FCA Enforcement Notice: Responding to a Decision Notice and Tribunal Reference

How an FCA enforcement case develops

FCA enforcement cases pass through a defined sequence. Knowing where you are in the sequence determines the procedural rights available.

1. Investigation under section 168 FSMA

The FCA appoints investigators under section 168 of the Financial Services and Markets Act 2000. The notice of appointment sets out the matter under investigation and the powers the investigators have — typically the powers under sections 171-173 to require interviews, documents, and information.

This is not yet enforcement. It is information-gathering. But what is said and provided here is used in later stages.

2. Interview under caution / compelled interview

The FCA can compel interviews. Section 171 FSMA empowers investigators appointed under section 168 to require attendance, the answering of questions, and the production of documents. Section 174 FSMA restricts the use of such compelled statements: they cannot be used in evidence against the interviewee in criminal proceedings (or proceedings for the imposition of penalties under section 123 FSMA on market abuse), unless the interviewee adduces evidence inconsistent with the statement or refers to it. Statements remain admissible in regulatory proceedings before the RDC and the Upper Tribunal.

Four points worth knowing:

• The interviewee has the right to be accompanied by a legal adviser
• Failure without reasonable excuse to comply with a requirement can be certified to the High Court and dealt with as contempt (FSMA 2000 s.177(1)–(2))
• The privilege against self-incrimination operates in a limited form — it does not entitle the interviewee to refuse to answer
• The transcript can be used in disciplinary proceedings before the RDC and the Upper Tribunal

3. Settlement discussions

Many FCA cases settle. For a settlement agreement (other than a focused resolution agreement), the penalty reduction is 30% if the agreement is concluded during stage 1 and 0% in any other case (DEPP 6.7.3G). Stage 1 runs from the start of the investigation until the FCA has communicated its assessment of the appropriate penalty and given a reasonable opportunity to reach agreement.

Settlement involves a Settlement Agreement and a Final Notice. The Final Notice is published. The agreement is binding.

4. Warning Notice

If settlement is not reached, the FCA issues a Warning Notice under section 387 FSMA. The Warning Notice sets out:

• The action the FCA proposes to take
• The reasons (the alleged conduct, the relevant rules, the FCA's view of the seriousness)
• The right to make written and oral representations to the RDC

The Warning Notice is the moment to take stock. It is the first formal indication that the FCA has decided what it intends to do.

5. Representations to the RDC

The Warning Notice gives the recipient a period of at least 14 days to make representations (FSMA 2000 s.387(2)); the FCA may extend it (s.387(3)). The response — usually written, with an option for oral hearing — is the only formal opportunity to challenge the case before the Decision Notice is issued.

A good RDC response engages with:

• Each pleaded factual finding
• Each alleged breach of the FCA's rules or Principles
• The proposed sanction
• Mitigation
• Public-interest considerations

The RDC is a panel separate from the investigators. It is a committee of the FCA Board; apart from its chair, none of its members is an FCA employee (DEPP 3.1). Hearings are private.

6. Decision Notice

After considering representations, the RDC issues a Decision Notice under section 388 FSMA. The Decision Notice sets out the action the FCA will take and the reasons.

The Decision Notice is the trigger for the Upper Tribunal route.

7. Reference to the Upper Tribunal

The recipient can refer the matter to the Upper Tribunal (Tax and Chancery Chamber) on Form FTC3; the reference notice must be received no later than 28 days after the decision notice was given. References are governed by section 133 FSMA and the Tribunal Procedure (Upper Tribunal) Rules 2008 — particularly Schedule 3 (financial services cases).

The Tribunal hears the case afresh on the merits. It is not judicial review. It may consider evidence that was not before the FCA (s.133(4)). On a disciplinary reference the Tribunal decides the appropriate action and remits to the FCA (s.133(5)); otherwise it dismisses the reference or remits the matter for reconsideration (s.133(6)).

8. Final Notice

If no reference is made in time, or after the Tribunal's decision, the FCA issues a Final Notice under section 390 FSMA. The Final Notice is published.

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The Tribunal — a fresh hearing on the merits

The Upper Tribunal is composed of senior judges and specialist non-legal members. A reference under section 133 FSMA lets the Tribunal consider the matter afresh, within the powers in s.133(5) and (6).

What that means in practice:

• The Tribunal is not bound by any of the FCA's findings of fact
• The Tribunal is not bound by the FCA's view of seriousness or sanction
• The Tribunal hears live evidence from witnesses
• Both parties can call expert evidence
• Cross-examination of the FCA's investigators and witnesses is normal

This makes the Tribunal a substantive forum, not a paper review. It is also why Tribunal references are taken seriously by the FCA and lead to settlement in many cases.

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Sanctions the FCA can impose

The FCA's enforcement powers under FSMA 2000:

The Penalties Policy (DEPP 6) sets out a five-step framework:

1. Disgorgement (removal of any benefit)
2. Seriousness (a starting point linked to relevant revenue or income)
3. Aggravating and mitigating factors
4. Adjustment for deterrence
5. Settlement discount (where applicable)

A financial penalty calculation can run to many pages of analysis. Senior counsel will dissect each step in any RDC response and Tribunal reference.

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Section 56 prohibition and the senior managers regime

For individuals working in regulated firms, section 56 prohibition is the most career-defining sanction. A prohibition order means the person cannot perform any function in relation to any regulated activity carried on by any authorised person.

Prohibition is about fitness and propriety — typically engaged where:

• Dishonesty or lack of integrity is found
• Financial crime concerns are made out
• Repeated or serious failures to follow regulatory requirements
• The conduct shows the individual is not fit to operate in the industry

Under the Senior Managers and Certification Regime, senior managers carry personal accountability for the areas of the firm under their control. Conduct breaches by junior staff can lead to prohibition action against the senior manager who failed to oversee them.

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Costs

In FCA enforcement, the regulator does not normally seek costs from the firm or individual it has investigated. The FCA's investigation costs are funded from its supervisory levy.

In the Upper Tribunal, costs orders are limited: the Tribunal may order costs if a party or its representative has acted unreasonably in bringing, defending or conducting the proceedings, or, in a financial services case, if it considers that the decision referred was unreasonable (Tribunal Procedure (Upper Tribunal) Rules 2008, r.10(3)(d)–(e)). Your own defence costs can be substantial.

A firm's professional indemnity insurance often excludes regulatory penalties (which would be against public policy) but may cover defence costs. Check the policy early.

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Strategic considerations

Three points that recur in real cases.

1. Settle early or fight properly. The 30% settlement discount is available only at stage 1 (DEPP 6.7.3G). Firms that decide to fight should commit to it; firms that decide to settle should settle early.

2. Public-interest narrative matters. The FCA's Final Notice is published and read by journalists, regulators in other jurisdictions, and counterparties. The narrative of the misconduct is as important as the fine. RDC representations and Tribunal references that change the narrative — even where they do not eliminate it — have lasting value.

3. Do not let regulatory and criminal strategy diverge. Many FCA cases run alongside SFO criminal investigations. Statements made in compelled FCA interviews are inadmissible in criminal proceedings against the interviewee, but the underlying documents and other witnesses' evidence are not. Co-ordination between regulatory counsel and criminal-defence counsel is essential from day one.

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Bundle preparation for the Upper Tribunal

A reference to the Upper Tribunal generates a substantial bundle, prepared as the Tribunal directs. A typical bundle:

• Section A: Pleadings (Reference Notice, Statement of Case, Reply)
• Section B: Witness statements
• Section C: Decision Notice and underlying FCA documents
• Section D: Compelled interview transcripts
• Section E: Trading records, internal audit reports, board minutes (firm cases)
• Section F: Expert reports
• Section G: Authorities

Bundles in FCA Tribunal references can run across multiple sub-bundles. Check the Tribunal's directions and e-bundle guidance, which commonly call for:

• Pagination throughout the e-bundle
• Hyperlinked index
• OCR for full searchability
• Bookmarks at section and document level

BundleCreator's Regulatory Law template is designed to produce an organised, indexed bundle quickly.

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Frequently asked questions

Can I appeal a Tribunal decision?

Yes — to the Court of Appeal, on a point of law only, with permission. The Court of Appeal does not redetermine facts. Tribunal findings of fact are protected.

What if the FCA refers me to the SDT or another regulator?

Cross-regulator referrals happen — for example, an FCA finding against a solicitor working in a regulated firm can lead to an SRA referral. Each regulator runs its own process; outcomes from one regulator are evidence (not proof) before another.

Will the Tribunal hearing be in public?

Generally yes. All hearings must be held in public unless the Tribunal directs that a hearing, or part of it, is to be held in private (Tribunal Procedure (Upper Tribunal) Rules 2008, r.37).

How long does a Tribunal reference take?

It depends on the complexity of the case and the Tribunal's directions. Some references are settled before hearing.

Do I have to give evidence at the Tribunal?

No witness can be compelled to give evidence against themselves. But choosing not to give evidence in your own defence can be commented on by the Tribunal in its decision. Take careful tactical advice — this is a major strategic call.

Can I keep working while the case is pending?

Depends on the FCA's interim measures. The FCA can impose interim restrictions during investigation and can vary or restrict permission while the substantive case proceeds. If no interim restriction is in place, you can continue normal regulated activity until the Final Notice or substituted Tribunal decision.

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Further reading

• Financial Services and Markets Act 2000 — particularly Parts XI and XIV
• FCA Decision Procedure and Penalties Manual (DEPP) — the rulebook on enforcement procedure
• FCA Enforcement Guide (EG) — practice and approach
• Upper Tribunal (Tax and Chancery Chamber)
• Senior Managers and Certification Regime
• Solicitors Disciplinary Tribunal: Defending a Solicitor Against an SRA Referral
• Fitness to Practise: How GMC, NMC, and HCPC Hearings Differ