The review started with a call for evidence on Tuesday and forms part of a government plan to improve accountability in financial services, following the introduction of tougher rules for senior figures at banks last year.
Included in the regulators’ enforcement remit is the power to fine firms and individuals and the power to ban individuals from operating in the industry.
But concerns have been raised about how regulators exercise their powers, particularly under the FCA’s predecessor organisation the Financial Services Authority (FSA).
According to feedback published by the FSA last year, some firms and individuals felt the regulator had already made its decision before the investigation stage of its enforcement action had begun.
Additionally, some firms which gave feedback after going through the enforcement process expressed concern about the amount of evidence the FSA was willing to share with firms and individuals before settlement.
There has also been a perceived lack of independence in the disciplinary decision making process.
The government said it wants to determine whether the existing regulators’ arrangements and processes for enforcement decision making are fair and effective.
Chancellor George Osborne (pictured) said: “The government has taken action to provide a welcoming business environment for those in the financial services industry who play by the rules while ensuring that those intent on breaking them are held to account.
“I am committed to ensuring that the financial services regulators pursue a model of enforcement that delivers the appropriate balance of fairness, transparency, speed and efficiency.”
The first call for evidence closes on 4 July.
Treasury select committee chairman Andrew Tyrie MP said: “This is a step in the right direction.
“It can pave the way for implementing an important recommendation of the Banking Commission, providing greater autonomy for the FCA’s Regulatory Decisions Committee in taking enforcement decisions.
“Those who conduct an enforcement investigation should be, and be seen to be, independent from those who reach a verdict. It is crucial that regulators strike the right balance between supervisory and disciplinary powers.
“Enforcement should usually be the last resort, not the first.”
