The Candour Dividend: How the PRA Is Rewarding Early Co-operation

The PRA’s Head of Enforcement and Litigation, David Chaplin, has given a speech outlining the benefits of early co-operation and engagement in the context of PRA enforcement investigations.

He highlights the advantages to firms, the PRA and wider markets of a revised approach to enforcement that prioritises proactive engagement, early admissions and a more candid discussion of where things have gone wrong and how to fix them. Rather than seeing enforcement as inevitably a form of quasi-litigation, Chaplin argues for a change in the culture around enforcement investigations. The PRA’s Early Account Scheme, launched in 2024, is a key means by which the PRA is seeking to effect this change. He argues that the PRA is already seeing measurable changes in behaviour by firms since its introduction, even in cases which pre-date its introduction. These include:

• Earlier without prejudice engagement.

• Firms voluntarily producing structured factual accounts.

• Admissions being made months or even years earlier than would previously have been typical.

• In one case, a firm proactively indicated that a financial sanction would be appropriate — before any proposal had been put to it by the PRA.

Chaplin stresses that the more ‘traditional’ approach to enforcement investigations remains valid for certain types of cases, particularly those in which there is genuine uncertainty about the facts or responsibilities. In the right case - particularly those in which there is a ‘realistic and shared’ understanding early on that a breach has likely occurred - his message is clear: firms that engage early, candidly and constructively and accept responsibility where justified, will benefit from a more efficient investigation process and potentially larger reductions in penalty than would otherwise be available.  

It is interesting to consider the PRA’s position in the light of FCA Co-Head of Enforcement Therese Chambers' speech earlier this month. Both essentially seek to answer the same question: how can financial regulators increase the speed and efficiency of enforcement action without diminishing its impact and deterrence? Regulators and firms agree that lengthy investigations serve no one – they consume disproportionate amounts of resource and generate uncertainty, burdening firms, and prevent the regulator from ensuring harm is remediated quickly and messages are communicated to the market when they can make the maximum impact.

The proposed solutions, however, are subtly different. The FCA, we are told, is focusing on earlier use of its supervisory powers to deliver swifter remediation and redress. Enforcement is now reserved for only the most egregious or significant cases. The PRA, on the other hand, seems to be advocating for an approach in which candour and a ‘cards on the table’ approach enables firms to work towards a swifter solution within the confines of a formal enforcement investigation. 

It is important to remember that we are not entirely comparing like with like here. The PRA pursues a targeted docket of enforcement cases focused on its supervisory priorities. It has a vastly smaller investigations team. Given that, it is perhaps easier for it to develop the level of trust and engagement with individual firms required for a scheme like the EAS to operate. It no doubt helps to build that confidence that firms opting to use the EAS are offered the incentive of a maximum of 50% discount on penalty. This contrasts with the FCA, where the extent to which it will or will not take early co-operation into account when calculating penalty is difficult to predict.

Nonetheless, sufficient similarity of purpose remains to make the differences in approach between the two regulators worth considering. Supervisory tools can achieve swift and impactful results, but they largely operate within the confines of the relationship between the FCA and its regulated firm. There is value to the market in visible concluded enforcement action. It provides an important means of sending a message to the industry about regulators’ expectations and increases broader deterrence. It may well be that, by establishing efficiency gains within the context of formal enforcement action, the PRA achieves the more decisive balance here.