Enforcement as a Regulatory Tool

In the wake of constant threats of imminent financial scams and scandals, the implementation of an effective enforcement programme is increasingly an ongoing challenge for regulators around the world. Whilst, some regulators adopt an enforcement-led approach, which is characterized by the specific allotment of resources to enforcement activities, others are more geared towards work done in 'prevention' rather than ex-post enforcement actions.

As the integrated regulator for the financial services sector other than banking, and global business, the FSC's regulatory objectives as mandated under the FSA are as follows:

• Protecting consumers;
• maintaining confidence in the financial system;
• financial stability; and
• reducing financial crime.

In delivering its regulatory objectives, FSC champions a prevention model as it seeks to prevent and/or identify problematic issues early in the regulatory process.

The Prevention Model

• frequent review processes;
• periodic and exceptional reporting requirements;
• on-site inspections, with greater emphasis on supervision; and
• adopting a stringent licensing framework.

As a risk based regulator, throughout its work, the FSC prioritises its resources in the areas which pose the biggest threat to its regulatory objectives. Enforcement is one of a number of regulatory tools available to the FSC as part of its preventive approach. The FSC's approach to the use of its enforcement powers plays an important role in the pursuit of its regulatory objectives.

Principles:

• The effectiveness of the regulatory regime depends to a significant extent on maintaining an open and co-operative relationship between the FSC and those it regulates.
• The FSC exercises its enforcement powers in a manner that is transparent, proportionate, responsive to the issue, and consistent with its publicly stated policies.
• The FSC ensures a fair treatment when exercising its enforcement powers.
• The FSC aims to change the behaviour of the person who is the subject of its action, to deter future non-compliance by others, to eliminate any financial gain or benefit from non-compliance, and where appropriate, to remedy the harm caused by the non-compliance.