16 November 2009
Are the FSA’s prosecution powers too far reaching?
In an article published in The Lawyer, Robert Brown , partner, Corker Binning, asks whether the FSA’s prosecutor roles are too far reaching.
Opinion: FSA’s prosecutor roles are too far-reaching
Robert Brown, partner, Corker Binning
The surge in the number of criminal prosecutions brought by the FSA has been well-publicised. The recent Court of Appeal judgments in R v Rollins and R v McInerney will embolden further the financial regulator as a prosecutor of financial crime.
The court held that the FSA can act as both a public and private prosecutor in relation to the same case, asserting that it can now prosecute for offences beyond those specified in the statute that empowered it to bring prosecutions.
Neil Rollins and Michael McInerney were the subject of separate prosecutions brought by the FSA, the former for insider dealing and the latter for boiler room fraud. The distinguishing feature of these cases was the addition of charges of money laundering against both defendants.
The significance of this move is that money laundering offences derive from the Proceeds of Crime Act 2002, not the Financial Services and Markets Act. The Court of Appeal ruled that the FSA, acting as an “ordinary citizen”, had a common law entitlement to conduct a private prosecution for money laundering, saying this made “practical good sense”.
It is not difficult to appreciate why the court found that allowing the FSA to act simultaneously in both capacities was sensible. Otherwise an allegation of money laundering would have to be decided by a separate trial brought by a different prosecuting agency.
However, pragmatic judgments can sometimes create bad law. Doubts persist as to the wisdom of allowing the FSA to prosecute as both a public body and a private citizen. The judgment may be taken by other authorities – such as the Health and Safety Executive or the Department of Work and Pensions – as giving them the power to prosecute beyond their immediate remits. This moves the law into an area apparently not envisaged by Parliament.
Promulgating the legal fiction that the FSA is no more than a private person may also have worrying implications. Public prosecutors such as the CPS are accountable for their decision-making at various levels: there is a duty to publish and abide by a code of practice, the availability of judicial review to overturn a flawed prosecutorial decision and, in the case of recklessness or worse, the crime and tort of misfeasance in public office. It may be safe to assume that the FSA will adopt the CPS code of practice when prosecuting in a public or private capacity, but it is hard to imagine the Director of Public Prosecutions ever using their power to discontinue a private prosecution by the FSA.
More importantly, the FSA will be both investigator and prosecutor, and as a result will lack the independence inherent in the structures of the CPS and the Revenue and Customs Prosecutions Office (RCPO). As a result there may be a lack of public confidence in the capacity of the FSA to act as a ‘minister of justice’ when deciding whether to bring charges arising from an investigation that has been conducted by its own enforcement section.
The recent cases enliven the debate on the necessity of separate prosecuting authorities. Bearing in mind its broad remit to become a super-regulator, why, if it so decided, might the FSA not embark on an ambitious programme of becoming the preeminent UK law enforcement agency in relation to financial crime? This ambition would perhaps be welcomed by those who think the FSA and the SFO should be merged, in the same way that the CPS will soon subsume the RCPO.
The Court of Appeal has made it clear that the FSA has greater powers than anyone imagined. What is not known is where those powers end.
Corker Binning solicitor Gemma Tombs assisted with this article