The Financial Services Commission (“FSC”) on 11 December 2020 released a Communique introducing a new approach of resolving certain enforcement cases through settlement. This comes as an endeavor to reach a mutual agreement between the FSC and a licensee to uphold public interest by ensuring that enforcement outcomes are determined in a consistent, proportionate and timely manner, not exceeding 60 calendar days as from the date of confirmation received. The sooner a licensee makes an admission, the greater the reduction in penalty will be.
The FSC makes a distinction between what is meant as settlement in a commercial dispute and settlement in a regulatory context. This instance is concerned with the regulatory definition and therefore, the terms of the settlement should be aligned to the statutory objectives of the FSC when a licensee is agreeing to the terms of any settlement with the FSC. The settlement process is premised on the principle of without prejudice, i.e. if there is no agreement reached between the FSC and the licensee, all materials used during the process will not be disclosed in the formal enforcement process.
The Settlement Framework process is only triggered if a licensee makes a written request for the matter to be considered. What this also means, is that by initiating the settlement process the licensee is automatically admitting a form of breach. The FSC reserves the right to decline a licensee’s request to opt for the Settlement Framework if it is not in line with the objectives of the Commission. The initiation may be made at any stage of the enforcement process, i.e on the information gathering stage, investigation stage, inquiry stage and/or show cause stage. The only limitation is that the request will not be entertained if a Decision Notice has already been issued by the Enforcement Committee (“EC”), i.e. when the EC imposes an administrative sanction. It is noteworthy that whilst a Settlement process in ongoing there is no stay of any enforcement action which have already started and these will continue in parallel with the settlement discussions as long as it takes for the matter to be resolved.
If the FSC and the licensee succeeds in reaching a positive outcome, a Settlement Agreement is then drawn up and signed by both parties. In case of a breach, the FSC will consider the respective actions to be taken due to the failure of complying with the agreed terms, as well as, the initial breach. The FSC retains the right to seek other avenues of resolving non-compliance with the obligations such as civil or criminal sanction that is deemed. Moreover, it is up to the FSC to determine whether to proceed with the publication of as Settlement case details or not.
All in all, the Settlement Framework is welcomed as a means of enforcing the systems in place by the implementation of proportionate and timely risk mitigation strategies through remedial plans worked out mutually between the FSC and the licensee, thereby offering the opportunity to the FSC to treat breaches on a more hands-on approach together with the licensee.
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