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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.

Published: 23 June 2022

Last updated: 23 June 2022

This version was printed or saved on: 5 December 2022

Online version: https://www.gamblingcommission.gov.uk/consultation-response/licensing-compliance-and-enforcement-policy-consultation-response

Executive summary

The Licensing Compliance and Enforcement Policy (the Policy) builds on the Gambling Commission's Statement of principles for licensing and regulation and sets out our regulatory policies in relation to:

We amend the Policy from time to time to ensure that it remains clear to operators and other stakeholders, transparent and up to date.

At the end of 2021 we launched a consultation on amending the Policy to include our proposed policy on regulation of products which, by virtue of their name, branding, marketing or game rules give the impression that they are more of a valuable investment rather than a gambling product. Products such as these create the risk of uncertainty as to where the regulatory responsibility may lie, which risks harm to the second and third licensing objectives. The purpose of the Policy is to provide clarity and certainty for operators and consumers about the scope of our regulatory remit. 

At the same time, we took the opportunity to introduce other updates to the Policy which include:

Introduction

The Gambling Commission

We licence and regulate commercial gambling within Great Britain, including the National Lottery.

Our functions under the Gambling Act 2005 include:

We have a statutory duty to permit gambling provided that it is reasonably consistent with the licensing objectives.

Consultation proposals and background

We issued the consultation on 17 November 2021, and it ran for 12 weeks until 9 February 2022. In total we received 66 responses to the consultation from operators, trade associations, members of the public, the charity and not-for-profit sector and others.

The questions we asked in the consultation together with a summary of the feedback we received and the outcomes are set out within the following Summary of responses sections.

Summary of responses - Licensing changes

Proposal 1: Policy position in relation to dual regulation products

Proposal

Financial products

The Commission considers that products whose name, branding, marketing or game rules contain language associated with financial products such as 'stock', 'share', 'index' or 'investment' risk harming the second and third licensing objectives, because they may give the impression that they are in the nature of a valuable investment rather than a gambling product. Products which are or may also fall to be regulated by other regulators, for example under the Financial Services and Markets Act 2000 (opens in a new tab), create the risk of uncertainty as to where the regulatory responsibility may lie, so risking harm to the second and third licensing objectives. Accordingly, the Commission will not normally grant operating licences involving such products. 

Consultation question

    Q5. To what extent do you agree with the proposed policy position (that the Commission will not normally licence gambling products whose name, marketing and games rules contain language associated with financial products or products that we consider contain elements that do or may fall to be regulated by other regulators)?

Respondents’ views

The majority of respondents agreed with the proposal. Respondents noted that products should be marketed in a transparent manner and should not utilise language that is indictive of being a financial or investment product rather than a gambling one. Furthermore, respondents noted the need for consumers to have clarity in relation to the protections that are, or are not, in place.

Respondents commented as follows:

A number of respondents made comments about adopting a policy position based upon the use of language associated with financial products. These included:

Our position

In the absence of legislative change at this time and given that we cannot licence products that fall outside of our remit, the best approach is to provide clarity to customers about what is licensed by us, what is not licensed by us, and what protections they are afforded.

We do not agree that this approach stifles innovation or is inconsistent with our duty to permit gambling in so far as it is reasonably consistent with pursuit of the licensing objectives. Gambling innovation must occur within the boundaries of the Gambling Act 2005 (opens in a new tab) and we consider that presenting a product as something it is not, via use of language and imagery most commonly associated with the financial sector, is not reasonably consistent with the licensing objectives which refer to gambling being conducted in a fair and open way and protecting people from being harmed or exploited by gambling.

Where gambling products with names, marketing and games rules contain language associated with financial products, we will apply a principles and risk-based approach aimed at ensuring that the language used is not misleading and that customers can readily determine if they are placing a bet, playing a game of chance or taking part in activity that falls to be regulated by others. The words listed in the policy proposal were for illustrative purposes and not an exhaustive list.

Some respondents sought clarity on the exceptions that may apply to the policy. Applications are reviewed on a case-by-case basis, and applicants will have the option of altering product offerings to bring them entirely within or take them entirely outside of our remit, thus addressing concerns over regulatory uncertainly. Furthermore, for products entirely within our remit, applicants will have the ability to change their product presentation and marketing to ensure our policy objectives are met.

Based on the above, we will proceed to implement the policy we proposed which we conclude provides clarity to consumers and operators and best mitigates the risks of consumer confusion and exposure to financial risk and possible harm.

Proposal 2: Changes to complete applications

Proposal

Updated paragraph 3.8

If an application is incomplete or information required to support the application is missing or not provided upon request then, depending on the individual circumstances, the Commission may: 

The application fee is payable on submission of the application. The Commission will not refund the application fee where an application is rejected for any reason, including where the application is rejected as incomplete. 

Consultation question

    Q6. To what extent do you agree with our proposal that including these amendments within the Policy provides greater clarity for applicants (in relation to rejection of incomplete applications and retention of application fees)?

Respondents’ views

The majority of respondents agreed with the proposal and noted:

Respondents also made the following comments:

Our position

Guidance for the forms is embedded throughout the online application process and is available on our website to prepare for completing and submitting the application. However, the Commission is committed to continuously improving its services and regularly gathers feedback and implements relevant changes. Information about what constitutes a complete application is already available on our website, however it is clear from some of the comments that this could be improved. These improvements will be taken forward in the new financial year.

When an application is considered incomplete, Licensing writes to the applicant, informing them of the information that is missing and giving them 10 working days to provide it. Only if the information is still not provided after that period, do we reject the application as incomplete.

Suggestions that applicants should be able to engage with the Licensing team are noted. Engagement currently takes place through the application process however pre-application support is necessarily limited to general advice. The Commission is responsible for assessing and making decisions about applications and there would be a clear conflict of interest if we assist applicants by providing more detailed support and advice beyond the general advice. The Commission’s current fee structure supports our licensing, compliance and enforcement work but does not extend to pre-application services.

Proposal 3: Clarification of relevant persons

Proposal

Updated paragraph 3.10

In considering operating licence applications the Commission will include assessment of the suitability of those persons considered relevant to the application. The persons considered relevant may vary depending on the information provided in the operating licence application and on company structure, but are likely to exercise a function in connection with, or to have an interest in, the licensed activities. It may also include shadow directors, persons or other entities who are controllers of the applicant and/or those who are its ultimate beneficial owners.

Consultation question

    Q7. Do you agree that these examples will assist operators in identifying what is a relevant person and providing necessary information about them to the Commission?

Respondents’ views

The majority of respondents agreed with the proposal and many commented that relevant persons should be subject to scrutiny.

Respondents also commented that:

Our position

Whilst the Commission has made a minor amendment to the paragraph following responses, we do not intend to provide further examples because this is a policy statement and not intended to provide exhaustive lists.

The Gambling Act 2005 necessarily gives the Commission discretion as to who are considered relevant persons. It is an applicant’s responsibility to identify who might be relevant, bearing the Policy in mind, but the Commission will, on a case-by-case basis, identify and ask for information about who it considers may be relevant persons not identified by an applicant.

Proposal 4: Timescale for using licence

Proposal

New paragraph for insertion after current paragraph 3.10

In considering operating and personal licence applications, the Commission will include assessment of whether an operating licence applicant is likely to provide facilities for gambling within a reasonable period or a personal licence applicant is likely to be employed in a role that requires a personal licence within a reasonable period. 

Consultation question

    Q8. To what extent do you agree with our proposal to add a statement setting out our expectations that licences are used within a reasonable period of time of granting?

Respondents’ views

The majority of respondents agreed with the proposal and commented:

Respondents also made the following comments:

Our position

Whilst the Commission understands the comments about defining what a ‘reasonable’ period is, the Commission does not intend to define this because it is right that we consider each application on its own merits. Whilst it might be reasonable, based on the information provided with the application and the type of application, to expect one applicant to begin to use their licence within a couple of months of it being granted, it may not be reasonable for another applicant.

In respect of personal licence holders who may be in between jobs, it should be noted that this new paragraph applies specifically to applicants for licences.

It should be noted that this applies to all personal licence applicants. Those applying for a personal licence purely to provide consultancy services and who do not intend to take up a role that requires them to hold a personal licence are unlikely to be granted a licence.

Proposal 5: Clarification of suitability criteria

Proposal

Updated paragraph 3.11

When considering the suitability of an applicant the Commission will look beyond the applicant itself and may for example consider those connected with the applicant such as: persons relevant to an application by reason of their being likely to exercise a function in connection with, or to have an interest in, the licensed activities, shadow directors, persons or other entities who are controllers of the applicant, ultimate beneficial owners. In respect of the applicant and others connected with the applicant the Commission has regard to the following elements and seeks evidence to support and enable an assessment to be made against each one: 

Updated paragraph 3.22

The Commission will also want to ensure that it can establish who benefits from the gambling provided and therefore require that any shareholders with a 3 percent holding are listed and that those with over 10 percent holding complete an Annex A form to enable further checks to be carried out on them. This requirement is without prejudice to paragraph 3.13 above. If the beneficiary of any business is a Trust then the Commission will want to know who the beneficiaries of that Trust are.

Similarly, where a person or entity holds shares as a nominee the Commission will want to know who the true owners are.

Updated paragraph 3.27

The Commission will consider the evidence and findings of complaints about the applicant and investigations by other regulators. The Commission will look into the applicant and other relevant persons to see if there has been a history of problems or business failure and will use open source checks to assist with that. This involves an assessment of an applicant’s willingness to comply with regulatory responsibilities, uphold the licensing objectives and work co-operatively with the Commission.

Updated paragraph 3.28

The Commission will take up references and may review the CVs or employment history of the applicant or other relevant persons to assess their work experience and the training they have received which demonstrates their competence to carry out the role required of them. This involves an assessment of an applicant’s ability to comply with regulatory responsibilities, uphold the licensing objectives and work co-operatively with the Commission.

Consultation question

    Q9. To what extent do you agree that the amended wording, including additions on suitability, will assist operators in understanding how the Commission assesses suitability and supplying all the information needed for this with the application?

Respondents’ views

The majority of respondents agreed with the proposal and made the following comments:

Respondents also made the following comments:

Our position

Whilst the Commission has made a minor amendment to the proposed paragraph, we do not intend to provide further examples of relevant persons within a policy statement. The Commission disagrees that the statement is jargon-filled and we do not intend to give further definitions of certain words as this is a policy statement.

Whilst an operator undoubtedly must consider the competence of people it employs, the Commission’s consideration of suitability must also include competence because we need assurance that individuals will not adversely impact the licensing objectives.

Where the Commission has concerns about an application, for example, because a person or entity has not demonstrated their willingness to comply with regulatory responsibilities, the Commission will set out specific examples related to that specific case in any correspondence with the applicant.

It would not be appropriate to differentiate between public and private companies; the suitability criteria apply to all applicants although the Commission will take a risk-based and proportionate approach when applying the criteria. This includes whether individuals or entities are already approved by the Commission or another regulator.

Proposal 6: Clarification of financing arrangements

Proposal

New paragraph to be inserted after current paragraph 3.13

The Commission will not grant an operating licence until it is fully satisfied that the operation will not be financed by the proceeds of crime and that profits from the operation will not be used to finance criminal activity. To that end, applicants will be asked to provide information and evidence as required both as to the source of finance of the proposed operation and as to the identity of those connected to the applicant as specified in paragraph 3.11 above. 

New paragraph to be inserted after current paragrapgh 3.25

As stated above, the Commission will also wish to be satisfied as to the sources of the applicant’s finance to satisfy itself that such funds are not tainted by illegality.

Consultation question

    Q10. To what extent do you agree that the amended wording will assist operators in better understanding their responsibility to provide full and open information about source of funding for their business?

Respondents’ views

The majority of respondents agreed with the proposal and noted:

Respondents also commented as follows:

Our position

Following the responses, the Commission has removed the phrase ‘tainted by illegality’ from paragraph 3.25 within the Policy and replaced it with wording that more closely aligns with the first licensing objective.

In relation to providing clearer guidance and examples of documents that would satisfy evidence requirements, we do not intend to provide these because this is a policy statement and funding arrangements can vary significantly. The types of documents that may evidence on source of funding may not be applicable to others.

As set out in the Commission's Statement of principles for licensing and regulation and elsewhere in the Policy, the Commission takes a risk-based and proportionate approach, including in respect to the amount and detail of information an applicant is required to provide. The Commission acts in line with legislation and will continue to do so.

The intention of the new paragraph is to make much clearer to applicants their responsibilities in satisfying the Commission as to source of funding and to make clear the importance of the first licensing objective in relation to source of funding.

Proposal 7: Addition of new examples to update the Commission about

Proposal

Updated paragraph 3.46

Once a licence has been granted and issued, it is important that licensees read through it to check that the details on the licence are correct and that they are familiar with the conditions attached to the licence. Licensees should also be aware of the changes and matters they must keep the Commission informed of whilst they are the holder of a licence. Failure to do so may result in regulatory action being taken. This includes, but is not restricted to: 

Consultation question

    Q11. To what extent do you agree that the amended wording with the inclusion of some examples will assist operators in understanding the importance of reporting key changes and matters to the Commission?

Respondents’ views

The majority of respondents agreed with the proposal and noted:

Respondents also made the following comments:

Our position

The intention of the addition of examples is not to provide an exhaustive list of all matters that licensees should report to the Commission and we agree that these matters are set out in the LCCP and/or on our website. However, some licensees are not reporting these changes, submitting regulatory returns, or submitting variation and/or change of control applications in the required timescales. We remain of the view that the addition of some key examples highlights to licensees the importance of these matters and, by extension, the importance of reading and understanding their licence conditions thoroughly and putting in place mechanisms to comply.

It should be noted that licences do not have an expiry date and changes to this would require changes to the Gambling Act 2005.

In respect of timely submission of variation applications, it remains the responsibility of the licensee to have controls in place to monitor its activities and ensure it is complying with requirements. This includes understanding when they may be nearing their fee category limit and submitting the application in sufficient time to allow the Commission to consider and grant it before the fee category is exceeded. The fee category limits are clearly set out on all licences.

An application for a licence is granted because the applicant has demonstrated their ability to comply with requirements, so the onus is very firmly and rightly on a licensee to make sure they are operating compliantly.

Proposal 8: Minor updates to reflect minor changes to processes in the policy

Proposal

Updated paragraph 3.6

All applicants are required to supply the Commission with sufficient and complete information to support their application, and in particular information that will enable an assessment of their suitability to be made. However, the Commission takes a risk based and proportionate approach to the amount and detail of information an applicant is required to provide. Guidance on the type of information required is included on our website and online application services.

Updated paragraph 3.14

On considering an application for a licence the Commission is required to: grant it; refuse it; or grant it in respect of one or more of the specified activities and refuse it in respect of the others. In some circumstances the Commission may attach specific conditions to the licence, which may, for example, have the effect of restricting the activities that may be carried out in reliance on the licence.

Updated paragraph 3.20

The Commission requires individuals to provide identification information, as recommended by the Disclosure and Barring Service (DBS), which is checked in accordance with their advice. The Commission will seek to follow up and resolve any inconsistencies, such as an indication on the DBS record that states aliases have been used by an applicant.

Updated paragraph 3.23

The Commission requires a full description of the company structure and would satisfy ourselves that other companies in the structure are either listed companies or that we knew of nothing untoward about them. We might carry out checks with overseas regulators in respect of overseas companies.

Updated paragraph 3.45

If the applicant is successful then a licence will be issued either by email. For operating and personal licences relevant details of the licence will be published in the public register on the Commission’s website.

Consultation question

    Q12. Do you agree with the proposed changes to the Policy to reflect our service?

Respondents’ views

The majority of respondents agreed with the proposal and noted:

Respondents also made the following comments:

Our position

It is clear from some of the comments that providing the online application service ‘help and guidance’ in one document available for download would be of great value to applicant and licensees. This improvement will be explored in the new financial year, as part of continuous improvement, and taken forward as soon as practicably possible.

The Commission has deliberately excluded mention of it being mandatory for all applications to be made online as certain types of application cannot currently be made in this way; the Commission continues to accept these specific applications by email. Again, as part of continually updating and improving our services, we are working towards all applications being submitted online only.

It should be noted that the Commission checks associated companies within the same group structure or under common ownership already as part of the application process. In respect of further defining company structure, we do not intend to do this because this is a policy statement and company structures can vary enormously.

In respect of concerns about identity requirements, the Commission no longer requires photographs from personal licence applicants because we have a robust online identity verification process in place.

Summary of responses - Compliance changes

Proposal 9: Remote assessments

Proposal

New paragraph to be inserted - Remote Compliance assessments

The Commission may conduct remote compliance assessments for the purposes of determining whether activities are being carried on in accordance with the conditions of the operator's licence or determining the suitability of the licensee to carry on the licensed activities.

Such assessments may be conducted using video conferencing platforms such as Skype.

During such assessments the Commission may request sight of documents and records held by the licensee, including customer records and the audit trail in relation to customer accounts.

Consultation question

    Q13. To what extent do you agree with the proposed amendment to the Policy to reflect our approach to remote assessments?

Respondents’ views

The majority of responses to this question supported the amendment being proposed. Respondents commented as follows:

Our position

In implementing the change as proposed, we have considered the proportionality and legality of using this method of assessment and we are satisfied that we have appropriate controls in place to ensure that laws relating to data protection are complied with.

It is important that we have the flexibility to conduct assessments in a number of ways as we have a diverse range of operators based across the world. We will maintain the option to conduct assessments either face to face or via remote means. We acknowledge comments about preferences and visibility of the Commission and will ensure that we make the best use of the resource we have considering resource and the most appropriate and efficient means for conducting each assessment.

We have conducted many assessments remotely, and since the beginning of the Covid-19 pandemic most of our work has been conducted remotely using various different technology.

We allow opportunities for those being assessed to provide feedback and clarify anything we have asked. We also ensure that a summary of our findings is provided post an assessment to ensure that a licensee has an opportunity to respond to our findings.

We reference ‘Skype’ only as an example of video conferencing software.

Proposal 10: Assessment framework

Proposal

Updated paragraph 4.19

In carrying out this assessment, the Commission will use the following framework:

Serious failings

This indicates that a substantial risk to the licensing objectives; or significant concerns about the licensee’s suitability; or significant non-compliance with the requirements of the Act and the Commission’s LCCP.

Improvement required

This indicates that there is less risk to the licensing objectives; the licensee meets the minimum expectations regarding suitability; the licensee just meets the requirements of the Act and the Commission’s LCCP.

Compliant

This indicates that the licensee is unlikely to pose a risk to the licensing objectives; the licensee appears to be suitable to carry on the licensed activities in question; the licensee appears to be meeting the requirements of the Act and the Commission’s LCCP.

Consultation question

    Q14. To what extent do you agree with the proposed amendment to the assessment framework?

We proposed changes to the explanations of 'Serious Failings', 'Improvement Required' and 'Compliant'. Most responses supported the proposal but noting some of the feedback, we are implementing the proposal with some amendment.

Respondents’ views

Respondents made the following comments:

Our position

We use the summary of our assessment findings, which we send out to licensees after every assessment to clarify where we believe an issue is a breach of a licence condition or where there is an issue of concern, that could be categorised in different terms as a minor non-conformity. We do not consider that additional subcategories are required.

'Improvement required' is used to reflect circumstances where a licensee may be in breach of a licence condition or social responsibility code, or any other requirement attached to a licence. However, we would not use this description where we judge that there is likely to be a significant impact on consumers, the licensing objectives, or the reputation of the industry. We would also expect clear assurances that a licensee will make immediate changes to ensure that there is no future risk. As an outcome focussed regulator we will consider the impact, or potential impact of non- compliance.

Some respondents have requested that the outcome descriptions are more prescriptive. However, our focus in on achieving consistency and so additional categories are not helpful. We are committed to communicating the findings of our assessments in writing with clear details around the actions required.

Proposal 11: Special Measures

Proposal

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.

Consultation question

    Q15. To what extent do you agree with our proposal to add the use of Special Measures to our regulatory toolkit?

Respondents’ views

The majority of respondents agreed with this proposal and commented as follows:

Our position

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.

Summary of responses - Enforcement changes

Proposal 12: Commencing a review of an individual licence

Proposal

Updated paragraph 5.10

The process of review may itself reveal facts or matters requiring investigation. Accordingly, the Commission will take a flexible approach to the procedure to ensure that all relevant facts and matters are investigated, and that the licensee has a full opportunity to make representations in relation to the review.

Updated paragraph 5.20

While in most cases, the Licensee’s representations will enable the Commission to proceed to a determination, in some cases the Licensee’s representations may raise further questions for the Commission. This may be because the licensee has not adequately replied to the preliminary findings letter or because its representations raise further questions requiring investigation. This may lead to further investigations by the Commission, as set out at paragraph 5.10 above, which may result in a further consolidated preliminary findings letter. In such a case, the Commission will afford the Licensee the opportunity to make further representations before moving to consider its determination. 

Consultation question

    Q16. To what extent do you agree with the proposed amendment to paragraphs 5.10 and to 5.19?

Respondents’ views

The majority of respondents supported the proposed changes. Respondents commented as follows:

Respondents also indicated that the Commission was perceived to be more than fair in its regulatory approach.

Our position

We consider it important that our processes are transparent and available to licensees and their advisers. There are many occasions when engagement is not withheld to the point of obstruction but is not as effective as it could be. In these instances, clarifying the process and the opportunity for representations is important to manage the process and relationship.

Similarly, whilst every effort will be made to issue only one set of preliminary findings, where required we must have the flexibility to ensure fair weight is given to the available information.

It is not envisaged that this amendment would be utilised solely for the benefit of the Commission and officials will continue to expect licensees to engage comprehensively at the earliest opportunity. It is anticipated this would be used exceptionally, rather than routinely.

The Commission will make available to licensees under review projected timescales for case progression at the outset of an investigation and these will be monitored on an ongoing basis as applicable to the facts of each individual case. The Commission already provides detailed rationale in its decision letters and notices and will ensure this continues to apply.

The Commission intends to continue with its proposals to amend paragraphs 5.10 and 5.19 of the Policy.

Proposal 13: Financial penalties

Proposal

New paragraph for insertion after current paragraph 5.26

Whether a financial penalty is to be imposed following a review or without a review having taken place, the Commission may request financial information regarding the financial resources available to a licensee, including but not limited to its own resources and those of any parent or group company or ultimate beneficial owner. In the absence of sufficient information, the Commission will infer that the licensee has the resources to pay such financial penalty as is appropriate in the circumstances of the case.

Consultation question

    Q17. To what extent do you agree with this proposal?

Respondents’ views

The majority of respondents agree with this proposal and commented as follows:

Those who supported the amendment felt that opaqueness of a licensee’s financial position could increase risks for consumers and that publicly traded organisation should be transparent in relation to its available resources.

Supportive respondents felt the Commission should start from a position of assuming the defined penalty is affordable with the onus on the licensee to prove otherwise whilst ensuring proportionality between the fine quantum and scale of breaches. One respondent stated the proposed change was reasonable and in accordance with the Commission’s existing powers.

Our position

The Commission intends to proceed with the proposed amendment.

We acknowledge views about the Commission publishing a formula explaining penalty calculations. It remains our position that to do so could encourage noncompliance by facilitating licensees to cost their actions, which could increase risk to consumers. Equally, we appreciate the need for licensees to understand what factors have informed our decision making and, mitigating and aggravating factors. The Commission will continue to ensure these elements are articulated in correspondence during the review.

The Act stipulates that the Commission will have regard to the affordability of a proposed penalty. The Act is not prescriptive on the definition of financial resources but for a group structure where dividends and loans are available to move monies around the group it follows that a licensee has more financial resources available to it than a stand-alone company and should be assessed accordingly. In addition, consideration of the group finances removes the ability of the licensee to move monies available to fund a penalty out of reach during the investigation period.

As with a licensee that appears to have financial resources available to fund a penalty, there is an opportunity to provide clarity and evidence on what funds are available or are not available in a group or a company to fund a penalty. On a case-by-case basis and proportionate to the identified failings, the Commission will decide what level of penalty is appropriate and whether it requires additional financial information from the business structure either prior to communication of the penalty or if affordability is raised during representations.

Proposal 14: Suspension

Proposal

Updated paragraph 5.27

The Commission has the power to suspend a licence on deciding to conduct a review or during a review if the Commission suspects that:  

A licensee who wishes to challenge an interim suspension may seek a hearing before a Regulatory Panel of Commissioners. In such a case, the Commission will list the matter for hearing as soon as reasonably practicable.

Consultation question

    Q18. To what extent do you agree with the amended paragraph?

Respondents’ views

The majority of respondents agreed with the proposed amendment. Respondents’ comments related to:

The respondents who supported the change indicated this would be a generous and reasonable addition.

Our position

The Commission recognises the significant impact suspensions have on licensees and undertakes such action only when there is a reasonably held belief that this is the only action which will appropriately mitigate the alleged breaches whilst further enquiries are undertaken.

We recognise the need to engage at an early point and will work to ensure that if suspension is believed to be required, we will engage with the licensee initially. Should those efforts not yield the results we expect then suspension will follow its procedural route. Where such a decision is challenged it would be before different officials and as such we will continue with the amendment. Commissioners are not employees of the Commission and afford a layer of separation from officials which will help act as a safeguard to test our decision making.

Proposal 15: Regulatory settlements

Proposal

New paragraph for insertion after current paragraph 5.33

The process of regulatory settlement is intended to produce a rapid and fair disposal of a case. Accordingly, regulatory settlements should be offered at an early stage in the process. The Commission will not normally accept offers of regulatory settlements offered after the licensee has made representations on the Commission’s preliminary findings. 

Consultation question

    Q19. To what extent do you agree with the proposal?

Respondents’ views

The majority of respondents agreed with the proposed amendment. Respondents commented as follows:

Those who supported the amendment felt the current regime works well and is well organised. Observations did suggest that the drafting could be improved to reflect that it is not the nature of the settlement route to operate as a commercial negotiation.

Our position

We introduced settlements to provide alternative resolution to reviews which can be lengthy and complex. We sought to recognise constructive early engagement and mitigation of issues to the benefit of consumers, the licensee and the Commission. We have already published guidance which covers what criteria will be assessed in making decisions on Regulatory Settlements.

The Commission does not invite, nor negotiate settlements. If a licensee wishes to submit a settlement the Commission up until now has been duty bound to consider it, irrespective of the stage submitted however our view that settlement is a privilege and not a right remains.

We will continue to consider settlements until the representation window post issuance of preliminary findings concludes. We note that within the review process, the licensee will have had multiple opportunities to engage with the Commission and provide information to us and understand our position.

If the licensee can clearly demonstrate factual inaccuracies in the Commission’s position, this ought to be contained with the settlement offer to explain why parts of our findings may not be accepted. If a further preliminary finding is issued by the Commission, the clock would be reset to the last preliminary findings. The Commission will maintain its position of not negotiating settlements but detailed reasons for decisions, whether acceptance or rejection will continue to be provided within this revised timeframe.

The Commission will therefore proceed with the amendment.