assess the effectiveness of the reforms.