In July 2021, the Financial Conduct Authority ("FCA") and UK Gambling Commission ("UKGC") entered into a Memorandum of Understanding ("MOU") establishing a framework for cooperation, coordination, and information sharing. The MOU envisages that the two regulators will increase their working together on matters of mutual interest, and sets out a framework for the mutual exchange of information to enhance their ability to discharge their respective regulatory functions.
This Update provides an overview of the MOU, and considers its implications.
The UKGC is an independent, non-departmental public body which, amongst other things, regulates all gambling activities in Great Britain, apart from spread betting, in partnership with local licensing authorities. Its statutory objectives are:
- to prevent gambling from being a source of crime and disorder;
- to ensure that gambling is conducted in a fair and open way;
- to protect children and other vulnerable persons from being harmed or exploited by gambling.
The UKGC does this by:
- issuing and publishing licences and codes of practice;
- monitoring compliance with regulatory requirements and licence conditions;
- investigating breaches of licence conditions and take regulatory enforcement action where appropriate;
- investigating and prosecute illegal gambling;
- advising the UK Government on gambling and related issues;advising gambling licensing authorities on how they should exercise their functions.
The FCA is responsible for, amongst other things, setting and enforcing rules relating to the conduct of regulated firms, including by fixing standards of conduct in retail and wholesale financial markets, and supervising trading infrastructures supporting those markets.
The FCA does this by:
- authorising firms and individuals who carry on regulated activities;
- supervising firms in the financial services sector;
- investigating and enforcing activity against firms and individuals carrying out regulated activities;
- bringing criminal prosecutions in relation to financial crime.
Information sharing and cooperation between the FCA and the UKGC
The MOU recognises that the FCA and the UKGC may overlap in their respective regulatory remits and that, as a consequence, sometimes it may not be clear which regulator is better placed to lead on an issue that arises. Overlapping remits between the FCA and other regulators and law enforcement bodies has been a theme which has occupied no little public attention recently, as the FCA has encountered difficulties in connection with a number of high profile cases involving activities and allegations over which the FCA and other regulators or law enforcement agencies – based both in the UK and overseas - have had jurisdiction to act. Overlapping jurisdiction can lead to hesitation, reluctance, and stasis on the part of the FCA (or indeed any other regulator), preventing meaningful and decisive action, perhaps partly due to the mindset that a certain issue (also) falls within the remit and responsibility of another regulator or law enforcement agency.
Accordingly, the MOU provides that the two regulators will discuss with each other matters potentially falling within both their respective remits, to ensure that the appropriate regulator can be identified. The MOU envisages that this will be achieved by the FCA and the UKGC:
- notifying each other of significant developments where the other is likely to have an interest;
- establishing designated points of contact for that notification to take place;
- exchanging views in a timely manner;
- seeking to reach a mutually agreed position at working level where a decision is required.
In addition, the MOU commits the regulators to sharing information with each other on issues of mutual interest (to the extent permitted by law). This is envisaged to include information:
- about investigations that may be of relevance to the functions of the other regulator;
- regarding criminal and/or fraudulent activity that might cast doubt on the fitness and proprietary of an FCA-authorised firm or approved person;
- that may relate to an FCA-authorised firm's governance or culture and systems and controls, and the same in relation to UKGC-licenced operator's suitability to carry on licenced activities;
- relating to unlicensed gambling facilities.
The information is envisaged to be shared between the regulators both proactively and on request, as appropriate. The purpose for which information will be shared would need to be set out in any potential request for information or proactive disclosure, but would include enforcement and supervisory purposes. Similarly, on general policy matters of mutual interest, the regulators have agreed to consult with each other at an early stage.
There are, of course, natural limits and safeguards to the exchange of information. In this regard, the MOU:
- commits the regulators not to disclose information so shared without the consent of the other (unless required by law);
- acknowledges the restrictions on disclosure of personal data pursuant to the UK GDPR;
- recognises that the regulators will notify and cooperate with each other in relation to requests submitted under the Freedom of Information Act 2000, insofar as they relate to information that has been provided by the other regulator.
The MOU will be reviewed by the regulators annually.
There are a number of bilateral and multilateral MOUs in place between the FCA and other regulators or law enforcement agencies: both UK-based regulators (such as the Payment Systems Regulator, the Pensions Regulator, and the Financial Ombudsman Service), and numerous international and overseas financial services regulators and bodies (such as the US Securities and Exchange Commission and the Hong Kong Monetary Authority - see here). These memoranda are not legally binding, but they do provide a framework for cooperation and the legal and policy basis on which potentially sensitive information should be shared. MOUs are therefore believed to be an important tool for regulators, providing them with a gateway through which to receive information and intelligence to which they might not otherwise have access. Though MOUs with other regulators have been part of the regulatory landscape for some time now, and a number were concluded by the FCA with EU and other European regulators and bodies in 2019 to provide for continuing cooperation and information-sharing following Brexit, their importance, utility, and use are expected to continue to grow in view of the increasingly cross-border nature of financial markets, financial activity, and financial crime.
The necessity and significance of this particular MOU may be inferred from the expectation that there will be increasing overlap between the FCA and the UKGC as regards areas of mutual interest and their respective remits. For example, both regulators are the subject of findings and recommendations in the recent Independent Review report into the collapse of BetIndex1, even though it was regulated by the UKGC and not the FCA. The FCA has had, and continues to have, a much-publicised and debated issue in addressing activities believed to occupy areas close to the regulatory perimeter, and its leadership has made speeches recently indicating that it will be increasingly prepared to take action in these areas, particularly where there is the potential for consumer harm2. MOUs, and closer cooperation with other regulators who also regulate similar activities, individuals, and firms, will continue to form an increasing part of the overall approach by which regulators like the FCA and UKGC supervise such activities, and take enforcement action if and where needed.
2 See, for example, the FCA CEO's speech on 22 September 2021 (https://www.fca.org.uk/news/speeches/seizing-opportunity-challenges-priorities-fca), and the FCA Director of Enforcement's speech on 18 May 2021 (https://www.fca.org.uk/news/speeches/rise-scams-and-threat-legitimate-financial-services-industry)