Firms that are about to become the subject of regulatory investigations should take note of the latest changes to the British Financial Conduct Authority's and Prudential Regulation Authority's enforcement regimes.

The changes, for non-prudential purposes, occur primarily in the DEPP (Decision Procedure and Penalties Manual) and EG (Enforcement Guide) parts of the FCA's rulebook.

The idea, first mooted in a Treasury paper of December 2014, was to make the ways in which the FCA and PRA compel recalcitrant firms to comply with rules fairer and fasater. Andrew Green QC’s report about the FSA’s 'enforcement' activity in relation to the failure of Halifax Bank of Scotland (HBOS) followed in November 2015 and made recommendations about three things that harked back to the Treasury's paper. These were:

• the decisions that the regulator had to make before one of its staff referred someone to its 'enforcement' people;
• continuing dialogue between the 'Enforcement and Market Oversight' division (EMO, which conducts forensic investigations into suspected misconduct and compliance failures) and the 'Supervision' division of the FCA during an investigation; and
• the process by which the regulator informs someone who is subject to investigation about the matters that it is investigating.

The FCA and PRA have made, or are making, changes in the following areas.

• The way in which their staff decide whether to refer an issue to EMO or the Regulatory Action Division for investigation.
• The provision of more information to someone about why he has been, in the regulators' phrase, "referred for investigation."
• Regular updates throughout investigations.
• Effective levels of communication between the Enforcement and Supervision divisions during investigations; and
• More guidelines to govern joint FCA/PRA investigations.

The FCA is also introducing a process for partly contested cases. This will allow someone who is under investigation to 'agree' certain elements of a case (perhaps on the subject of penalties, facts, liability or a combination of these issues) and contest the other elements before the Regulatory Decisions Committee. They will still be able to obtain a discount on the penalty in accordance with their 'agreeability,' in the American style. The FCA is also setting up a mechanism by which people under investigation can proceed more directly and quickly to the Upper Tribunal by means of external adjudication that is wholly independent of the FCA (or at least, to the extent that the tribunal is). The FCA is also abolishing penalty discounts at Stage 2 and 3 of the settlement process and retaining the same panel that gave the warning notice to hear representations and decide whether to write a decision notice.

The PRA is planning to put other recommendations into practice, including its suggestions (which it submitted to interested parties for comment last year) for an enforcement decision-making committee; the publication of a short guide to PRA enforcement procedures; and a review of its approach to settling cases.