Enforcement Decision Making Committee Report 2023/24

Foreword

This is the fifth report of the Enforcement Decision Making Committee (EDMC) of the Bank of England (the Bank), covering the period of 1 March 2023 to 29 February 2024. Earlier reports are available on the Bank’s 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 were updated and published in January 2024. 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. Beyond that, the subject has the right to refer the matter to the Upper Tribunal (which is part of the UK Court system), which considers the matter afresh.

The Bank (including in its capacity as the Prudential Regulation Authority (PRA)) regulates fewer firms and fewer authorised individuals than the Financial Conduct Authority (FCA). The Bank, therefore, undertakes far fewer enforcement investigations than the FCA, which is the conduct regulator. Consequently, the number of contested cases dealt with by the EDMC is considerably fewer than those dealt with by the Regulatory Decisions Committee of the FCA. There are no cases ongoing at the time of this report.

As noted in previous annual reports, there is an established process by which the EDMC, through the secretariat, conducts a review of settled cases to assess the ongoing fairness and effectives of the PRA’s settlement process. The parties and their legal representatives who have participated in settlement discussions are invited to comment should they wish to do so. Such a review has now taken place in respect of five 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 will likely 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 also acts in Scottish and Northern Ireland (S&NI) Banknote Regime enforcement cases, pursuant to the relevant policy.

1.3 The EDMC’s published procedures require it to submit an annual statement to Court, with a copy also provided to the Prudential Regulation Committee (PRC). Subject to applicable disclosure restrictions, it will subsequently be published, to report on at least the following:

• how often the Committee has met and which members have sat in which matters;
• resourcing, recruitment, and profile;
• costs incurred;
• number of matters brought to it 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 Committee and of which it informs the EDMC Chair; and
• any other matters which the Committee feels it needs to bring to Court's attention.

1.4 This document sets out the report for the period from 1 March 2023 to 29 February 2024. The Annex deals specifically with each item listed in paragraph 1.3.

2: Membership

2.1 The current EDMC members were appointed for renewable, fixed three-year periods. The EDMC currently comprises six members, with legally qualified members appointed as Chair and Deputy Chair, in line with its procedures. The members’ terms were renewed in 2021 for a second term.

2.2 In 2023 the Bank published a consultation proposing various amendments to enforcement policies, including changes to the EDMC procedures. The updated EDMC procedures were subsequently published in January 2024. Under the updated procedures new members will serve for renewable, fixed five-year periods, with no more than two consecutive terms. Additionally, where an EDMC member is working on a live matter and their term is coming to an end, that term can be extended until the matter they are working on has come to a resolution. Existing members can also extend their second term by two years to July 2026^{footnote [2]}.

2.3 The current members of the EDMC are:

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

2.4 The EDMC Procedures allow for up to nine members, and in September 2023 the Bank commenced recruitment for an additional three EDMC members. The new members will join during 2024 to bring the Committee to nine members in total. This recruitment exercise ensures that a situation does not arise in which the terms of all members expire at the same time, thereby preserving continuity of experience and expertise on the EDMC. It is not currently envisaged that generally there should be more than six members going forward but that depends on the workload of the Committee. The costs for recruitment are included in ‘Other Costs’ in the report summary table at the end of this report and account for the majority of the costs associated with the EDMC for this period. 

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 legal advisers from (or appointed by) the Bank’s Legal Directorate. The legal advisers are independent from the Bank’s investigation teams.

3.2 There have been no cases brought to the EDMC during the reporting period. As noted above, the Bank (including in its capacity as the PRA) regulates fewer firms and fewer authorised individuals than FCA and the Bank, therefore, opens far fewer enforcement investigations than the FCA, which is the conduct regulator.

3.3 The EDMC Procedures set 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 UK 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 sees fit in order to do so.

4.2 In the reporting period, there have been no decision notices referred to the Upper Tribunal.

5: General matters

Non-case specific meetings

5.1 The EDMC met on three occasions to discuss matters of broader interest to the work it carries out. These matters included relevant regulatory frameworks, engagement with the Bank’s Legal Directorate, and administrative matters. Further such meetings are scheduled during 2024. As no cases were considered in this reporting period, there were no case-specific meetings.

Conflicts of interest

5.2 Members are required 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 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.

Other matters

5.3 In January 2024 the Bank published the updated EDMC Procedures, following a consultation on proposed amendments to enforcement policies. The amendments included updates to the remit of the EDMC, reflecting practical experience of the EDMC in dealing with cases^{footnote [3]} and clarifying the roles and responsibilities of the committee.

6: Review of the enforcement settlement process

6.1 As set out in the Bank’s statement of policy, the EDMC has 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 2023/24 reporting period, the EDMC reviewed feedback on five settled cases. This is the highest number of cases that have been reviewed in a period since the settled cases review started in 2019. Overall, the feedback did not raise any material issues and the EDMC did not make any recommendations to the PRC. However, there were some learnings around information, guidance and settlement processes, which have been passed on to the relevant enforcement teams and to the PRC. Feedback from the firm/individuals’ lawyers provides insight but only happens in a minority of cases. Where it is provided, feedback is considered and taken into account where relevant.

7: Looking forward – the next 12 months

7.1 On 28 March 2024, the Bank announced a consultation on its approach to enforcement in conjunction with the powers bestowed under the Financial Services and Markets Act 2023. Those powers cover a range of entities including critical third parties, entities involved in wholesale cash distribution and securitisation entities. The proposals in the consultation, if adopted, will result in an expansion of the remit of the EDMC. The EDMC will follow the consultation closely.

Annex: Report summary

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