FRC sanctions guidance to tribunals

In this section, we consider that the final sentence of paragraph 9 should be moved to the top of this section and amended to read as follows:

The primary purpose of imposing sanctions for acts of Misconduct is not to punish, but to protect the public and the wider public interest. Therefore, any sanction or combination of sanctions imposed by a Tribunal should be no more than the minimum necessary to achieve the objectives of the Scheme as set out in paragraph 9.

We note that Exclusion is automatic where a Member fails to pay in full, including interest, any fine and/or costs order within the time specified for payment. We suggest that this be amended to enable the time specified for payment to be adjusted upon the application of the Member.

In the equivalent provision relating to Member Firms, it is unclear whether the words ‘at the relevant time’ refer to the date on which the misconduct was committed or the date on which payment fell due or some other date.

It is unclear whether the order that a Member or Member Firm be ineligible for a prescribed period for registration is intended to be a suspension of an existing registration or a safeguard for the future in situations where a registration is not held at the time the order is made, or both. We suggest it be made explicit whether suspension of a registration is available as a sanction or not. In our view, suspension should not be available because it would entail automatic reinstatement of the registration when the period of suspension ends. We consider it would be inappropriate automatically to reinstate an individual or firm’s registration without the Participant’s Licensing Committee having the opportunity to check that there has been nothing in the intervening period which has rendered the Member or Member Firm ineligible to hold such registration. 

The FRC has indicated its intention that where any matter is listed as an aggravating factor, the converse should be treated as a mitigating factor and vice versa. We consider that such intention should be explicitly stated in the guidance in order to avoid misunderstanding by the Tribunal or arguments being raised before the Tribunal unnecessarily.

We welcome the focus on the deterrence test instead of a prescribed level of fine or other sanction. We take the view that it is always better to focus guidance on the ultimate desired outcome, leaving the matter of how to reach that outcome within the discretion of the Tribunal in a particular case.

We were concerned to note that the FRC intends to develop a body of precedents for use alongside the guidance, for a number of reasons as set out below. 

Confusion is likely to result as to whether deference ought to be given to a precedent or to the guidance where they appear to differ. 

The detailed reasons for any precedent decision would need to be considered in order for it to be fully understood. As the body of precedents develops this will be a time-consuming task and, we suggest, will detract from the benefits of the guidance.

Some precedent decisions may not go into sufficient detail about the reasons for a reduction in a fine or costs order made. For example, a reference to the member’s financial position might be made but without any other information to enable a future Tribunal to understand why the amount of the reduction was appropriate in the precedent case.

We strongly suggest that the Tribunal is directed not to consider precedent decisions. Alternatively, if the FRC decides to continue with a combined precedent and guidance approach, we suggest that the guidance should refer explicitly to the precedents, directing the Tribunal not to be constrained by them, warning them of the need to consider the full reasons for the decision before deciding that it is appropriate to follow a precedent, and stating that where there appears to be a discrepancy between a precedent and the guidance, the guidance should prevail.