The Bank of England wants to cut penalties for errant businesses and individuals in half, in an effort to boost earlier cooperation with wrongdoing investigations at banks, insurers and other financial services firms it oversees.
The central bank’s Prudential Regulation Authority’s proposal for an early settlement discount of up to 50 per cent was part of a plan consultation released on Thursday. The regulator also outlined plans for an “upfront account scheme” that could offer faster settlements for non-criminal cases.
Discounts are often levied in PRA enforcement actions, but the current maximum is 30%, whether the parties cooperate and agree settlement terms in the early days of an investigation or fight tooth and nail before agreeing a deal in an investigation last hours.
Sam Woods, CEO of PRAhe said the proposals reflect lessons learned by the regulator in its first decade which “enabled us to review the bank’s enforcement policies to ensure they are clear and enable efficient and effective enforcement outcomes.”
During that period, the BoE successfully prosecuted 25 enforcement cases, including a Action 2018 against then Barclays chief executive Jes Staley for reporting offences, resulting in a £640,000 joint fine with the Financial Conduct Authority and an investigation by standard paper for regulatory reporting failures which resulted in a £46m fine.
Matthew Nunan, Gibson Dunn’s attorney and former law enforcement official at the FCA, said there could be a “very substantial savings” for regulators if companies and individuals work together, leading to an early conclusion to a ‘investigation. The regulator can conclude an investigation early only if he is convinced that the revelations represent a “true picture of the facts,” Nunan added.
Nunan said an early settlement discount scheme would likely appeal to City businesses for reputational reasons, rather than the financial savings it might offer. “Often the ability to get the regulator to acknowledge that the company has fully cooperated and resolved the matter is most important, and recognition that the individual qualified for the maximum possible discount could be significant.”
He said companies would also welcome the new upfront payment scheme as “the ability to quickly resolve a problem and move forward” is a priority, given that “we’ve seen share prices bounce even as large fines are announced because the market recognizes the advantage of drawing a line under a problem.
But Robert Dedman, a lawyer at CMS and former head of enforcement at the PRA, warned of potential pitfalls, since companies would have to “move quickly to qualify [for the discount] without necessarily knowing the full extent of the breach alleged”.
“The scheme also increases the risks for senior managers who have been suspended or fired from their companies, as they may effectively find themselves unable to access the information they need to qualify for the rebate,” he added.
The PRA consultation period lasts until 4 August.
—————————————————-
Source link