Enforcement Decision Making Committee: 2020/21 Report

Foreword

This is the second report of the Enforcement Decision Making Committee (EDMC) of the Bank of England covering the period of 1 March 2020 to 28 February 2021. The first report, covering the period for the EDMC’s establishment in August 2018 to 29 February 2020, is available on our website. As noted there, the model for the EDMC is primarily based on an adapted version of the Financial Conduct Authority’s (FCA) Regulatory Decisions Committee (RDC). The EDMC works to strengthen the Bank’s enforcement processes by ensuring a functional separation between the Bank’s investigation teams and executive as a whole, and the Bank’s decision makers in contested enforcement cases. The essence of the system is that decisions are taken by the EDMC independently, with the EDMC being independent from the Bank’s investigation teams and executive as a whole.

The procedures of the EDMC are as published in 2018. The process is designed to operate fairly and transparently, providing for disclosure of relevant material to the subject of an investigation, and allowing for written and oral representations by both the subject and the enforcement & litigation division of the Bank of England (the Bank). It is in effect the final stage of administrative decision-making by the Bank in contested enforcement cases. The subject also has the right to refer the matter to the Upper Tribunal (which is part of the Court system).

The committee meets quarterly to discuss matters relating to its work. From March 2020 until the date of this report, these meetings, and panel meetings for contested cases, have taken place remotely. By this means, despite restrictions imposed by the pandemic, it has been possible to conduct the work of the committee near normally. It may however be noted that the hearing of oral representations by subjects has not occurred over the course of the year, and careful thought will be given as to the fairest and safest way of doing this in consultation with subjects and their lawyers should the occasion arise.

From November 2020, we have been dealing with a number of cases, which remain in course of decision making at the time of writing. They have arisen from a joint investigation by the FCA and the Prudential Regulation Authority (PRA). In terms of decision making by the EDMC and RDC, our primary concern has been to eliminate any unnecessary duplication in the process from the perspective of the subjects.

We are pleased to report that, after consultation, a process has been established through the secretariat for the review of settled cases by the EDMC, in line with recommendations for such a review by HM Treasury and with the PRA’s public commitment in that regard. The utility of a review will depend on whether there are sufficient cases to draw useful thematic conclusions and to consider any recommendations whilst preserving the anonymity of the subjects. In consultation with the Bank’s enforcement and litigation division, we will decide each year whether or not to undertake a review, the output of which will be reported to the Prudential Regulation Committee and, where appropriate, included in our annual reports.

An essential part of our functioning is the administrative support given by the secretariat, and the legal support given by the independent legal adviser appointed from within the Bank’s legal directorate. While the number of contested cases is unpredictable, and in future the number may remain relatively low, individual cases can involve a considerable workload for those involved. The resourcing which has been made available to the Committee is currently sufficient in this regard.

Sir William Blair

Chair, Enforcement Decision Making Committee

1 Overview

1.1 The EDMC is a committee of the Bank. It was established by the Bank’s Court of Directors in August 2018 to help the Bank discharge its responsibilities and strengthen its enforcement processes by ensuring a functional separation between the Bank’s investigation teams and the Bank’s decision makers in contested enforcement cases.^{footnote [1]}

1.2 We act within the statutory regimes operated by the Bank for: (i) prudential regulation; (ii) financial market infrastructure (FMI); and (iii) resolution. We will also act in Scottish and Northern Ireland (S&NI) Banknote Regime enforcement cases, pursuant to the relevant policy.

1.3 Our published procedures require us to submit an annual statement to the Bank’s Court of Directors (Court), with a copy also provided to the Prudential Regulation Committee, which we will then publish, to report on at least the following:

• how often we have met and which members have sat in which matters;
• resourcing, recruitment, and profile;
• costs incurred;
• the number of matters brought to us from the PRA, FMI and Resolution, and in respect of the S&NI banknote regime, respectively;
• number of statutory notices respectively dealt with;
• whether our decisions have been subject to subsequent successful challenge;
• situations where a member was unable to hear a matter because of an actual or perceived conflict;
• any other matters which Court considers relevant to the operation of the EDMC and of which it informs our Chair; and
• any other matters which the EDMC feels it needs to bring to Court's attention.

1.4 This document sets out our report for the period of 1 March 2020 to 28 February 2021. The Annex deals specifically with each item listed in paragraph 1.3.

2 Membership

2.1 Our members are appointed for renewable, fixed three-year periods. The EDMC comprises six members, with two legally qualified members appointed as Chair and Deputy Chair, in line with our procedures.

2.2 Our members’ current membership terms will end in July 2021. No other changes to membership have been made during the period covered by this report.

2.3 The EDMC has the following members:

• Sir William Blair (Chair)
• Dr Philip Marsden (Deputy Chair)
• Kishwer Falkner, Baroness Falkner of Margravine
• Anne Heal
• Mark Hoban
• Edward Sparrow

3 Cases

3.1 The EDMC Chair convenes panels of at least three members to hear cases. Panels are supported by a secretariat function to provide administrative support and an independent legal adviser (or advisers) appointed by the Bank’s legal directorate. The legal advisers are independent of the Bank’s investigation teams.

3.2 There have been no concluded cases during the period covered by this report. However, as at the end of the reporting period, we have been considering a number of cases.

3.3 The document ‘Procedures – The Enforcement Decision Making Committee’ sets out how we take decisions.

4 Upper Tribunal proceedings

4.1 The subject of a decision by the EDMC has the right to refer the case to the Upper Tribunal (which is part of the Court system). These proceedings are not a matter for us: the relevant team within the PRA deals with the matter on behalf of the Bank. The Upper Tribunal considers the matter afresh, in other words it reaches its own decision on the matter and may hear such evidence as it thinks fit in order to do so.

4.2 In our 2019/20 annual report, it was reported that decision notices issued by both ourselves and the RDC regarding Mr Stuart Malcolm Forsyth had been referred to the Upper Tribunal. At the time of writing, this case is being considered by the Upper Tribunal, which will in due course make its own determination.

5 General matters

Non-case specific meetings

5.1 In addition to our work on specific cases, we have met as a committee on four occasions to discuss matters of broader interest. These included relevant regulatory frameworks, engagement with the Bank’s legal directorate, and administrative matters. Due to the Covid-19 pandemic, all meetings since March 2020 have been held remotely. Further such meetings are scheduled during 2021.

Conflicts of interest

5.2 Members are to declare actual or potential conflicts of interest prior to appointment, and any that arise after appointment. These are declared to the EDMC Chair and/or the Bank’s Conflicts Officer, who then take any appropriate action necessary to manage such actual and/or potential conflicts. During the period covered by this report, no situation has arisen where a member has been unable to hear a matter because of a conflict.

6 Review of the enforcement settlement process

6.1 In October 2019, the PRA’s updated Statement of Policy on its approach to enforcement^{footnote [2]} gave us responsibility for conducting periodic reviews of settled enforcement cases, to assess the ongoing fairness and effectiveness of the PRA’s settlement processes. As part of these reviews, we will seek comments from subjects who have settled PRA enforcement cases; relevant enforcement staff; and relevant PRA decision- makers involved in settlement. We have agreed a process for these reviews in line with the Statement of Policy.^{footnote [3]}

6.2 The outcome of each review will be reported to the PRA’s Prudential Regulation Committee and a summary of the review will (if appropriate) be included in our next EDMC annual report.

7 Looking forward - the next 12 months

7.1 We will continue our work on the ongoing cases we are currently considering. It is possible that the implementation of the Senior Managers and Certification Regime will increase the number of contested enforcement cases, due to the greater individual accountability imposed, but this is unpredictable.

7.2 We will continue to review our ways of working to ensure our work remains effective during Covid-19 related restrictions.

Annex: Report summary

As noted, our procedures document lists points on which we must report. These are set out in the table below.