A person who is or may be subject to enforcement action may discuss the proposed action with FSA staff through settlement discussions. Settlement discussions may take place on an informal basis at any time during the enforcement process. Where FSA staff have recommended that enforcement action be taken against a person, the mediation scheme will be available to those persons against whom action is proposed where settlement discussions are, in the opinion of either party, unlikely to lead to an agreed settlement. This appendix sets out the procedure for settlement and the framework of the mediation scheme, and explains the special procedure for making statutory notice decisions where a settlement is reached2.

If a person who is or may be subject to enforcement action wishes to discuss the proposed action with FSA staff on an informal basis, he may do so at any time during the enforcement process. This might be before the giving of a warning notice, before a decision notice, or even after referral of the matter to the Tribunal. 2The FSA and the person concerned should agree that discussions will take place on a "without prejudice" basis, and that neither party may subsequently rely on admissions or statements made in the context of the discussions, or documents recording the discussions. Neither FSA staff nor the person concerned may disclose to the RDC any such admissions or statements made by the other.21

The terms of any proposed settlement will:

1. (1)

   be put in writing and be agreed by FSA staff and the person concerned;

2. (2)

   include a statement of the facts and any breaches admitted by the person concerned and the proposed action to be taken; and

3. (3)

   be considered in accordance with the settlement decision procedure set out in DEC App 1.2.2A G2.

   2

1. (1)

   2The fact that the person subject to enforcement action agrees to a financial penalty or other outcome will not usually obviate the need for a statutory notice recording the FSA's decision to take that action.

2. (2)

   Where, however, the person subject to enforcement action agrees not to contest the content of a proposed statutory notice, the decision whether to give that statutory notice will be taken by senior FSA staff.

3. (3)

   The decision will be taken jointly by two members of the FSA's executive of at least director of division level (the settlement decision makers).

4. (4)

   One of the directors taking the decision will usually be, but need not be, the director of Enforcement. (In exceptional cases, the director of Enforcement may have been directly involved in establishing the evidence on which the decision is based and would not therefore be able to participate (see section 395(2) of the Act).)

5. (5)

   Statutory notice for these purposes:

   1. (a)

      means any statutory notice the giving of which would otherwise require a decision by the RDC;

   2. (b)

      includes a statutory notice associated decision.

1. (1)

   2The settlement decision makers will often participate in the without prejudice discussions exploring possible settlement. Their involvement may facilitate agreement between FSA staff and the person concerned and avoid the delay that might otherwise result from needing to explain the basis for any settlement reached.

2. (2)

   If the settlement decision makers have not been involved in the discussions, but an agreement has been reached, they may ask to meet the relevant FSA staff or the person concerned in order to assist in the consideration of the proposed settlement.

The settlement decision makers may2:

1. (1)

   accept the proposed settlement by issuing a decision notice, second supervisory notice1 or (where appropriate) notice of discontinuance based on the terms of the settlement; or

2. (2)

   decline the proposed settlement;

whether or not the2settlement decision makers have met with the relevant FSA staff or the person concerned.

1. (1)

   2Where the settlement decision makers decline to issue a statutory notice despite the proposed settlement, they may invite FSA staff and the person concerned to enter into further discussions to try to achieve an outcome the settlement decision makers would be prepared to endorse.

2. (2)

   2However, if the proposed action by the FSA has been submitted to the RDC for consideration, it will be for the RDC to decide:

   1. (a)

      whether to extend the period for representations in response to a warning notice; or

   2. (b)

      if representations have been made in response to a warning notice, whether to proceed to give a decision notice.

If it is not possible to reach an agreed proposed settlement of the case by informal discussions, the person concerned may elect to submit the case to mediation.

Mediation is a confidential without prejudice dispute resolution process in which a neutral mediator assists the parties in trying to settle their differences. The mediator is not a judge or arbitrator and has no power to bind the parties, but rather operates as a facilitator of the discussions.

As mediation will be on a "without prejudice" basis, admissions made by the parties in the course of the mediation and documents prepared for the purposes of the mediation may not be referred to in subsequent proceedings relating to the dispute if the mediation is unsuccessful. However, if the mediation results in a proposed settlement of the dispute which is approved by the 2settlement decision makers, the terms of the proposed settlement will form the basis of a decision notice, and subsequent final notice, or second supervisory notice1 or (where appropriate) notice of discontinuance, given by the FSA.

Following the issue of a warning notice the person will have access to certain material on which the FSA has relied in deciding to commence disciplinary proceedings (see DEC 2.4.2 G). The period following the issue of the warning notice is therefore a natural point for 2mediation if the parties consider that the involvement of a neutral mediator is required to facilitate progress in any settlement discussions2.

Mediation will not be available in enforcement cases where the FSA is contemplating bringing a criminal prosecution or cases involving disciplinary action for late submission of a report to which ENF 13.5(Financial penalties for late submission of reports) applies.3

Mediation will be available in all other enforcement cases falling within the scope of the RDC. In those cases involving allegations of unfitness and impropriety based on judgements about dishonesty or lack of integrity and the exercise of the FSA'sown-initiative powers on a variation or cancellation of permission, mediation will be available subject to the FSA's consent.31

In a case falling within the scope of the scheme, (see DEC App 1.4.1 G and DEC App 1.4.2 G), mediation will take place where an election to mediate is made after the warning notice has been issued and before the FSA issues a decision notice (the relevant warning notice will state the circumstances in which mediation is available for that matter under the terms of the scheme). Where an election to mediate is made before the issue of a warning notice or after the issue of a decision notice, mediation will be available subject to the FSA's consent.32

A person is not obliged to take part in a mediation in the course of the enforcement process.3

The scheme will be administered by a body (the mediation provider) which:

1. (1)

   is independent of the FSA;

2. (2)

   provides a panel of experienced mediators who are independent of the FSA; and

3. (3)

   has suitable expertise of and experience in the administration of mediation schemes.

If a case is submitted to mediation, the parties will send a joint mediation notice in an agreed form to:1

1. (1)

   the mediation provider; and

2. (2)

   2if the mediation is between the giving of the warning notice and the decision notice, the RDC Office2.

   2

The mediation notice will commit each party to use their best endeavours to progress the mediation process in a timely manner.

The person may request in the mediation notice that the time period specified in the warning notice for making oral or written representations (or both) to the RDC be extended by a maximum of 14 days, to allow time for the mediation to be completed. On receipt of a mediation notice requesting such an extension, the RDC will notify the parties and the mediation provider of its agreement to the requested extension or of any other extension that it sees fit.

If required, the person may apply to the RDC for a further extension in order to complete the mediation (see DEC App 1.7.5 G). The total of all extensions to the 28 day time period for making written or oral representations may not exceed 28 days, other than in exceptional circumstances.

Once the parties have agreed to mediate, and a mediation notice has been sent to the mediation provider, the mediation provider will liaise with the parties in order to deal with the matters set out in DEC App 1.7.2 G to DEC App 1.7.11 G.

1. (1)

   The mediation provider will maintain a panel of suitable mediators, and recommend in each case a mediator to the parties. The parties are free to accept or decline the recommendation. If either party declines the recommendation, the mediation provider will seek to obtain agreement on another mediator from the panel.

2. (2)

   If the parties cannot agree a mediator within 7 days of the mediation notice being received by the mediation provider, the mediation provider will appoint a mediator.

3. (3)

   The mediators on the panel will all be:

   1. (a)

      experienced commercial mediators; and

   2. (b)

      accredited by or registered with a recognised mediation organisation.

4. (4)

   Experience of and expertise in the financial services sector will not be compulsory for panel mediators, but may be desirable.

5. (5)

   Mediators will, in accepting appointments, be required to confirm to the parties that they have no conflicts of interest in doing so.

The mediation provider will liaise with the parties and the mediator to agree:

1. (1)

   a suitable date for the mediation; and

2. (2)

   a timetable for the mediation process as a whole, including the date for submission of case summaries and exchange of documents referred to in the case summaries.

1. (1)

   Most mediations should last no longer than one full day, but in complex cases more time may be necessary. The mediator will assist the parties in deciding how much time to set aside. If the mediation requires more time than allotted to it, the parties may ask the mediation provider to set up a further day or days.

2. (2)

   The parties and the mediator will use their best endeavours to complete the mediation as soon as practicable.

1. (1)

   In complex cases, the agreed timetable may extend beyond the initial extension agreed by the RDC, in which case the parties may request a further extension from the RDC (see DEC App 1.6.4 G).

2. (2)

   If the mediation has not started within the allotted timetable, the FSA may decline to mediate, and the matter will be referred to the decision notice stage.

The mediation may take place at any venue acceptable to the parties and the mediator. This may be at the offices of the mediation provider, the mediator (if different), the FSA or elsewhere.

1. (1)

   Each mediation will take place in accordance with the terms of a mediation agreement. The agreement will set out the terms on which the mediation will take place, in particular, the agreement will provide that:

   1. (a)

      the mediation will be on a "without prejudice" basis and confidential; and

   2. (b)

      the parties who attend the mediation will have authority to agree proposed settlement terms (subject, in relation to the FSA staff, to App 1.7.9G).

2. (2)

   The mediation agreement will be signed by the parties, the mediator and the mediation provider.

1. (1)

   Confidentiality is a key element of the mediation process. It means that:

   1. (a)

      matters disclosed in, and documents created for the purposes of, the mediation cannot be referred to in the public domain; and

   2. (b)

      matters disclosed by one party to the mediator in confidence will not be disclosed to the other party without consent.

2. (2)

   Under the mediation scheme, however, confidentiality will be limited in that:

   1. (a)

      if any information indicating potentially criminal conduct is disclosed to the mediator, the mediator will not be required to keep that matter confidential (and may choose to terminate the mediation);

   2. (b)

      the terms of any settlement reached will, if approved by the settlement decision makers, be incorporated in a decision notice, and subsequent final notice or second supervisory notice, or (where appropriate) notice of discontinuance which may be made public;

      2
   3. (c)

      the FSA may publish information regarding the operation of the scheme on an anonymous basis in the FSA's annual report; such information may include, for example, the number of mediations conducted under the scheme and the number of those mediations which have resulted in agreed settlements.

3. (3)

   In all other respects, documents prepared for the purposes of, and discussions taking place in the course of, the mediation will retain the confidential status they had during the mediation itself.1

1. (1)

   A key feature of mediation is the requirement that those who attend the mediation on behalf of each party have full authority to agree proposed settlement terms.

   2
2. (2)

   The FSA will be represented during the mediation proceedings and at the mediation itself by the FSA staff who initially recommended that disciplinary action be taken.

   2
3. (3)

   2One or both of the settlement decision makers who would make the decision as to the giving of the statutory notice or notices in the event of a settlement may also attend. If their attendance is impracticable, the FSA will endeavour to ensure that the settlement decision makers are available for consultation during the mediation. This is to enable a clear indication to be given to the parties and the meditator whether the settlement decision makers will find the proposed settlement terms acceptable.

4. (4)

   [deleted]2

   2

1. (1)

   Mediation requires the parties to be able to discuss the dispute in an informed way. Therefore, each party attending the mediation will be required to produce:

   1. (a)

      a short case summary setting out the issues in dispute; and

   2. (b)

      any documents referred to in the case summary.

2. (2)

   These documents must be submitted to the mediation provider in triplicate at least one week before the mediation. The mediation provider will be responsible for the exchange of documents.

3. (3)

   The parties and the mediator may agree to dispense with the requirement to produce documentation before the mediation.

1. (1)

   The costs of the mediation provider in administering and conducting the mediation process (including the fee payable to the mediator) will be agreed between the FSA and the mediation provider when the mediation provider is appointed.

2. (2)

   For each mediation, the mediation provider will invoice the parties for the anticipated costs of administering and conducting the mediation in advance. The FSA and the person will bear half of these costs each. Any additional costs incurred by the mediation provider will be invoiced after the mediation. These costs will also be shared. The costs referred to in (1) and (2) do not include legal or other costs that the FSA or person may incur in relation to the mediation, which will be the responsibility of the parties.

Once appointed, the mediator may (in his discretion) call a preliminary meeting with the parties and their advisers (if any). This may be used to ensure that the parties are properly prepared for the mediation, agree the issues for discussion and understand how the process will operate.

The mediation will take place at the agreed time and place.

If the person withdraws from the mediation process after it has agreed to mediate, it will be responsible for its share of any costs incurred by, or owing to, the mediation provider (see DEC App 1.7.11 G (1)).

The mediation agreement will set out the terms on which a party or the mediator, or both, may terminate the agreement. These will include terms providing that:

1. (1)

   either party may withdraw from and terminate the mediation at any stage before or during the mediation (subject to the provisions on costs in DEC App 1.9.2 G, for terminations before the mediation takes place);

2. (2)

   either party or the mediator may withdraw if the mediation has not taken place within the agreed timetable; and

3. (3)

   the mediator may withdraw from and terminate the mediation if, for example, a criminal offence by or involving a party to the mediation is disclosed to him (see DEC App 1.7.8 G (2)(a)).

Mediation can only give rise to one of two outcomes:

1. (1)

   a proposal for settlement agreed between the parties; or

2. (2)

   no agreed proposal.

If no agreed proposal is reached, the mediation will be terminated and the case will return to the point it had reached in the enforcement process prior to the mediation.1

If a settlement proposal is agreed, it will be considered in accordance with the settlement decision procedure2. If it is approved, a decision notice, and subsequently a final notice, will be issued reflecting the terms of the agreement reached. If it is not approved, the case will return to the point it had reached in the enforcement process prior to the mediation. 1

1A person may elect to mediate only once during the course of the enforcement process.

The parties may bring legal or other advisers of their choice with them to the mediation, although it is important to preserve the informality of the mediation process.

The mediation provider will administer the mediation scheme and the FSA will monitor and review its operation at the end of each year. The FSA proposes to publish core information relating to the operation of the scheme in the FSA's Annual Report.1

1. (1)

   DEC 2.4.7 G to DEC 2.4.12 G set out the FSA's approach to giving third parties copies of statutory notices pursuant to section 393 of the Act.

2. (2)

   The decision to give a warning notice or a decision notice to a third party is a statutory notice associated decision.

3. (3)

   In cases therefore where the decision to give a warning notice or decision notice is taken by settlement decision makers, those decision makers will decide whether a copy of the notice should be given to a third party in accordance with section 393 of the Act. Any representations made by the third party in response to a warning notice will be considered by the settlement decision makers.