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A judge’s view of the regulators approach to supervision and enforcement


Her Honour Hazel Marshall KC Lieutenant Bailiff, made some interesting comments about regulators, in handing down her Judgment [18th April 2023]

In paragraphs 479 and 480 of the judgment the following is stated:-

  • 479.I accept that the Commission’s function is to raise standards. I also accept that the Commission’s approach to regulation is that of managing risk.
  • However, the danger, it seems to me, is that approaching regulation with a dogged focus simply on risk can lead to a lack of perspective, where adherence to form and process are treated as more important than substance.
  • Whilst the protective effect of requiring adherence to policies, processes and controls is obvious, the Commission must surely, still, apply balance and common sense when determining whether and what sanctions to impose, in respect of defaults, if those sanctions are to remain reasonable and proportionate in the particular case.
  • 480.It is usually an easy exercise to find a fault.
  • After a charge that a person did not ask questions, when it turns out that they actually did the charge then becomes one of not recording the answer, or that one should have asked a further question rather than judged oneself “comfortable” with the answer, or that the questions should have been asked earlier.
  • These are complaints which it is easy to make with the benefit of determinedly critical hindsight.
  • Too often the real complaint then seems to become that, in a matter of discretionary judgment, the person simply did not come to the same conclusion (for example, as to whether or not to determine the business relationship, or whether or not records in a particular form were “sufficient”, or whether or not it was appropriate to be satisfied with information obtained) as the Commission’s inspector, armed with hindsight and a zealous eye, would have come to.
  • After a protest that the evil suggested did not in fact happen, the criticism becomes that this misses the point because it could have happened, but it seems to me that that can only be accepted up to a point, and not simply as an automatic justification for criticism or sanction.
  • The fact that a person has the temerity to question the reasonableness of the Commission’s criticisms then provokes the further charge that the person thereby demonstrates failure to understand his regulatory obligations.
  • I have found examples of this kind of approach throughout this case.
  • It rather suggests that once any matter has been referred to the ED, it is almost a matter of honour that charges should be laid and severe penalties successfully exacted.
  • Indeed, the Commission’s comment accompanying the Final Notice, cited at [84] above, treating “failures which have occurred in the last three years” and “more historical failings …..which have remained on going until resolved in the last three years” (emphasis added) as being equally appropriately the target of the Commission’s power to punish suggests a rather mean-spirited refusal to recognise that the latter failings have been resolved, as if the writer is so keen to make exemplary use of the Commission’s powers of sanction that he finds this a matter of regret.

Read the judgment.

  • Her Honour Hazel Marshall KC Lieutenant Bailiff, sitting alone Hearing Dates: 25th – 27th October 2022 Judgment handed down: 18th April 2023

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