FCA criticised by Complaints Commissioner for its handling of enforcement limitation issues

04 October 2017. Published by Lucy Kerr, Senior Associate

The Office of the Complaints Commissioner recently upheld two complaints against the FCA for making a "serious mistake" in its management of limitation issues for two connected investigations. The Commissioner criticised the FCA not only for its mismanagement of the limitation issue, but also for the unnecessary delays in concluding its own internal investigation into these complaints.

The RDC issued Warning Notices to two individuals in 2014, as a result of investigations launched by the FCA in 2012.  The case against them was based in part on a document received by the FCA in 2010.  No issues relating to limitation were brought to the RDC's attention by the FCA before it issued the Warning Notices, despite the individuals making previous challenges to the FCA's calculation of the limitation period.  

(At that time, the FCA had three years from the date on which it became aware of the relevant misconduct for a Warning Notice to be issued.  The limitation period for FCA investigations has now been extended to six years under the Financial Services (Banking Reform) Act 2013).

The FCA subsequently reconsidered its calculations and agreed that it was in fact out of time to bring disciplinary action and the cases were dropped.

The individuals complained to the FCA and Commissioner.  The FCA partially upheld the complaints, concluding that it had not given adequate consideration to limitation in advance of the Warning Notices being issued - and apologised for this.

The Commissioner upheld the complaints against the FCA (Final Decision (FCA00062) and Final Decision (FCA00097)), likewise finding that the FCA should have acted sooner in response to the potential limitation issues.  However, the Commissioner did not agree with the FCA that a lack of awareness of the limitation issues was to blame.  On the contrary, the Commissioner found that the FCA had been aware of the limitation issue for several years, but had taken a hasty decision in 2011 that the documents received in 2010 were not relevant for limitation purposes and it had, therefore, discounted the issue prematurely.  The Commissioner found there was "no adequate explanation" for the FCA reaching the conclusion that these documents were not relevant to limitation and found that the FCA had given the matter very little examination in coming to this decision.

Overall, the Commissioner found that:

  • the FCA demonstrated a "closed‑minded attitude" and a "lack of rigour" in its treatment of the limitation issue;
  • the FCA had been unnecessarily slow in investigating the complaints internally; and
  • it had failed to meets its duty to ensure proceedings were managed competently and fairly.

However, the Commissioner found no evidence of bad faith on the FCA's part, or a deliberate attempt to conceal the limitation issues from the RDC.

This decision follows closely on the heels of another complaint being upheld against the FCA for acting outside its powers under s166 FSMA by instructing a skilled person to award compensation on behalf of a firm when the firm had not consented to the skilled person doing so.

The FCA has said it is considering the lessons it can learn from these complaints.  No doubt it will be keen to ensure that limitation and other crucial building blocks sit at the forefront of its investigators' minds going forward to ensure investigations are not thwarted by technicalities in the future.

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