Enforcement Decision Making Committee: 2021/22 Report

Foreword

This is the third report of the Enforcement Decision Making Committee (EDMC) of the Bank of England (the Bank), covering the period of 1 March 2021 to 28 February 2022. Earlier reports are available on our website. The EDMC works to strengthen the Bank’s enforcement processes by ensuring a functional separation in contested enforcement cases between investigation teams and executive on the one hand, and decision makers on the other. The essence of the system is that decisions are taken by the EDMC independently.

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. It is in effect the final stage of administrative decision-making by the Bank in contested enforcement cases. The subject has the right to refer the matter to the Upper Tribunal (which is part of the Court system) and which considers the matter afresh.

As noted in the second annual report, since the outbreak of the Covid-19 pandemic, the quarterly meetings of the EDMC and panel meetings for contested cases have taken place remotely. Hybrid and in person meetings resumed when permitted by Government guidelines. It seems likely going forward that meetings will include each of these formats, each of which can be useful, and this will be in the interests of efficiency as well as fairness.

From November 2020, we have been dealing with a number of cases, which remain in course of decision making at the time of writing.

As noted in the second annual report, 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 Prudential Regulation Authority’s (PRA) public commitment in that regard. Such a review has now taken place in respect of two settled cases. Following the review, the EDMC is not proposing any recommendations.

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

1.3 The EDMCs published procedures require it to submit an annual statement to the Court, with a copy also provided to the Prudential Regulation Committee (PRC), which will then be published, to report on at least the following:

• how often the EDMC has met and which members have sat in which matters;
• resourcing, recruitment, and profile;
• costs incurred;
• the number of matters brought to the EDMC from the PRA, FMI and Resolution, and
• in respect of the S&NI banknote regime, respectively;
• number of statutory notices respectively dealt with;
• whether the EDMC’s 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 the Chair; and
• any other matters which the EDMC feels it needs to bring to Court's attention.

1.4 This document sets out the report for the period of 1 March 2021 to 28 February 2022.

The Annex deals specifically with each item listed in paragraph 1.3.

2. Membership

2.1 The EDMC 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 its procedures.

2.2 The members’ membership terms were renewed in 2021 for a second term, ending in July 2024. 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, the EDMC has been considering a number of cases.

3.3 The document ‘Procedures – The Enforcement Decision Making Committee’ sets out how the EDMC takes 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 the EDMC: 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 determination on the matter and may hear such evidence as it thinks fit in order to do so.

4.2 In the 2020/21 annual report, it was reported that decision notices issued by both the EDMC and the Regulatory Decisions Committee imposing a financial penalty and a prohibition order on Mr Stuart Forsyth were being considered by the Upper Tribunal. The Upper Tribunal determined that the Financial Conduct Authority (FCA) and the PRA should not issue a financial penalty against Mr Forsyth and should reconsider their decision to prohibit Mr Forsyth. The prohibition proceedings against Mr Forsyth were duly discontinued in the light of this determination. Various matters were raised in the determination about the adequacy of disclosure, which are being resolved by the appropriate function in the PRA (and FCA).

5. General matters

Non-case specific meetings

5.1 In addition to the EDMCs work on specific cases, it has met as a committee on four

occasions to discuss matters of broader interest to work it carries out. These included relevant regulatory frameworks, engagement with the Bank’s Legal Directorate, and administrative matters. Further such meetings are scheduled during 2022.

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 (SoP) on its approach to enforcement^{footnote [2]} gave the EDMC 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, the EDMC seeks comments from subjects who have settled PRA enforcement cases; relevant enforcement staff; and relevant PRA decision makers involved in settlement. The outcome of each review is reported to the PRC and a summary of the review is (if appropriate) included in the next EDMC annual report.

6.2 During the 2021/22 reporting period, the EDMC sought feedback on two cases that had settled since the SoP was updated in October 2019. Given the small number of cases reviewed, the EDMC has been cautious in its approach to drawing conclusions, however there were some resulting learnings, which have been passed on to the relevant PRA enforcement officers and to the PRC. Overall, the feedback did not raise any material issues and the EDMC did not make any recommendations to the PRC.

7. Looking forward - the next 12 months

7.1 The EDMC will continue its work on the ongoing cases that it is currently considering. Additionally, it will begin the second review cycle for reviewing settled enforcement cases.

7.2 The EDMC has been flexible in adapting to new ways of working as a result of Covid-19 related restrictions and has ensured that its work remains effective throughout this time. Looking forward, it will continue to ensure its effectiveness as it reverts to more in-person and hybrid meetings.

Annex: Report summary

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