Licensing, Compliance and Enforcement Policy: Consultation Response
This response sets out our position in relation to the consultation around proposed changes to our Licensing, Compliance and Enforcement Policy.
- Executive summary
Summary of responses - Licensing changes
- - Proposal 1: Policy position in relation to dual regulation products
- - Proposal 2: Changes to complete applications
- - Proposal 3: Clarification of relevant persons
- - Proposal 4: Timescale for using licence
- - Proposal 5: Clarification of suitability criteria
- - Proposal 6: Clarification of financing arrangements
- - Proposal 7: Addition of new examples to update the Commission about
- - Proposal 8: Minor updates to reflect minor changes to processes in the policy
- Summary of responses - Compliance changes
- Summary of responses - Enforcement changes
Proposal 11: Special Measures
Updated paragraph 4.22
If serious failings are revealed during or as a result of a compliance assessment, then the Commission may decide that it is appropriate to place the licensee into Special Measures. The effect of Special Measures is that the licensee will be invited to submit and agree an urgent action plan to rectify the regulatory failings identified. This may include divestment of any financial benefits derived from the failings. If the licensee fails to agree an action plan, or fails to implement the agreed action plan, the Commission is likely to proceed to review the licence. Compliance with the action plan does not prevent the Commission from reviewing the licence in any event, but such compliance will be treated as a mitigating factor. Where the licensee has fully complied with the action plan, it may request release from Special Measures. The Commission will consider such a request following a further compliance assessment.
- Q15. To what extent do you agree with our proposal to add the use of Special Measures to our regulatory toolkit?
The majority of respondents agreed with this proposal and commented as follows:
- Special Measures can be effective in achieving compliance whilst avoiding a section 116 review (opens in a new tab)
- we should publish when operators enter Special Measures to ensure consumers could assess if their risk appetite is big enough to continue to use the services of such operator
- can a non-compliant operator continue trading under Special Measures?
- the approach to divestment needs to be clearer and the Commission should consider whether funds can be divested back to consumers
- licensees should be able to refuse to enter Special Measures and to defend its position if a review is then instigated.
At present we do not announce the outcome of our assessment work, only our enforcement casework. As a proportionate regulator we would consider publication of information about the Special Measures process only as part of a piece of work to look at publication of assessment outcomes in general. To do otherwise would not provide a balanced picture. We will be evaluating the effectiveness of the Special Measures process as part of our review of the outcomes of its introduction.
The Special Measures process includes a requirement that a licensee takes immediate steps to mitigate risk to consumers and the licensing objectives. Where we judge that the consumer risk is too high, we are likely to consider measures other than Special Measures.
The comments on divestment fall outside of the parameters of this consultation. A decision on divestment to customers, where this is outside of a formal regulatory investigation, is for the licensee. By not divesting back to consumers the licensee risks a separate claim from a consumer. We do not have legal powers to settle an individual dispute.
While it is open to a licensee to refuse Special Measures, this would most likely mean that the licensee, based on the identified failings, would be considered for review of its licence. As part of that review process, we would want to understand why the operator was unwilling to work to achieve compliance at pace. The review process allows for the licensee to make representations about the Commission’s findings and proposed course of action.
We will be implementing the proposal as set out in the consultation document.
Proposal 10: Assessment framework
Last updated: 22 June 2022
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