ENF 21.5 Discipline

The disciplinary measures available to the FSA are set out in Part VI of the Act and consist of:

1. (1)

   financial penalties (described in ENF 21.7); and

2. (2)

   public censures (described in ENF 21.8).

Disciplinary sanctions are one of the regulatory tools available to the FSA. They are not the only tool, and it may be possible to address instances of non-compliance without recourse to disciplinary action. However, the effective and proportionate use of the FSA's powers to enforce requirements imposed by or under Part VI of the Act (including the Part 6 rules) will play an important role in supporting the FSA's pursuit of its regulatory functions.

The imposition of financial penalties and the issuance of censures for breaches of the requirements imposed by or under Part VI of the Act help to promote high standards of conduct and ensure that regulatory standards are being upheld by deterring persons from further breaching the requirements and by demonstrating generally the benefits of compliant behaviour. An increased public awareness of regulatory standards may also contribute to the protection of investors.

Non-disciplinary measures are also available to the FSA where it considers that it is necessary to take protective or remedial action. These include the following.

1. (1)

   where the smooth operation of the market is, or may be, temporarily jeopardised or where the protection of investors so requires, the FSA may suspend, with effect from such time as it may determine, the listing of any securities at any time and in such circumstances as it thinks fit (whether or not at the request of the issuer or its sponsor on its behalf);

2. (2)

   when the FSA is satisfied that there are special circumstances which preclude normal regular dealings in any listed securities, it may cancel the listing of any security;

3. (3)

   where there are reasonable grounds to suspect non compliance with the disclosure rules and transparency rules, the FSA may require the suspension of trading of a financial instrument with effect from such time as it may determine; and

4. (4)

   where there are reasonable grounds for suspecting that a provision of Part VI of the Act, a provision contained in the prospectus rules, or any other provision made in accordance with the Prospectus Directive has been infringed, the FSA may:

   1. (a)

      suspend or prohibit the offer to the public of transferable securities as set out in section 87K of the Act; or

   2. (b)

      suspend or prohibit admission of transferable securities to trading on a regulated market as set out in section 87L of the Act.

Under section 87P of the Act (Exercise of powers at request of competent authority of another EEA State), the FSA may exercise its powers under sections 87K and 87L of the Act to assist a competent authority of an EEA State in the performance of its functions under the law of that State in connection with the Prospectus Directive.

The Act also provides the FSA with criminal prosecution powers in relation to offences under sections 85. These are described in ENF 15.

The FSA has criminal prosecution powers in relation to insider dealing and misleading statements and practices. Additional considerations apply in determining whether the FSA will take disciplinary action for cases of alleged market abuse (section 123 of the Act) (see ENF 14).

In certain cases, despite having concerns regarding the behaviour of a person, the FSA may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal disciplinary action. For example, the breach may be minor in nature or degree, or the person may have taken immediate and full remedial action (although these types of factor by themselves will not determine the course of action taken by the FSA). In these types of case, the FSA considers that it will be helpful for the person to be made aware that they came close to being subject to formal disciplinary action, and may to that end, if appropriate, give a private warning.

The FSA's general approach to the content of a private warning in this context and to the relevance of such a warning for disciplinary action in relation to future breaches of provisions imposed by or under Part VI of the Act will follow, in broad terms, the approach described in ENF 11.3.4 G and ENF 11.3.6 G to ENF 11.3.9 G in the context of private warnings given to firms or approved persons.