The Mauritian financial regulator has set out its new approach to the resolution of enforcement cases through settlement, a word that it shrinks from defining fully. Only firms are to be allowed to ask for settlements.
The watchdog does, however, have a good deal to say about its expectations of the process. ‘Settlement’ is to be a type of regulatory decision and, in the regulatory context, is not to be the same as the settlement of a commercial dispute. The regulator's literature often mentions the process as though it is already up and running. It states vaguely in its list of "frequently-asked questions" on the subject that "settlement provides an avenue for reaching outcomes in certain enforcement cases where there is mutual agreement between the FSC and a licensee [i.e. a regulated firm] that the latter has committed breaches which aresupported by facts and evidence."
This strongly implies that a firm can only "settle" if it admits wrongdoing. A firm that is facing enforcement action can ask the regulator in writing to consider the matter for settlement. Indeed, the request for, or initiation of, any discussion about a settlement must come from the firm.
The current version of the regulator's enforcment manual states that "one of the commission’s objectives through enforcement is to ensure compliance with regulatory requirements. To this end, the commission will be introducing a settlement framework as a means to achieve timely and proportionate outcomes in appropriate circumstances."
At no point in the manual does the commission say what it means by a 'framework,' but it refers to part 1 of its text as its "enforcement framework" and that part contains some background information about enforcement, the legal basis for it, the forms it takes, policy, liaison with other bodies and, of course, settlement. Perhaps the "settlement framework" will be a similar potpourri of information on the subject.
The regulator expects discussions about settlements not to last for more than 60 calendar days after it has sent a 'confirmation' to the firm in question to the effect that such discussions may proceed. It wants to allow any member of the board of the firm to attend if he likes, although not a senior manager without written permission from the board.
Settlement should be possible at any stage of the enforcement process, which (according to the enforcement manual) encompasses the enforcement information gathering, investigation, inquiry and "show cause" (where a firm explains why a certain course of punishment would be unjust) stages. Once the regulator's enforcement committee issues a decision notice, however, the time for talking will be up.
The SFC wants to retain the discretion to publish or not publish the outcome of each settlement according to its whims.
It also evidently sees the new process as a route towards swift capitulation on the part of any firm that it might be investigating, noting that "settlement discussions that do not proceed expeditiously are likely to have a prejudicial effecton an investigation/inquiry or the enforcement process generally."
Pains and penalties
If any firm breaches the terms of its "settlement agreement" with the regulator, the regulator promises not to be lenient. Its rights to seek any other civil or criminal sanction that it wants are not to be prejudiced.
Fines and discounts in Mauritius run along British lines. Stage 1 of a settlement - the early stage - is to earn the capitulator a 30% discount from the fine. Stage 2 - which falls between the moment when the regulators refer the matter to the Enforcement Committee and moment when the FSC issues a warning notice - carries a 10% discount. After the warning notice (but before a decision notice), only 5% is possible.
If the parties reach no agreement, the matter ought to proceed in accordance with the formal enforcement process. In a little note marked ‘Without prejudice,’ the regulator notes: "Correspondence and any material submitted in the context of settlement discussions will not be used or referred to at any stage in the formal enforcement process."