CRED 15
Enforcement
CRED 15.1
Application and purpose
- 01/12/2004
CRED 15.1.1
See Notes
This chapter contains guidance on the investigation and enforcement powers available to the FSA, and its approach to the use of those powers, in respect of:
- (1) [Deleted]
- (2) credit unions, with respect to their activities of accepting deposits; and
- (3) approved persons of credit unions, as set out in CRED 6.
- 01/12/2004
CRED 15.1.2
See Notes
The FSA's effective
and proportionate use of its investigation and enforcement powers plays an
important role in the pursuit of its regulatory
objectives.
- 01/12/2004
CRED 15.2
Investigation and enforcement powers
- 01/12/2004
CRED 15.2.1
See Notes
The FSA's investigation
and enforcement powers in the Industrial and Provident Societies Act 1965,
the Friendly and Industrial and Provident Societies Act 1968 and the Credit
Unions Act 1979, although its main powers derive from the Act and the Unfair Terms Regulations.
- 01/12/2004
CRED 15.2.2
See Notes
For ease of reference:
- (1) Annex 1 to this chapter (CRED 15 Annex 1 G) contains a table of the FSA's investigation and enforcement powers under the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968 and the Credit Unions Act 1979; and
- (2) Annex 2 to this chapter (CRED 15 Annex 1 G) contains a table of the main relevant investigation and enforcement powers under the Act and the Unfair Terms Regulations, showing where they are considered in the Enforcement manual (ENF).
- 01/12/2004
CRED 15.2.3
See Notes
Some of the FSA's powers listed in CRED 15 Annex 1 G are similar to the powers listed in CRED 15 Annex 2 G. For example, the FSA has information gathering and investigation
powers under both the Industrial and Provident Societies Act 1965, as extended
by the Credit Unions Act 1979, and the Act.
These different powers enable the FSA to
investigate and enforce the different requirements imposed on credit unions by legislation.
- 01/12/2004
CRED 15.2.4
See Notes
In appropriate circumstances, the FSA may need to consider
which power to use, and whether to use powers, from one or more of the Acts.
Which power or powers are appropriate will vary according to the circumstances
of the case. Where the FSA is
exercising its investigation and enforcement powers, it will normally explain
to the credit union,
individual or other persons concerned
under which power, or powers, it is acting.
- 01/12/2004
CRED 15.2.5
See Notes
However, it is the responsibility of credit unions and individuals, or other persons connected to them to ensure that their actions comply with the requirements of the legislation and the FSA's rules, at all times. Credit unions and those involved with them can contact their usual supervisory contact at the FSA about the use of the FSA's investigation and enforcement powers.
- 01/12/2004
CRED 15.3
The FSA's approach to the use of its investigation and enforcement powers
- 01/12/2004
CRED 15.3.1
See Notes
There are a number of principles underlying the FSA's approach to the exercise of its investigation and enforcement powers in relation to credit unions:
- (1) the effectiveness of the regulatory regime depends to a significant extent on the maintenance of an open and cooperative relationship between the FSA and the management of credit unions;
- (2) the FSA will seek to exercise its investigation and enforcement powers in a manner that is transparent, proportionate and consistent with its publicly stated policies; and
- (3) the FSA will seek to ensure fair treatment when exercising its investigation and enforcement powers. For example, the FSA's decision making process for regulatory enforcement cases generally gives an opportunity for both written and oral representations to be made, and also provides for a facility for mediation in certain disciplinary cases.
- 01/12/2004
CRED 15.3.2
See Notes
The investigation and enforcement powers available to the FSA form part of the regulatory toolkit it will use to meet its regulatory objectives of protecting consumers, promoting public awareness, maintaining confidence in the financial system and reducing financial crime. Where a credit union, or an individual, has failed to comply with the requirements of the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968, the Credit Unions Act 1979, the Act, the FSA's rules, or other relevant legislation (for example, the Criminal Justice Act 1993 and the Money Laundering Regulations), it may be appropriate to deal with this without the need for formal disciplinary or other enforcement action.
- 01/12/2004
CRED 15.3.3
See Notes
The proactive supervision and monitoring
of credit unions,
and an open and cooperative relationship between credit unions and their supervisors, will,
in some cases where a contravention has taken place, lead the FSA to decide against
taking formal disciplinary action. However, in such cases, the FSA will expect the credit union, or the individual,
to act promptly to take the necessary remedial action, agreed with its supervisors,
to deal with the FSA's concerns.
If the credit union,
or the individual, does not do this, the FSA may
take investigation or enforcement action in respect of the original contravention.
- 01/12/2004
CRED 15.3.4
See Notes
Where the FSA has concerns about a credit union, or an individual, it will normally
discuss its concerns with them before considering the use of its investigation
and enforcement powers. However, the FSA may
take action without discussing its concerns with a credit union in urgent cases or in cases
where the interests of consumers might otherwise be put at risk.
- 01/12/2004
CRED 15.4
The FSA's policies and procedures for taking enforcement action
- 01/12/2004
CRED 15.4.1
See Notes
[Deleted]
- 01/12/2004
CRED 15.4.2
See Notes
The FSA's enforcement powers in the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968, the Credit Unions Act 1979 and the Act can be grouped into three broad categories, based on the type of procedure that applies to their use. The three broad categories are:
- (1) regulatory enforcement powers, which the FSA must exercise by statutory notice procedures;
- (2) civil enforcement powers, which the FSA must exercise by making application to the civil courts; and
- (3) criminal prosecution powers, which the FSA must exercise by bringing proceedings in the criminal courts.
- 01/12/2004
CRED 15.4.3
See Notes
When the FSA exercises its regulatory enforcement powers, the statutory notice procedure it must follow varies depending on the type of action to be taken and the provisions of the relevant legislation.
- (1) If the FSA is using its regulatory enforcement powers under the Act, it must give the reasons and various notices required by the Act and, in all cases, allow the person receiving the notice an opportunity to make representations. The FSA's decision making procedures for notices to be given by the Act are set out in DEC. CRED 16 provides an overview of DEC.
- (2) If the FSA is using its regulatory enforcement powers under the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968 and the Credit Unions Act 1979, it will have regard to the Principles set out in CRED 3 and will, so far as appropriate, provide a process that is consistent with that in DEC.
- 01/12/2004
CRED 15.4.4
See Notes
When the FSA uses its civil enforcement powers and
criminal prosecution powers under the relevant legislation, it must follow
the procedures of the civil and criminal courts.
- 01/12/2004
CRED 15.4.5
See Notes
- (1) If the FSA is considering using its regulatory enforcement, civil enforcement or criminal prosecution powers under the Act, it will apply the policies on the use of those powers set out in ENF.
- (2) If the FSA is considering using its regulatory enforcement, civil enforcement or criminal prosecution powers under the Industrial and Provident Societies Act 1965, the Friendly and Industrial and Provident Societies Act 1968 and the Credit Unions Act 1979, it will, to the extent appropriate, apply the policies on the use of similar powers under the Act (as set out in ENF).
- 01/12/2004
CRED 15.5
Financial penalties for late submission of reports
- 01/12/2004
CRED 15.5.1
See Notes
- 01/12/2004
CRED 15.5.2
See Notes
The FSA attaches considerable
importance to the timely submission by credit
unions of the reports referred to in ENF 13.5. This is because the information that they contain is essential
to the FSA's assessment
of whether a credit union is
complying with the requirements and standards of the regulatory system and to the FSA's understanding of
that credit union's business.
- 01/12/2004
CRED 15.5.3
See Notes
- (1) In general, the FSA's approach to disciplinary action arising from the late submission of a report will depend upon the length of time after the due date that the report in question is submitted. Where the period of delay is no more than 28 business days, the FSA considers that in the majority of cases it will be appropriate to limit the sanction imposed on the credit union concerned to a financial penalty fixed by reference to the indicative scale of penalties at ENF 13 Annex 1 G (reproduced at CRED 15 Annex 3 G).
- (2) There may, however, be exceptional circumstances in which the FSA considers that it is appropriate not to seek a penalty, or to impose a lower penalty than the one indicated by the scale. An administrative difficulty such as pressure of work does not, in itself, constitute an exceptional circumstance for this purpose.
- (3) Equally, the FSA may impose a higher penalty than the one indicated by the scale at ENF 13 Annex 1 G (CRED 15 Annex 3 G) having regard to the seriousness of the contravention and the extent to which the contravention was deliberate or reckless. This may include, for example, a case where a credit union repeatedly fails to submit its reports on time or where there is information that suggests that such a delay was deliberate.
- (4) The FSA will also have regard to the submission frequency of the late report when assessing the seriousness of the contravention. For example, a short delay in submitting a quarterly report may have more serious implications for the supervision of the credit union in question than a similar delay in submitting an annual report. Such a delay may therefore be subject to a higher penalty than the one suggested by the indicative scale.
- 01/12/2004
CRED 15.5.4
See Notes
Reference
to an indicative scale of penalties for breaches of this nature represents
an exception to the FSA's general
policy described in ENF
13.3.1 G (Factors relevant
to determining the appropriate level of financial penalty). The FSA considers that it
is appropriate to treat this type of breach differently from other regulatory
breaches on the basis that the nature of the facts establishing the breach
is likely to be similar in each case and that the scale will ensure consistency
in the treatment of the credit
unions in question.
- 01/12/2004
CRED 15.5.5
See Notes
- (1) Where a report is submitted more than 28 business days after the due date, and there are no exceptional circumstances justifying the failure to submit on time, the financial penalty imposed is likely to exceed the amount indicated by the scale at ENF 13 Annex 1 G (CRED 15 Annex 3 G) for 21 to 28 business days delay. The FSA will determine the precise level of the financial penalty to be imposed in accordance with the approach discussed in ENF 13.3.3 G (Factors relevant to determining the appropriate level of financial penalty).
- (2) In addition, in appropriate cases, the FSA may bring disciplinary action against the approved person or persons within the credit union's management who are ultimately responsible for ensuring that the credit union's reports are completed and returned to the FSA (see ENF 11.5 (Action against approved persons)).
- 01/12/2004
CRED 15.5.6
See Notes
In
applying the guidance in ENF 13.5 (Financial penalties for late submission of reports),
the FSA may
treat a report which is materially incomplete or inaccurate as not received
until it has been submitted in a form which is materially complete and accurate.
For the purposes of the guidance,
the FSA may
also treat a report as not received where the method by which it is submitted
to the FSA does
not comply with the prescribed method of submission.
- 01/12/2004
CRED 15.5.7
See Notes
In
most late reporting cases, it will not be necessary for the FSA to appoint an investigator under its
powers discussed in ENF
2 (Information gathering
and investigation powers) since the fact of the breach will be clear. It follows
that the FSA will
not usually send the credit
union concerned a preliminary findings letter (see ENF
2.5.12 G (The FSA's policy on exercising its powers:
firms, approved persons and others)) for late-reporting disciplinary action.
- 01/12/2004
CRED 15.5.8
See Notes
A
failure by a credit union to
submit a report by the due date may indicate wider problems within the credit union, for which
more serious disciplinary sanctions or other enforcement action (see ENF 11.2.3 G (Introduction)) or both may be appropriate.
- 01/12/2004
CRED 15.5.9
See Notes
The FSA will use the decision
making procedure set out in DEC
4.5.2 G to DEC
4.5.6 G (Delegation of RDC decisions and modified RDC
procedures) to decide whether to impose a financial penalty for the late submission
of a report. It will use this procedure whether the period of delay is more
than or less than 28 business
days including if no submission has been made at all.
- 01/12/2004
CRED 15.5.10
See Notes
- (1) Once a final notice has been issued relating to a financial penalty and any other relevant sanction for a late report, the FSA will consider whether it is unfair to the credit union or prejudicial to the interests of consumers to publish information relating to the decision. The FSA anticipates that in most cases where reports have been submitted late, no such unfairness or prejudice will exist. If so, it will enter details of the decision in the FSA Register.
- (2) The FSA may also publicise the sanctions on a wider basis where the contravention is considered to be particularly serious. Examples of situations that may result in wider publicity include where the period of delay exceeds 28 business days or where the credit union in question has previously failed to submit its reports on time to the FSA or to any previous regulator.
- 01/12/2004
CRED 15 Annex 1
Enforcement Powers
- 01/12/2004
See Notes
| SUBJECT | SECTION OF THE RELEVANT ACTS | |
| CANCELLATION OR SUSPENSION OF REGISTRATION | ||
| Power to cancel the registration of a credit union | Industrial & Provident Societies Act 1965, s.16 as applied by Credit Unions Act 1979, s.20(1) | |
| Power to suspend the registration of a credit union | Industrial & Provident Societies Act 1965, s.17 as applied by Credit Unions Act 1979, s.20(1) | |
| INSOLVENCY PROCEEDINGS | ||
| Provision of information: when a credit is in receivership | Industrial & Provident Societies Act 1965, s.43 | |
| Provision of information: when a credit union is subject to a creditors' voluntary liquidation | Industrial & Provident Societies Act 1965, s.59 | |
| INFORMATION GATHERING AND INVESTIGATION POWERS | ||
| Power to require information from individuals who are, or have been, officers of a credit union | Industrial & Provident Societies Act 1965, s.48 extended by Credit Unions Act 1979, s.17(1) | |
| Power to appoint an investigator to look into the affairs of a credit union | Industrial & Provident Societies Act 1965, s.49 extended by Credit Unions Act 1979, s.18(1) | |
| AUDITING OF ACCOUNTS | ||
| Power to require the financial accounts of a credit union for past years to be audited | Industrial & Provident Societies Act 1965, s.9(c) | |
| COMPULSORY WINDING UP | ||
| Power to petition the court for the winding up of a credit union | Credit Unions Act 1979,s.20(2) | |
| PROSECUTION OF CRIMINAL OFFENCES | ||
| Power to prosecute offences under the Industrial & Provident Societies Act 1965, Industrial & Provident Societies Act 1968 and the Credit Unions Act 1979 | Credit Unions Act 1979,s.28 | |
- 01/12/2004
CRED 15 Annex 2
Enforcement Powers
- 01/12/2004
See Notes
| This table gives the main location in the Enforcement manual where guidance appears on the powers referred to in the Act and the Unfair Terms Regulations list below. This is an edited version of the table given at ENF 1 Annex 1 |
| SUBJECT | PART AND SECTION OF THE ACT | ENFORCEMENT MANUAL LOCATION |
| VARIATION AND CANCELLATION OF PERMISSION AND WITHDRAWAL OF AUTHORISATION OF CREDIT UNIONS | ||
| Duty to withdraw authorisation | Part III, s. 33 | ENF 5 |
| Variation and cancellation on the FSA's own initiative | Part IV, s. 45 | ENF 3 (Variation), ENF 5 (Cancellation) |
| Prohibitions and restrictions | Part IV, s. 48 | ENF 3.3.10 |
| PROHIBITION OF INDIVIDUALS | ||
| Power to make a prohibition order | Part V, s. 56 | ENF 8 |
| WITHDRAWAL OF APPROVAL FROM APPROVED PERSONS | ||
| Power to withdraw approval from approved persons of credit unions | Part V, s. 63 | ENF 7 |
| DISCIPLINARY POWERS AGAINST APPROVED PERSONS | ||
| Public statements of misconduct | Part V, s. 66 | ENF 11 and ENF 12 |
| Financial penalties | Part V, s. 66 | ENF 11 and ENF 13 |
| INFORMATION GATHERING AND INVESTIGATION POWERS | ||
| Power to require information from credit unions | Part XI, s. 165 | ENF 2.3.2 G - ENF 2.3.7 G |
| Power to require credit unions to provide a report by a skilled person | Part XI, s. 166 | ENF 2.3.8 G - ENF 2.3.11 G |
| Power to appoint persons to carry out general investigations into credit unions | Part XI, s. 167 | ENF 2.3.12 G - ENF 2.3.13 G |
| Power to appoint persons to carry out investigations in particular cases involving a person or a credit union | Part XI, s. 168 | ENF 2.3.14 G - ENF 2.3.15 G |
| Powers of investigation appointed under s. 167 | Part XI, s. 171 | ENF 2.4.2 G - ENF 2.4.5 G and ENF 2.4.10 G - ENF 2.4.12 G |
| Additional powers of investigators appointed as a result of s. 168 (1) or (4) | Part XI, s. 172 | ENF 2.4.6 G -ENF 2.4.7 G and ENF 2.4.10 G - ENF 2.4.12 G |
| Powers of investigators appointed as a result of s. 168 (2) | Part XI, s. 173 | ENF 2.4.8 G and ENF 2.4.10 G - ENF 2.4.12 G |
| Information and documents: supplemental provisions relating to investigators appointed under s. 167 or s. 168 | Part XI, s. 175 | ENF 2.4.10 G - ENF 2.4.12 G |
| Entry of premises under warrant | Part XI, s. 176 | ENF 2.15.1 G - ENF 2.15.4 G |
| DISCIPLINARY POWERS AGAINST CREDIT UNION | ||
| Public censure | Part XIV, s. 205 | ENF 12 |
| Financial penalties | Part XIV, s. 206 | ENF 13 |
| DISQUALIFICATION OF AUDITORS APPOINTED BY CREDIT UNIONS | ||
| Disqualification of auditors for failure to comply with a duty imposed under the Act | Part XXII, s. 345 | ENF 17 |
| ORDERS AGAINST DEBT AVOIDANCE | ||
| Provisions against debt avoidance: the right to apply for an order | Part XXIV, s. 375 | ENF 10.9 and ENF 10.10 |
| INJUNCTIONS AGAINST PERSONS | ||
| Injunctions for breach of a relevant requirement | Part XXV, s. 380 | ENF 6.3, ENF 6.5 and ENF 6.6 |
| RESTITUTION | ||
| Power to apply to court for a restitution order | Part XXV, s. 382 | ENF 9 |
| Power to require restitution | Part XXV, s. 402 | ENF 9 |
| PROSECUTION OF CRIMINAL OFFENCES | ||
| Power to prosecute offences under the Act and subordinate legislation | Part XXVII, s. 401 | ENF 15 |
| Power to prosecute other offences | Part XXVII, s. 402 | ENF 15 |
| UNFAIR TERMS REGULATIONS | ||
| Power to seek injunctions under the Unfair Terms Regulations. | N/A | ENF 20 (Unfair terms in consumer contracts) |
- 01/12/2004
CRED 15 Annex 3
Financial penalties
- 01/12/2004
See Notes
| Number of business days late | Annual fees payable by firm Note |
|||||||
| £1 to £150 | £151 to £500 | £501 to £1,000 | £1,001 to less than £10,000 | £10,000 to less than £20,000 | £20,000 to less than £50,000 | £50,000 to less than £100,000 | £100,000 or greater | |
| 22-28 | 40 | 100 | 200 | 400 | 800 | 2000 | 4000 | 6000 |
| 15-21 | 30 | 75 | 150 | 300 | 600 | 1500 | 3000 | 4500 |
| 8-14 | 20 | 50 | 100 | 200 | 400 | 1000 | 2000 | 3000 |
| 1-7 | 10 | 25 | 50 | 100 | 200 | 500 | 1000 | 1500 |
| Note: | ||||||||
| 1. For this purpose, the annual fee payable by the credit union is the annual fee for the most recent financial year for which the FSA has fully invoiced the credit union before the date on which the relevant report first became late. | ||||||||
| 2. Where the credit union first becomes authorised after 2 July 2002, and at the time the report first becomes late the credit union has not previously been fully invoiced by the FSA for an annual fee, the annual fee of the credit union will be treated as that for £1 to £150. | ||||||||
- 01/12/2004