REC 2A.4 Power and procedure for RAP penalties and censures

3Under regulation 5A (Power to impose civil penalties) of the RAP Regulations, where the FCA considers that a RAP has contravened any requirement in regulations 17, 18(8), 19(1) or (2), or 37 of the UK auctioning regulations, the FCA has the power to impose a civil penalty on that RAP.

3Where the FCA is entitled to impose a penalty on a RAP, it may instead publish a statement censuring it.

3The provisions of the UK auctioning regulations referred to in REC 2A.4.1G are applicable to a RAP and require it to, in summary:

1. (1)

   only grant admission to bid to applicants that comply with the conditions set out in regulation 17 of the UK auctioning regulations, including the prerequisite that the applicants are eligible to bid in accordance with regulation 16 of the UK auctioning regulations;

2. (2)

   require an applicant for admission to bid to ensure that its clients, and the clients of its clients, are able to comply with information requirements, interviews, investigations and verifications carried out or required by the RAP;

3. (3)

   refuse to grant admission to bid, or revoke or suspend that admission, to any person:

   1. (a)

      that is not, or is no longer, eligible to bid (under regulation 16 of the UK auctioning regulations); does not meet, or no longer meets, the requirements of regulations 16, 17 and 18 of the UK auctioning regulations; or is wilfully or repeatedly in breach of the UK auctioning regulations, the terms and conditions of its admission to bid or other related instructions or agreements; or

   2. (b)

      where the RAP suspects the person is involved with money laundering, terrorist financing, criminal activity or market abuse, provided that such refusal, revocation or suspension is unlikely to frustrate efforts by the law enforcement authorities to pursue or apprehend the perpetrators of those activities; and

4. (4)

   monitor the relationship with bidders admitted to bid in its auctions.

3The power in regulation 5A of the RAP Regulations to impose a civil penalty or publish a statement adds to the FCA's other supervisory powers in relation to RAPs (see REC 4) and its power to impose penalties on a RAP under the Money Laundering Regulations. The FCA will use this power under the RAP Regulations where it is appropriate to do so and with regard to the relevant factors listed in DEPP 6.2.1G. In deciding between a civil penalty or a public statement, the FCA will also have regard to the relevant factors listed in DEPP 6.4.

3The FCA will notify the subject of the investigation that it has appointed officers to carry out an investigation under either or both the RAP Regulations or the Money Laundering Regulations and the reasons for the appointment, unless notification is likely to prejudice the investigation or otherwise result in it being frustrated. The FCA expects to carry out a scoping visit early on in the enforcement process in most cases.

3Where the FCA uses the power to impose a penalty, it will be for an amount that is effective, proportionate and dissuasive and with regard to relevant factors listed in DEPP 6.5 to DEPP 6.5D in determining the appropriate level of financial penalty.

3The FCA will also have regard to whether the person followed any of the FCA’s guidance and will not take action under regulation 5A of the RAP Regulations where there are reasonable grounds for it to be satisfied that the person took all reasonable steps and exercised all due diligence to ensure that the requirement was complied with.

3When the FCA proposes or decides to take action against a RAP in exercise of its power in regulation 5A of the RAP Regulations, it must give the RAP a warning notice or a decision notice respectively. Those notices must state the amount of the penalty or set out the terms of the statement, as applicable. On receiving a warning notice, the RAP has a right to make representations on the FCA’s proposed decision.

3Where the FCA is proposing or deciding to publish a statement censuring a RAP or impose a penalty on the RAP under regulation 5A of the RAP Regulations, the FCA’s decision maker will be the RDC. This is to ensure that the FCA’s power to censure or impose a penalty on a RAP has the same layer of separation in the decision-making process, and is exercised consistently with, similar penalty and censure powers of the FCA under other legislation. The RDC will make its decisions following the procedure set out in DEPP 3.2 or, where appropriate, DEPP 3.3. A RAP that receives a decision notice under regulation 5A of the RAP Regulations may refer the matter to the Tribunal.

3Sections 393 and 394 of the Act apply to notices referred to in this section. See DEPP 2.4 (Third party rights and access to FCA material).

3As with cases under the Act, the FCA may settle or mediate appropriate cases to assist it to exercise its functions in the most efficient and economic way. The settlement discount scheme set out in DEPP 6.7 applies to penalties imposed under the RAP Regulations.

3The FCA will apply the approach to publicity that it has outlined in EG 6.