Chapter 5

Requirements made under the Enforcement Byelaw

Contents_________
1.

INQUIRIES
Conduct of inquiries

2.

ENFORCEMENT PROCEEDINGS

2.1

Establishment of Enforcement Committees
Enforcement Board
Composition
Enforcement Tribunals
Composition
Objections to appointment
Role of the Chairman
Revocation and suspension of membership of an Enforcement Committee
Conflicts of interest
Replacement of members

2.2

Commencement of Enforcement Proceedings
Power to bring enforcement proceedings
Joinder and Severance
DiscontinuanceAppointment of legal representatives
Settlement before the Enforcement Board
Service of a defence

2.3

Enforcement Proceedings before Enforcement Tribunals
Appointment of an Enforcement Tribunal
Decision in default of a defence
Directions
Change of plea
Settlement before the Enforcement Tribunal
Hearing of the charges
Decision of the Enforcement Tribunal as to misconduct
Submissions as to sanctions and costs

Decision of the Enforcement Tribunal on sanctions and costs
Conclusion of enforcement proceedings
2.4

Procedural and Evidential Matters
Power to determine procedure
Decision making basis
Stay of proceedings
Failure to attend hearings
Time limits
Amendments
Provision of documents
Non-compliance
Burden and standard of proof
Admissions
Admissibility of evidence
Findings of other courts and other bodies

3.

APPEALS

3.1

Appeal Tribunal
Composition
Revocation and suspension of membership of an Appeal Tribunal
Conflicts of interest

3.2

Conduct of an Appeal
Commencement of an appeal
Appointment of Appeal Tribunal
Objections to appointment
Applications for permission to appeal
Statement of grounds of appeal
Stay of decision being appealed against
Oral hearings
Decision of the Appeal Tribunal

3.3

Procedural and evidential matters
Power to determine procedure
Joinder and Severance
DefaultTimeAmendments
Provision of documents
Appointment of legal representatives
Preliminary hearings
Admissibility of evidence
Findings of other courts and other bodies

4.

COUNCIL STAGE
Application to the Council
Special meeting
Decision of the Council

4A.

ADMINISTRATIVE FINES

4A.1 Administrative fine for failure to comply with the requirements of paragraph 2.4F orparagraph 2.5C of the Membership & Underwriting Conditions and Requirements
Acts or omissions for which the Council may impose a fine pursuant to paragraph 36B
Calculation of administrative fine
Procedure for imposition of administrative fineComposition of the Administrative Sanctions Panel

5.

INTERVENTION ORDERS
Power to make an intervention order
Duration
NoticeWithout Notice
Notification of an intervention order
Application to review
Inquiries
Enforcement Proceedings

6.

PUBLICATION
Confidentiality
Appeals
Intervention orders

7.

MISCELLANEOUS MATTERS
Human Rights Act 1998

APPENDICES
1.
2.
3.
4.
5.
6.
7.
8.
9.

Enforcement proceedings flowchart
Appeals (against decision of an Enforcement Tribunal)
Draft order for directions
Service of documents
Principles of enforcement action
Standing Instruction for settlement proposals submitted to the Enforcement Board underparagraph 2.2.13 of the Enforcement Requirements
MSARC framework for the imposition of sanctions
Consolidated fining policy for Lloyd’s returns
Lloyd’s overseas returns fining policy

1.

INQUIRIES
Requirements made under paragraph 6 of the Enforcement Byelaw
Conduct of inquiries

1.1

Subject to any terms of reference or any direction or order made or given by theCouncil, any person appointed to conduct an inquiry may conduct the inquiry anddetermine its procedures as he thinks fit.

1.2

The person appointed to conduct the inquiry shall submit a written report to theCouncil on the matters inquired into and the report may include a recommendation
as to any action that should be taken including the institution of enforcement
proceedings.

1.3

Where any person subject to the enforcement jurisdiction of the Society makes
available to a person conducting an inquiry or his agent any information, documents
or other materials that is relevant or relates to the subject matter of that inquiry, thenthe information, documents or other materials provided shall not be disclosed otherthan in accordance with the Information and Confidentiality Byelaw (No. 21 of
1993).

2.

ENFORCEMENT PROCEEDINGS
Requirements made under paragraph 12 of the Enforcement Byelaw

2.1

Establishment of Enforcement Committees
Enforcement Board

2.1.1

All enforcement proceedings shall be determined in accordance with theserequirements either by the Enforcement Board or, where the proceedings have notbeen determined by the Enforcement Board, by an Enforcement Tribunal.
Composition

2.1.2

The Enforcement Board shall comprise not less than three individuals –(a)(b)

a qualified lawyer who is not a member of the Society, who shall be the
Chairman of the Enforcement Board; andtwo or more individuals one of whom shall be the Deputy Chairman of the
Enforcement Board,

provided that in making any decision the quorum of the Enforcement Board shall
include at least one individual who falls within Section 7, subsection 1A of Lloyd’s
Act 1982.”
2.1.3

Each member of the Enforcement Board shall be appointed for a term not exceeding
three years and such appointment may be renewed by the Council from time to time.

2.1.4

Where a member of the Enforcement Board is engaged in the determination of
enforcement proceedings that have not concluded at the date his appointment expires
he may continue to be a member of the Enforcement Board for the purposes ofdetermining those enforcement proceedings.

Enforcement Tribunals
Requirements made under paragraph 14 of the Enforcement Byelaw

Composition
2.1.5

Each Enforcement Tribunal shall comprise three individuals –
(a)

(b)

2.1.6

a qualified lawyer of at least 10 years standing or a person who holds or has
held judicial office in the United Kingdom, who shall be the Chairman of the
Enforcement Tribunal; andtwo other individuals at least one of whom shall be an individual who falls
within Section 7, subsection 1A of Lloyd’s Act 1982.

The Enforcement Board shall notify the parties to the enforcement proceedings ofthe composition of the Enforcement Tribunal as soon as reasonably practicable.

Objections to appointment
2.1.7

The defendant may object to the appointment of any member of an Enforcement
Tribunal on any reasonable ground including where the defendant has grounds tobelieve that the member has a conflict of interest.

2.1.8

Any objection to the appointment of any member of an Enforcement Tribunal by the
defendant shall be made in writing setting out the reasons for the defendant’s
objection to the relevant appointment and shall be served by the defendant on the
Enforcement Board as soon as reasonably practicable (and shall be copied to theRepresentative of the Council).

2.1.9

Where the Enforcement Board upholds the defendant’s objection, it shall retire thatmember of the Enforcement Tribunal and appoint another person in his place.

Role of the Chairman
2.1.10

Before the substantive hearing of the enforcement proceedings, the Chairman of the
Enforcement Tribunal shall be responsible for the conduct of the enforcement
proceedings and shall exercise all the powers of the Enforcement Tribunal except tothe extent that the Chairman considers it appropriate for those powers to be
exercised by the members of the Enforcement Tribunal together.

Revocation and suspension of membership of an Enforcement Committee
2.1.11The Council shall revoke or suspend the appointment of any member of the
Enforcement Board and the Enforcement Board shall revoke or suspend theappointment of any member of an Enforcement Tribunal at any time where themember –
(a)

(b)

(c)
(d)

(e)

has been convicted of a crime which, in the opinion of the Council or the
Enforcement Board as appropriate, involves discreditable conduct and suchconviction has not to the knowledge of the Council or the Enforcement Board
as appropriate, been set aside on appeal or otherwise;
has been found liable or admitted liability in civil proceedings incircumstances where such a finding or admission involves gross negligence,dishonesty or fraud;
has been declared insolvent or bankrupt or has entered into any arrangementwith creditors;
is subject to an adverse finding in any enforcement proceedings or proceedings
brought by any regulatory or professional body or where any such proceedings
are pending;was, at the time of his appointment, a member of the Society but who
subsequently ceases to be a member of the Society.

Conflicts of Interest
2.1.12The Council shall revoke or suspend the appointment of any member of the
Enforcement Board and the Enforcement Board shall revoke or suspend theappointment of any member of an Enforcement Tribunal where that member has aconflict of interest or is reasonably perceived to have a conflict of interest.

Replacement of members
2.1.13

Where the appointment of an individual member of an Enforcement Committee isrevoked or suspended during enforcement proceedings whether through resignation
or by reason of paragraphs 2.1.11 or 2.1.12 above then –
(a)

(b)

where the individual is a member of the Enforcement Board and the
Enforcement Board is left inquorate, the Council shall appoint one or more
new members as soon as reasonably practicable and the enforcement
proceedings shall be referred to the reconstituted Enforcement Board;
where the individual is a member of an Enforcement Tribunal, theEnforcement Board shall appoint a new Enforcement Tribunal to hear anddetermine those enforcement proceedings unless each of the parties consents
to the appointment of a new member of the original Enforcement Tribunal.

2.2

Commencement of Enforcement Proceedings
Requirements made under paragraph 16 of the Enforcement Byelaw
Power to bring enforcement proceedings

2.2.1

Where the Council institutes enforcement proceedings against a defendant underparagraph 16 of the Enforcement Byelaw those enforcement proceedings shall beinstituted and conducted in accordance with these requirements.

2.2.2

The Council may institute enforcement proceedings against two or more defendants
as part of the same proceedings.

2.2.3

The Council shall appoint an individual to conduct enforcement proceedings on its
behalf (the “Representative of the Council”) including the conduct of any settlement
negotiations. The Representative of the Council shall notify the defendant and the
Enforcement Board of his appointment, as soon as reasonably practicable and, if
there is a change of appointment after that date, at the time of such change ofappointment.

2.2.4

All enforcement proceedings shall be instituted in the name of the Council by meansof service on the defendant and the Enforcement Board of a notice of enforcement
proceedings (a “Notice”) which shall –
(a)
(b)
(c)
(d)

2.2.5

state by way of charge or charges the alleged misconduct;state the facts and matters relied on;state the nature or class of the sanction or sanctions the Council seeks against
the defendant; andbe accompanied by copies of any documents referred to in the Notice and a
copy of the Enforcement Byelaw (No. 6 of 2005) and these requirements.

The Representative of the Council may at any time after the Notice has been
served on the defendant, send a copy of the Notice to any firm or company of which
the defendant is, or was at the time of the alleged misconduct, a partner, director or
employee.

Joinder and Severance
2.2.6

Where enforcement proceedings are brought separately against two or more persons
in respect of matters which the Council considers to be related, the Council may
require those proceedings to be determined by one Enforcement Tribunal either at asingle hearing of the charges or otherwise save that the Enforcement Tribunal may
order that enforcement proceedings against two or more defendants shall be heard
separately.

Discontinuance
2.2.7

The Representative of the Council may discontinue any enforcement proceedings
before a decision giving effect to a settlement is issued or before any decision as to
misconduct is issued by an Enforcement Tribunal. The enforcement proceedings
shall be discontinued subject to any issue of costs.

Appointment of legal representatives
2.2.8

The Representative of the Council and the defendant may each instruct a qualified
lawyer to represent them in the enforcement proceedings. Where the Representativeof the Council or the defendant instructs a qualified lawyer he shall notify the otherparty and (in the case of contested proceedings) the Enforcement Tribunal of thename of the lawyer concerned in writing as soon as reasonably practicable before thecommencement of the substantive hearing before the Enforcement Tribunal.

Settlement before the Enforcement Board
2.2.9

The Representative of the Council may serve on the defendant at the time of serviceof the Notice written proposals for the settlement of the enforcement proceedings.
These proposals shall –
(a)

(b)

state the sanction or sanctions which the Council considers would beappropriate for the defendant to accept in order settle the enforcement
proceedings; andstate the amount of costs that the Council considers that it would beappropriate for the defendant to pay in order to settle the enforcement
proceedings.

2.2.10

Any proposals for the settlement of the enforcement proceedings shall not be
disclosed to the Enforcement Board (save in the case of an agreed proposal pursuant
to paragraph 2.2.12 hereof) or to an Enforcement Tribunal except in relation to costs.

2.2.11The defendant may enter into negotiations with the Representative of the Council
regarding the settlement of the enforcement proceedings before the Enforcement
Board within the time allowed for the service of the Defence.

2.2.12

Any agreement that the Representative of the Council and the defendant may reachregarding the proposed settlement of the enforcement proceedings shall be recordedin writing and shall –
(a)
(b)
(c)
(d)

state the charge or charges admitted by the defendant;
state the facts agreed;state the sanctions which the parties agree that the Enforcement Board may
impose on the defendant (including the terms of any notice of censure); andcontain a draft order for costs which the parties agree that the Enforcement
Booard may make.

2.2.13

Where the terms of a proposed settlement of the enforcement proceedings have been
agreed in accordance with paragraph 2.2.12 above, the Representative of the Council
shall submit the terms of a proposed settlement to the Enforcement Board.

2.2.14

Where a proposed settlement is submitted to the Enforcement Board underparagraph 2.2.13 above, it may approve, reject or suggest modifications to thesettlement proposals submitted. It may also require both parties to attend before it.

2.2.15

If the Enforcement Board decides to approve any proposed settlement submitted
then it shall issue a decision as to misconduct, sanctions and costs which gives effectto the agreed settlement and it shall notify the parties accordingly. The decision of
the Enforcement Board shall take effect immediately unless otherwise stated.

2.2.16

If the Enforcement Board rejects any proposed settlement submitted then it shallnotify the parties accordingly and the proceedings shall continue as enforcement
proceedings before an Enforcement Tribunal and all proceedings before theEnforcement Board shall, in such circumstances, remain confidential from the
Enforcement Tribunal except in relation to costs
Service of a defence

2.2.17

Within 28 days of the service of the Notice or such further period as the Enforcement
Board may permit, the defendant shall serve on the Enforcement Board and theRepresentative of the Council –

(a)
(b)

a written statement admitting each charge and the facts and matters alleged in
the Notice; ora written defence which shall –
(i)
(ii)
(iii)
(iv)

2.3

state which of the charges are admitted and which are denied;state which of the facts and matters alleged in the Notice are disputed;
state any other facts and matters relied on; andbe accompanied by copies of any documents referred to in the defence
except any documents previously served under paragraph 2.2.4 (d)above.

Enforcement Proceedings before Enforcement Tribunals

Appointment of an Enforcement Tribunal
2.3.1

As soon as reasonably practicable after time for service of the defence has expired
the Enforcement Board shall appoint the Chairman and the other members of the
Enforcement Tribunal, to hear and determine the enforcement proceedings if
proceedings have not been concluded before the Enforcement Board by agreement.

Decision in default of a defence
2.3.2

Where a defendant fails to serve a defence within 28 days of service of the Notice or
any further period as the Enforcement Board may permit, every charge and every
fact and matter alleged in the Notice shall be deemed to have been admitted by the
defendant and the Enforcement Tribunal shall issue a decision as to misconduct tothe parties.

2.3.3

Within 7 days of the date of service on the defendant of the decision as to
misconduct under paragraph 2.3.2 above, a defendant may apply to the Enforcement
Tribunal –(a)(b)

to set aside any decision as to misconduct; andfor permission to serve a defence.

2.3.4

The Enforcement Tribunal may grant the defendant’s application under paragraph2.3.3 if it is satisfied that the interests of justice require it to do so.

2.3.5

Within 14 days of the service of the decision as to misconduct or the Enforcement
Tribunal’s notification of its refusal to set aside the decision, whichever is later, eachparty may serve on the Enforcement Tribunal and the other party written
submissions on sanctions and costs. Either party may serve written submissions in
reply within 7 days.
2.3.6

Either party may in making their written submissions as to sanctions and costs
request that the Enforcement Tribunal convene an oral hearing for the purpose of
making additional submissions on sanctions and costs. The Enforcement Tribunal
shall convene such a hearing as soon as reasonably practicable.

2.3.7

Either party may refer in its submissions on sanctions and costs to any previous
misconduct that has been admitted by or otherwise proved against the defendant, andto any finding regarding the defendant made by any regulatory body or any Court ofcompetent jurisdiction, whether in the United Kingdom or elsewhere, and the
Enforcement Tribunal may take into account such matters as it considers appropriate
in determining sanctions and costs.

2.3.8

Either party may refer in its submissions as to costs to any written settlement
proposals but neither party may otherwise refer to any thing that was allegedly saidor done during the course of settlement negotiations in its submissions as to
misconduct or sanctions.

2.3.9

The Enforcement Tribunal shall notify the parties of its decision as to sanctions andcosts as soon as reasonably practicable in accordance with paragraph 2.3.25.

Directions
2.3.10The Enforcement Tribunal shall give directions for the conduct of the enforcement
proceedings as soon as reasonably practicable and may hold a preliminary hearing
for that purpose. The Enforcement Tribunal shall make an order for directions which
may include directions that the parties –
(a)

(b)
(c)

(d)

disclose copies of all documents which are or have been in their control uponwhich they rely in support of their case and the documents which adversely
affect their own case, adversely affect another’s party’s case or support
another party’s case;provide each other with the names of all witnesses whose evidence is to berelied on at the hearing;exchange copies of written witness statements setting out the substance of theevidence such witnesses will give which is signed and accompanied by astatement of truth;
comply with any of the other matters set out in the standard order for
directions attached at Schedule 3.

2.3.11The Enforcement Tribunal may hold further preliminary hearings at its discretion forthe purpose of monitoring and giving further directions regarding the conduct of theenforcement proceedings and also for the purpose of determining applications madeto it by the defendant or the Council.

Change of plea
2.3.12The defendant may admit a charge that he has denied in the defence at any time prior
to the conclusion of the hearing of the charges. Where the defendant admits a charge
on a different basis from that alleged in the Notice the Representative of the Council
shall indicate whether he wishes the Enforcement Tribunal to determine the charge
as alleged in the Notice.

2.3.13

Where the defendant admits a charge and that admission is accepted by the
Representative of the Council and by the Enforcement Tribunal that charge shall bedeemed to be proved and, unless there are other charges to be determined, theEnforcement Tribunal shall issue a decision as to misconduct against the defendantin respect of that charge in accordance with paragraph 2.3.21.

Settlement before the Enforcement Tribunal
2.3.14The Representative of the Council and defendant may agree proposed terms for thesettlement of the enforcement proceedings at any time after the appointment of the
Enforcement Tribunal and before the commencement of the hearing of the charges.

2.3.15

Any agreement that the Representative of the Council and the defendant may reachregarding the proposed settlement of the enforcement proceedings shall be recordedin writing and shall –
(a)
(b)
(c)

(d)

2.3.16state the charge or charges admitted by the defendant;
state the facts agreed;state the sanction or sanctions which the parties agree that the Enforcement
Tribunal may impose on the defendant (including the terms of any notice of
censure); andcontain a draft order for costs which the parties agree that the Enforcement
Tribunal may make.

Where the terms of a proposed settlement of the enforcement proceedings have been
agreed in accordance with paragraph 2.3.15 above, the Representative of the Council
shall submit the terms of a proposed settlement to the Enforcement Tribunal that has
been appointed to determine the enforcement proceedings.

2.3.17

Where a proposed settlement is submitted to the Enforcement Tribunal underparagraph 2.3.16 above, it may approve, reject or suggest modifications to thesettlement proposals submitted. It may also require both parties to attend before it.

2.3.18

If the Enforcement Tribunal decides to approve any proposed settlement submitted
then it shall issue a decision as to misconduct, sanctions and costs which gives effectto the agreed settlement and it shall notify the parties accordingly. The decision of
the Enforcement Tribunal shall take effect immediately unless otherwise stated.

2.3.19If the Enforcement Tribunal rejects any proposed settlement submitted then it shallnotify the parties and the Enforcement Board accordingly. The Enforcement Board
shall appoint a new Enforcement Tribunal as soon as reasonably practicable for the
purpose of determining the enforcement proceedings except that –
(a)

(b)

(c)

Any admission made by the defendant (other than an admission made in thecourse of a proposed settlement) which was accepted by the previous
Enforcement Tribunal shall stand before the new Enforcement Tribunal unlessthe latter considers it to be unsound in law.
Any concession made by the Representative of the Council or the defendant(other than a concession made in the course of a proposed settlement) which
was accepted by the previous Enforcement Tribunal shall stand unless the new
Enforcement Tribunal allows it to be withdrawn or varied.
Each direction and ruling made by the previous Enforcement Tribunal shallstand unless and until it is revoked or varied by the new Enforcement
Tribunal subject to the proviso that the hearing of the charges shall be
adjourned pending further direction by the new Enforcement Tribunal.

Hearing of the charges
2.3.20The charge or charges shall be determined following an oral hearing before theEnforcement Tribunal, unless the Enforcement Tribunal has directed that, on therequest of all parties, that some or all of the charges may be determined on the basisof written submissions and documents. The hearing shall be in private unless thedefendant requests a public hearing. In such a case the Enforcement Tribunal may inits discretion direct that any part of the hearing shall take place in private if in its
opinion this is necessary in the interests of justice.

Decision of the Enforcement Tribunal as to misconduct
2.3.21The Enforcement Tribunal shall serve on the defendant and the Representative of theCouncil its decision as to misconduct as soon as reasonably practicable and ifpossible, no later than 1 month after the conclusion of the hearing. The decision of
the Enforcement Tribunal as to misconduct shall include –(a)(b)

the decision in relation to each charge; andits findings of fact and reasons.

Submissions as to sanctions and costs
2.3.22

Within 14 days of the service of the Enforcement Tribunal’s decision as to
misconduct the Representative of the Council and the defendant shall serve on the
Enforcement Tribunal and each other –
(a)

(b)
(c)

written submissions as to the sanction or sanctions to be imposed in relation toeach charge which has been admitted by or otherwise proved against thedefendant;
written submissions as to the order of costs that the Enforcement Tribunal
should make; andwritten notification of any request to make supplementary oral submissions to
the Enforcement Tribunal as to sanctions and costs.

2.3.23

Within 7 days of the date of service of any submissions under paragraph 2.3.22(a)and (b) the parties may serve written submissions in reply on the Enforcement
Tribunal and each other.

2.3.24

Where the defendant or the Representative of the Council requests an opportunity tomake oral submissions as to sanctions and costs the Enforcement Tribunal shall holda hearing for this purpose.

Decision of the Enforcement Tribunal on sanctions and costs
2.3.25The Enforcement Tribunal shall serve on the defendant and the Representative of theCouncil its decision on sanctions and costs as soon as reasonably practicable, if
possible, within 1 month. The decision of the Enforcement Tribunal on sanctions
and costs shall include –
(a)
(b)
(c)

any sanction including any terms and conditions in connection with theimplementation of, or for the operation of, that sanction; andany order as to costs; andits reasons.

2.3.26

Unless it states otherwise and subject to paragraph 2.3.27, the decisions of the
Enforcement Tribunal on misconduct, sanctions and costs shall take effect 14 days
after the latest of –(a)(b)

2.3.27the date of service of the decisions of the Enforcement Tribunal; andthe date of the service on the defendant of a decision of the Appeal Tribunal
to refuse the defendant permission to appeal.

Where the defendant exercises any right of appeal or right to make a request to theCouncil under the Enforcement Byelaw the decision of the Enforcement Tribunal
shall not take effect before the determination of the defendant’s appeal or request to
the Council as the case may be.

Conclusion of enforcement proceedings
2.3.28

Enforcement proceedings shall not be treated as concluded until the decision of the
Enforcement Board or the Enforcement Tribunal takes effect.

2.4

Procedural and Evidential Matters
Power to determine procedure

2.4.1

Subject to these requirements, an Enforcement Committee shall have the power todetermine the conduct of enforcement proceedings as it considers appropriate.

Decision making basis
2.4.2

The decisions of an Enforcement Committee shall be by a majority.

Stay of proceedings
2.4.3

An Enforcement Tribunal may order that its determination of one or more issues
may be stayed until the determination of another issue and that the hearing of thecharges against one Defendant may be stayed until the determination of the charges
against another Defendant.

Failure to attend hearings
2.4.4

If a party to enforcement proceedings fails to attend any hearing or any part of ahearing before an Enforcement Committee it may proceed in his absence unless theEnforcement Committee is satisfied that that party has a reasonable excuse for his
absence.

Time Limits
2.4.5

An Enforcement Committee may, if it considers it appropriate, extend any period
within which a party is required by these requirements to do any act in connection
with the enforcement proceeding before it. If any period specified in theserequirements expires on a Saturday, Sunday, bank holiday, Christmas Day or Good
Friday, then that period shall be extended to the next day which is not such a day.
Any document that requires service must be served in accordance with Schedule 4 tothese requirements.

Amendments
2.4.6

An Enforcement Tribunal may permit a party to amend any Notice, defence to theenforcement proceedings (“defence”) or other written submission that has been
provided to or served on the Enforcement Tribunal on such terms as it thinks fit.

Provision of documents
2.4.7

An Enforcement Tribunal may require any party to the enforcement proceedings or
any person subject to the enforcement jurisdiction of the Society, whom it considers
may provide information or documents connection with any enforcement
proceedings, to make such documents or information available to it and to theparties in such manner as it considers appropriate.

Non-compliance
2.4.8

Where a party fails to comply with the Enforcement Byelaw or these requirements
or any direction or order of an Enforcement Tribunal, the Enforcement Tribunal may
take such action as it considers appropriate, including awarding costs against thatparty.

Evidence
Burden and standard of proof
2.4.9

The burden of proof in all contested enforcement proceedings shall be on theCouncil unless otherwise provided for in these requirements or in any of therequirements of the Council.

2.4.10The standard of proof applicable to enforcement proceedings is the standard
applicable to civil proceedings in England and Wales.

Admissions
2.4.11

Any fact or matter which is admitted by a defendant shall be treated as provenagainst him.

Admissibility of evidence
2.4.12

An Enforcement Committee shall not be bound by any enactment or rule of law
relating to the admissibility of evidence in proceedings before any Court of Law.
Without prejudice to the generality of the foregoing an Enforcement Committee may
admit in evidence –(a)(b)

the transcript of any evidence given by a defendant in any inquiry;
the written evidence of any person who is not called to give oral evidence at
the hearing of the charges provided that it is signed and accompanied by astatement of truth.

Findings of other courts and other bodies
2.4.13

The findings of fact of any court of competent jurisdiction or of any committee ortribunal of any statutory or professional body exercising a regulatory or enforcement
function, which have not been set aside on appeal or otherwise shall be prima facie
evidence of the facts so found and may be used as evidence in the substantive
hearing or in submissions as to sanctions and costs.

2.4.14

A criminal conviction of a defendant by any court of competent jurisdiction which
has not been set aside on appeal or otherwise shall be conclusive evidence of thecommission of the offence in question and may be used as evidence in thesubstantive hearing or in submissions as to sanctions and costs.

3.

APPEALS
Requirements made under paragraph 24 of the Enforcement Byelaw

3.1

Appeal Tribunal

3.1.1

All appeals shall be determined in accordance with these requirements by one
member of the Appeal Tribunal.
Composition

3.1.2

The Appeal Tribunal shall comprise a President and any other member of the Appeal
Tribunal as the Council may from time to time appoint.

3.1.3

Each member of the Appeal Tribunal shall be a qualified lawyer of at least ten years’
standing or a person who holds or has held high judicial office except that no person
shall be appointed to the Appeal Tribunal who is a –
(a)
(b)
(c)
(d)

3.1.4

person subject to the enforcement jurisdiction of the Society;member of the Council;
member of the Enforcement Board; ormember of a Enforcement Tribunal that has been involved in the matter
referred to the Appeal Tribunal.

Any person appointed to the Appeal Tribunal shall be appointed for a term of notless than 3 years and such appointment may be renewed by the Council from time totime. Where that person is engaged in the determination of an appeal which has notbeen concluded at the date that his appointment expires, he may continue to be amember of the Appeal Tribunal for purpose of determining that appeal.

Revocation and suspension of membership of an Appeal Tribunal
3.1.5

The Council shall revoke or suspend the appointment of any member of the Appeal
Tribunal at any time where the member of the Appeal Tribunal –(a)

has been convicted of a crime which, in the opinion of the Council, involves
discreditable conduct and such conviction has not to the Council’s knowledge
been set aside on appeal or otherwise;(b)

has been found liable in civil proceedings for gross negligence, dishonesty or
fraud;
has been declared insolvent or bankrupt or has entered into any arrangementwith creditors; or

(c)

(d)

is subject to an adverse finding in any proceedings brought by any regulatory
or professional body or where any such proceedings are pending.

Conflicts of interest
3.1.6

The Council shall revoke or suspend the appointment of any member of an Appeal
Tribunal where that member has a conflict of interest or is reasonably perceived tohave a conflict of interest.

3.2

Conduct of an Appeal
Commencement of an appeal

3.2.1

Where an appeal is brought by any person having a right of appeal under paragraphs
25, 29 and 30 of the Enforcement Byelaw (the “appellant”), the appeal shall beinstituted by the appellant serving on the Secretary to the Appeal Tribunal and theother party to the appeal proceedings (“the respondent”) a Notice of Appeal (a“Notice of Appeal”), which must be served –(a)in the case of an appeal from an Enforcement Tribunal within 14 days of thelatest of –
(i)
(ii)

(b)
(c)

the date of service on the appellant of the decision of the Enforcement
Tribunal appealed from; orif permission to appeal is required under paragraph 28 of the
Enforcement Byelaw, the date on which permission to appeal was
granted by the Appeal Tribunal;in the case of an appeal against an intervention order within 14 days of thedate of service of the intervention order;
in the case of an appeal under paragraph 23(c) of the Enforcement Byelaw
within 14 days of the decision of the Council appealed from.

Appointment of Appeal Tribunal
3.2.2

The Secretary to the Appeal Tribunal shall notify the parties to the appeal
proceedings of the member of the Appeal Tribunal who shall hear and determine theappeal as soon as reasonably practicable after receipt of the Notice of Appeal.

Objections to appointment
3.2.3

The parties to the appeal proceedings may object to the appointment of any memberof the Appeal Tribunal on any reasonable ground including where the party has
grounds to believe that the member appointed has a conflict of interest.

3.2.4

An objection to the appointment of the member of the Appeal Tribunal shall bemade in writing setting out the reasons for the objection to the relevant appointment
and shall be served by the party on the Secretary to the Appeal Tribunal as soon asreasonably practicable (and shall be copied to the other party to the appeal
proceedings).

3.2.5

Where the Appeal Tribunal upholds the party’s objection, it shall retire that memberof the Appeal Tribunal and appoint another person in its place, and the parties shallbe notified accordingly.

Applications for permission to appeal
3.2.6

An application to the Appeal Tribunal for permission to appeal under paragraph 28of the Enforcement Byelaw shall be made within 14 days of the date of service on
the appellant of the decision of the Enforcement Tribunal.

3.2.7

An application for permission to appeal shall be made in writing and shall set out thereasons why permission should be granted. The application shall be served on the
Representative of the Council and the Secretary to the Appeal Tribunal and shall beaccompanied by a copy of the decision of the Enforcement Tribunal, and if
applicable, the Enforcement Tribunal’s written reasons for its decision.

3.2.8

Within 14 days of the date of service of an application, the Council may serve
written submissions in reply on the appellant and the Appeal Tribunal.

3.2.9

The Appeal Tribunal may decide an application on the basis of the applicant’s
written submissions or may hold a hearing for this purpose as it considers
appropriate.

3.2.10At any time after service of an application for permission to appeal, the Appeal
Tribunal may, upon the application of any party, stay the implementation of thedecision of the Enforcement Tribunal, either in whole or in part.

Statement of grounds of appeal
3.2.11

Within 14 days of service of a Notice of Appeal or such further period as the Appeal
Tribunal may permit, the appellant shall serve on the respondent and the Secretary
to the Appeal Tribunal, a written statement which shall –
(a)
(b)
(c)

3.2.12state the grounds of appeal;state any facts or matters relied on; andbe accompanied by copies of any documents referred to in the written
statement.

Within 14 days of service by the appellant of the written statement referred to inparagraph 3.2.11 above, the respondent may serve on the appellant and the Appeal
Tribunal a reply.

Stay of decision being appealed against
3.2.13

At any time after service of a Notice of Appeal against an intervention order or froma decision of the Council, the Appeal Tribunal may, upon the application of any
party to such appeal, stay the implementation of the decision appealed against, either
in whole or in part.

Oral hearings
3.2.14

There shall be an oral hearing before the Appeal Tribunal unless the Appeal
Tribunal has directed that, on the request of all parties, the appeal may be
determined on the basis of written submissions and documents.

3.2.15The hearing shall be in private unless the appellant or the other party (other thanwhere the appellant is the Council under paragraph 26(a) and (b) of the Enforcement
Byelaw) requests a public hearing. In such a case the Appeal Tribunal may in its
discretion direct that any part of the hearing shall take place in private if in its
opinion this is necessary in the interests of justice.

Decision of the Appeal Tribunal
3.2.16The Appeal Tribunal shall serve on the parties to the appeal proceedings its decisionand reasons as soon as reasonably practicable. The decision shall take effectimmediately.

3.2.17

If the Appeal Tribunal has exercised its power under paragraph 3.3.11 of theserequirements to preserve the confidentiality of information, the written statement of
its decision and reasons shall disclose the fact that it has done so but need give nofurther particulars.

3.3

Procedural and Evidential Matters
Power to determine procedure

3.3.1

Subject to these requirements, the Appeal Tribunal shall have power to determine
the conduct of appeals as it considers appropriate

Joinder and Severance
3.3.2

The Appeal Tribunal may direct that appeals by two or more appellants shall beheard separately, or at the same time, or that a hearing of a particular issue be stayed
until the determination of another issue.

Default
3.3.3

If a party fails to attend any hearing before the Appeal Tribunal and the Appeal
Tribunal is not satisfied that he has a reasonable excuse for his absence, it may
proceed in his absence. The Appeal Tribunal may, in the event of the failure of theparty to comply with any direction of the Appeal Tribunal, take any action it
considers appropriate, including making an order as to costs against that party.

Time
3.3.4

An Appeal Tribunal may, if it considers it appropriate, extend any period within
which an appellant is required by these requirements to do any act in connection
with the appeal relating to the enforcement proceedings. If any period specified inthese requirements expires on a Saturday, Sunday, bank holiday, Christmas Day orGood Friday, it will be extended to the next day which is not such a day. Any
document that requires service must be served in accordance with Schedule 4 tothese requirements.

Amendments
3.3.5

The Appeal Tribunal may permit the amendment of any document served by theparties on such terms as it thinks fit.

Provision of documents
3.3.6

The Appeal Tribunal may require any party to the appeal or any other person subject
to the enforcement jurisdiction of the Society whom it considers should provide any
information or documents in connection with the appeal, to make such informationor documents available to it and to the parties in such manner as it considers
appropriate.

Appointment of legal representatives
3.3.7

The Council shall appoint a Representative of the Council to conduct the appeal
proceedings on its behalf. The Secretary to the Appeal Tribunal (and the otherparty) shall be informed of the name of the Representative of the Council and of any
subsequent change in that appointment

3.3.8

Each party to the appeal proceedings may instruct a qualified lawyer to represent
them. Where a party instructs a qualified lawyer he shall notify the Secretary to the
Appeal Tribunal (and the other party) of the name of the lawyer concerned in writing
as soon as reasonably practicable and in any event not less than 14 days before thecommencement of the substantive hearing before the Appeal Tribunal.

Preliminary hearings
3.3.9

The Appeal Tribunal may hold preliminary hearings for the purpose of –(a)(b)

giving any directions which it considers appropriate for the conduct of theappeal; ordetermining applications made to it by the parties to the appeal proceedings.

Admissibility of evidence
3.3.10The Appeal Tribunal shall not be bound by any enactment or rule of law relating to
the admissibility of evidence in proceedings before any Court of Law.

3.3.11When hearing an appeal brought under paragraph 23(b) or (c) of the Enforcement
Byelaw, the Appeal Tribunal shall be entitled to consider information or documents
which were before the body being appealed against without revealing either the
information or documents or their source.

Findings of other courts and other bodies
3.3.12

The findings of fact of any court of competent jurisdiction or of any committee ortribunal of any statutory or professional body exercising a regulatory or enforcement
function, which have not been set aside on appeal or otherwise shall, be prima facie
evidence of the facts so found and may be used as evidence in the appeal hearing
relating to the enforcement proceedings or in submissions as to sanctions and costs.

3.3.13A criminal conviction of a defendant by any court of competent jurisdiction which
has not been set aside on appeal or otherwise shall be conclusive evidence of thecommission of the offence in question and may be used as evidence in the appeal
hearing relating to the enforcement proceedings or in submissions as to sanctions
and costs.

4.

COUNCIL STAGE
Requirements made under paragraph 36 of the Enforcement Byelaw

4.1

All proceedings relating to enforcement proceedings before the Council shall be
determined in accordance with these requirements.

Application to the Council
4.2

An application to the Council under the Enforcement Byelaw to consider a sanction
imposed on a person (“applicant’’) in enforcement proceedings shall be made to theSecretary of the Council by the latest of –
(a)
(b)

4.3

the expiry of the time permitted for serving a Notice of Appeal on the
Appeal Tribunal; or
14 days of the decision of the Appeal Tribunal on an appeal.

The application shall made be in writing and –
(a)
(b)

(c)

identify the enforcement proceedings and the sanction concerned;
be accompanied by a copy of the decision imposing the sanction, any
written reasons given for that decision and, where applicable, any decision of
the Appeal Tribunal; andset out the applicant’s written representations regarding the sanction.

Special meeting
4.4

The Chairman or a Deputy Chairman of Lloyd’s shall convene a special meeting of
the Council to consider the sanction and shall give the applicant at least 14 days’
written notice of the special meeting.

4.5

The applicant may appear at the special meeting either in person or by a qualified
lawyer instructed by him and may make oral representations regarding the sanction
imposed. If the applicant wishes to make oral representations, he shall inform theCouncil in writing of this and of the name of any representative at least 3 days
before the hearing.

4.6

If the applicant appears at the special meeting, the Council may invite theRepresentative of the Council to attend either in person or by a qualified lawyer
instructed by him and to take such part in the meeting as the Council considers
appropriate.

Decision of the Council
4.7

The Council may, having considered the sanction imposed and any representations –
(a)
(b)
(c)

4.8

confirm, modify or grant dispensation in respect of the sanction;
give any directions necessary for the enforcement of any sanction which has
been confirmed or modified by the Council; andgive such directions as it considers fit regarding publication of its decision.

The Council shall notify the applicant of its decision as soon as reasonably
practicable in writing and the Council’s decision shall take effect immediately.

4A

ADMINISTRATIVE FINES
Requirements made under paragraph 36B of the Enforcement Byelaw

4A.1

Administrative fine for failure to comply with the requirements of paragraph 2.4F orparagraph 2.5C of the Membership & Underwriting Conditions and Requirements
Acts or omissions for which the Council may impose a fine pursuant to paragraph 36B

4A.1.1 These requirements apply to any failure by a member of the Society to comply withthe requirements of paragraph 2.4F or paragraph 2.5C of the Membership &Underwriting Conditions and Requirements (“MU&Rs”).
4A.1.2 Other than where a member has ceased to underwrite prior to the year of account inquestion, an administrative fine may be imposed on a member that does not holdmember’s assets in an amount equal to or higher than their Adjusted ECA at theAnnual CIL Date (pursuant to paragraph 2.4F of the M&URs) or that (except inquarter 4) has failed to provide additional funds when required to do so pursuant toparagraph 2.5C of the M&URs (or in each case by such other date as may beprescribed by the Council).
4A.1.3 In considering whether to impose an administrative fine pursuant to paragraph
4A.1.2, the Council shall have regard to all relevant factors including as to theimpact of any factors outside the member’s control, including any relevant delays on
the part of the Council.

Calculation of administrative fine
4A.1.4 An administrative fine to be imposed pursuant to paragraph 4A.1.2 above shall becalculated in accordance with the following formula:on a daily basis, an amount equal to the higher of:
(i)
(ii)

X multiplied by 0.18/365, and£500

where:
X = the shortfall in the amount of member’s assets provided, plus amounts
accrued to date

4A.1.5 The daily amount calculated in accordance with the formula in 4A.1.4 above shallaccrue between the following dates:(a)commencing on the first date upon which the member fails to comply with
relevant paragraph of the M&URs identified in 4A.1.1 in the relevant year ofaccount; and(b)ceasing upon the date upon which the member fully complies with the relevant
MU&Rs.

Procedure for imposition of administrative fine
4A.1.6 In order for an administrative fine to be imposed, a preliminary decision must firstbe taken by the Administrative Sanctions Panel.
4A.1.7 When the preliminary decision to impose an administrative fine is made, thatdecision must be notified to the member in writing as soon as reasonably practicalwith an explanation of the basis on which the Council intends to impose anadministrative fine in accordance with these requirements.
4A.1.8 When a member is notified of the preliminary decision to impose an administrative
fine, the member shall have 14 calendar days (or such longer time as the Council
may allow) in which to make any written representations as to why theadministrative fine should not be imposed and/or as to the amount of theadministrative fine.
4A.1.9 If no written representations are made within the time period stipulated in 4A.1.8
above, then the preliminary decision to impose the administrative fine shall stand as
the final decision of the Council.
4A.1.10 If written representations are made then those representations shall be considered by
the Administrative Sanctions Panel which shall decide whether to uphold, overturnor amend the preliminary decision.

Composition of the Administrative Sanctions Panel
4A.1.11 All decisions of the Administrative Sanctions Panel, must be taken by no less than
two members of the Administrative Sanctions Panel, which shall comprise:(a)the Chairman, the Chief Executive Officer, the Chief Financial Officer, theGeneral Counsel and the Company Secretary (howsoever described from time
to time); and(b)a person falling within section 7(1A) of the Lloyd’s Act 1982 provided that inmaking any decision, the quorum of the Administrative Sanctions Panel shall
include the person referred to at (b).

5.

INTERVENTION ORDERS
Requirements made under paragraph 39 of the Enforcement Byelaw
Power to make an intervention order

5.1

The Council may by the Market Supervision and Review Committee make an orderunder paragraph 37 of the Enforcement Byelaw restricting or suspending thepermission, consent, registration or right of any person subject to the enforcement
jurisdiction of the Society to transact, or be concerned or interested in the transactionof insurance business at Lloyd’s (an “intervention order”).

5.2

The Market Supervision and Review Committee shall only make an intervention
order where it considers that the making of such an order is required in order toprevent or reduce the risk of serious harm being caused to the interests of theSociety, members, underwriting agents or Lloyd’s policyholders.

5.3

The Market Supervision and Review Committee may make an intervention orderunder paragraph 5.1 above on such terms and conditions as it thinks fit.

Duration
5.4

An intervention order may be for a period not exceeding six months and the Market
Supervision and Review Committee may make one or more further intervention
orders to commence from the date of expiry of any previous intervention order.

Notice5.5

Save as provided in paragraph 5.9 below, the Market Supervision and Review
Committee shall serve on any person written notice where it is considering making
an intervention order.

5.6

Where notice is given, the notice shall –
(a)
(b)

5.7

state the terms and conditions; andstate the reasons why an intervention order is being considered.

Any person on whom that notice is served, may –(a)make written representations to the Market Supervision and Review
Committee regarding the proposed intervention order within 14 days; and

(b)

5.8

request an opportunity to make oral representations within such period as theMarket Supervision and Review Committee may determine.

The intervention order shall take effect at the end of the 14 day period unless written
representations are made to the Market Supervision and Review Committee underparagraph 5.7 above.

Without notice
5.9

Where the Market Supervision and Review Committee considers it appropriate to doso, it may make an intervention order without the notice specified underparagraph 5.5 above and the intervention order shall take effect immediately.

Notification of an Intervention Order
5.10

Where the Market Supervision and Review Committee makes an intervention order,
it shall notify the person on whom the intervention order is imposed as soon asreasonably practicable in writing of –
(a)
(b)

5.11

the terms and conditions of an intervention order; andthe reasons why the intervention order has been made.

Where notice has been given under paragraph 5.5 above and the Market Supervision
and Review Committee decides not to make an intervention order, it shall notify the
person concerned of its decision in writing as soon as reasonably practicable.

Application to Review
5.12

Any person on whom an intervention order has been imposed may at any time apply
in writing to the Market Supervision and Review Committee to have the intervention
order amended or set aside on the basis that there has been a material change in
relevant circumstances. An application shall –
(a)
(b)
(c)

identify the material change in circumstances;
contain written representations in support of the application;
request an opportunity to make oral representations within such period as theMarket Supervision and Review Committee may determine.

Inquiries
5.13

Where an inquiry is ordered under part D of the Enforcement Byelaw to inquire into
matters connected with the intervention order or the reasons for the intervention
order, then at the conclusion of the inquiry the Market Supervision and Review
Committee shall determine whether the intervention order is to be upheld, amended
or set aside in accordance with these requirements.

Enforcement Proceedings
5.14

Where enforcement proceedings are commenced under part F of the Enforcement
Byelaw in respect of a person on whom an intervention order has been imposed,
then the Market Supervision and Review Committee shall determine whether theintervention order shall expire on the conclusion of enforcement proceedings but
without prejudice to any sanction or costs order imposed in the enforcement
proceedings.

6.

PUBLICATION
Requirements made under paragraph 43 of the Enforcement Byelaw
Confidentiality

6.1

The Council shall not disclose the decision of an Enforcement Committee before thatdecision takes effect other than –
(a)
(b)
(c)

(d)
6.2

to the Secretary of State where such disclosure is made in the public interest;
to a police officer for the purpose of facilitating or supporting the institutionof criminal proceedings;
to any regulator or professional body for the purpose of assisting it todischarge its lawful functions, whether in facilitating or supporting theinstitution of proceedings or otherwise; orwhere enforcement proceedings are held in public.

The Council shall publish the decision of the Enforcement Board or an Enforcement
Tribunal if –
(a)
(b)
(c)

the decision incorporates a finding of misconduct;
the hearing of the charges was conducted in public; orthe defendant requests such publication,

on such terms as the Council sees fit unless in the opinion of the Council –
(i)
(ii)

the interests of justice do not require publication;
it is not in the interests of the Society, members, underwriting agents or
Lloyd’s policyholders for such action to be taken; or(iii) the enforcement proceedings concerned misconduct of an administrative
nature.
6.3

The Council may direct a defendant to disclose to a third party or third parties
information about a decision as to misconduct made against him by the Enforcement
Board or an Enforcement Tribunal in such form and manner as the Council
considers appropriate.

Appeals
6.4

The Council shall publish a decision of the Appeal Tribunal if –
(a)
(b)
(c)

the hearing was held in public;
the appellant requests the Council to do so; orthe decision upholds the decision of the Enforcement Tribunal.

on such terms as the Council sees fit unless in the opinion of the Council –
(i)
(ii)

the interests of justice do not require publication; or
it is not in the interests of the Society, members, underwriting agents or
Lloyd’s policyholders for such action to be taken.

Intervention Orders
6.5

Where an intervention order is made, amended or set aside the Council shall publishthat matter on such terms as the Council sees fit.

7.

MISCELLANEOUS MATTERS
Human Rights Act 1998

7.1

The Enforcement Board, each Enforcement Tribunal and the Appeal Tribunal may
adapt or waive any of these requirements to the extent necessary to give effect to the
Human Rights Act 1998 in any enforcement proceedings where in the reasonable
opinion of the Enforcement Board, each Enforcement Tribunal and the Appeal
Tribunal that Act is considered to apply to it.

Schedule 1
Enforcement Proceedings
Flowchart of key stages and timetable, please refer to the Enforcement Byelaw and requirements fordetailed information relating to each step. This flow chart is for information only and does not form partof these requirements.
Notice served

Serve defence or agree
settlement
28 DaysNo defence served – Noticeadmitted

Defence served

Agreed Settlement

Enforcement Tribunal issues
decision in default of defence

Appointment of Enforcement
Tribunal

Enforcement Board accept
settlement. No defence needs
to be served.

Defendant may apply to set
aside and seek permission toserve defence

Preliminary Hearing by
Enforcement Tribunal anddirections

If Defendant’s application
successful he may serve
defence

Disclosure of documents

7 DaysIf Defendant not successful,
Enforcement Tribunal willconsider sanctions and costs
7 DaysEnforcement Tribunal
decision as to misconduct or
notification of refusal to set
aside decision

Exchange of Evidence:
Factual and/or expert

Enforcement
Board rejectsettlement

Conclusion of
enforcement
proceedings &publication

Preparation of trial bundles
and core bundle (if required)

Skeleton Opening Statements

Substantive Hearing before
Enforcement Tribunal

Enforcement Tribunal issues
its decision on sanctions andcosts
14 Days

Enforcement Tribunal issues
its decision on misconduct
7 DaysParties serve on Enforcement
Tribunal written submissions
on sanctions and costs

Defendant may request written
reasons for decision
14 Days

Decision of Enforcement
Tribunal takes
effect/publication

7 DaysParties serve written
submissions in reply
14 DaysConclusion of enforcement
proceedings

Schedule 2
Appeals(against decision of an Enforcement Tribunal)

Flowchart of key stages and timetable, please refer to the Enforcement Byelaw and requirements fordetailed information relating to each step. This flow chart is for information only and does not form partof these requirements

Decision of Enforcement
Tribunal

Reasons of the Enforcement
Tribunal

Application for leave to appeal
needed?

No
Yes

14 Days

Notice of Appeal
14 DaysStatement of Grounds ofAppeal14 Days

Reply

Appeal Hearing (unlessotherwise agree)

Decision of the Appeal
Tribunal

14 Days

Decision to grant leave
14 Days

Refusal to grant leave.
Appeal concluded

Schedule 3
Note – The following draft order for directions may be varied, amended or adapted by the Enforcement
Tribunal as it considers appropriate in the circumstances of the enforcement proceedings.

Before the Lloyd’s Enforcement Tribunal

Case No. [LDB/ ]In the matter of:
The Council of Lloyd’s-v[Defendant]__________________________________________________DRAFT ORDER FOR DIRECTIONSGIVEN BY THE ENFORCEMENT TRIBUNAL
AT A PRELIMINARY HEARING
ON [DATE] AT [TIME] A.M.
__________________________________________________
Amended Notice1.

The Council shall serve the proposed amended Notice of Formal Enforcement
Proceedings no later than [].
Reply

2.

The Council may serve any reply to the Defence or Amended Defence no later than [ ].
Disclosure

3.

The Council and the Defendant shall serve on each other no later than [ ] a list of thefollowing documents –a)b)Documents on which each party relies;
Documents of which either party is aware which –i)ii)

Adversely affect each party’s own case; orSupport the other party’s case.

The list must identify the documents in a convenient order and manner and as concisely as
possible. It must indicate –a)b)those documents in respect of which the party claims a right or duty to withhold inspection;andthose documents which are no longer in the party’s control and what has happened tothose documents.

The list must include a disclosure statement containing the information set out in PracticeDirection 31, paragraph 4.1 to 4.6 of Part 31 of the Civil Procedure Rules.
The duty of disclosure continues until the enforcement proceedings are concluded. If
documents to which that duty extends comes to a party’s notice at any time during theproceedings, he must immediately notify every other party.
4.

All documents listed as being disclosable must be made available for inspection and copying nolater than [ ]. The reasonable costs of copying documents shall be incurred by the party
requiring the documents to be copied.
Core Bundle

5.

The Council shall serve on the Defendant and the Secretary of the Enforcement Tribunal achronological paginated bundle of documents, agreed as far as possible with the Defendant
comprising those documents to which the Council and the Defendant intend to refer whenpresenting their respective cases at the substantive hearing no later than [ ].
Factual and Expert Evidence

6.

The Council and the Defendant shall provide each other with the names of all witnesses(including expert witnesses) they intend to call at the hearing and shall exchange copies ofwritten witness statements (including expert reports) setting out the substance of the evidence
such witnesses shall give, signed by the witness and verified by a statement of truth no later than[ ]. All witness statements referring to documents shall refer to the pagination of those
documents in the chronologically paginated bundle served by the Council under direction 5
above. Copies of all such witness statements shall also be served on the Secretary to the
Enforcement Tribunal at the same time.

7.

All witness statements to stand as evidence in chief of the witness concerned unless otherwiseordered by the Enforcement Tribunal save where a witness touches on issues of good faith orhonesty the witness shall give that part of his evidence in chief in full and not merely to attest to
those matters.

8.

The Council and the Defendant shall notify each other and the Secretary to the Enforcement
Tribunal of the identity of those witnesses required to attend the hearing for the purposes ofcross-examination no later than [ ].
Skeleton Opening Statements

9.

The Council shall serve on the Defendant and the Secretary to the Enforcement Tribunal a
written skeleton opening statement by [ ]. The Defendant shall serve on the Council and theSecretary to the Enforcement Tribunal a written skeleton opening statement by [ ].
Substantive Hearing

10.

The hearing of the proceedings and any preliminary hearings will be held in [private or public,
either totally or in part].

11.

The hearing of the proceedings will be transcribed and will commence on [ ] at 10.30 a.m. at[location]. The hearing is presently estimated to last no more than [ ] days but if any party should
consider this estimate to require revision it shall give notice in writing of this and of the reasons
as soon as possible to the other party and to the Secretary of the Enforcement Tribunal. The
Enforcement Tribunal will sit between 10.30 a.m. – 4.00 p.m. each day (or as may be required).

12.

The Council and the Defendant shall have the right to apply to the Chairman of the Enforcement
Tribunal for further directions or a variation of any of the above directions.

…………………………………….
[Name] QC
ChairmanFurther Directions referred above may include –
(a)
(b)
(c)
(d)

A direction that the enforcement proceedings or any part of them should be determinedsolely on the basis of written submissions and supporting documents.
A direction for the service of written submissions on a point of law and supporting
documents.
A direction requiring the parties to exchange on the same day or different days copies ofall documents to be referred to at the hearing of the charges.
A direction requiring the parties to exchange on the same day or different days copies ofall documents in their possession, power or custody which to a material extent adversely
affect their own case or support the other party’s case as disclosed in their respective
written statements.

Schedule 4
Service of documents
1.

Any document that requires to be served in accordance with these requirements shallbe served effectively by –
(a)
(b)
(c)
(d)
(e)
(f)

2.

The proper address is –
(a)
(b)
(c)
(d)
(e)
(f)

3.

post to the proper address;
fax;
any other electronic means where the receiving party has consented to service by thatmeans;
leaving the document at the proper address;
personal service; orany alternative means permitted by any of the requirements of the Council forthe service of legal process on a person.

in the case of an individual, his business address or his usual or last known homeaddress;in the case of a partnership, its principal or its last known place of business;in the case of a body corporate, its registered office or principal office in the United
Kingdom;in the case of the Council, the business address of the Representative of the Council;
in the case of the Enforcement Board or the Enforcement Tribunal, the Secretary of the
Enforcement Committees; andin the case of any party’s qualified lawyer, the business address of that qualified lawyer.

The effective time of service of a document that is served in accordance with theserequirements shall be deemed to be –
(a)
(b)

(c)

(d)
(e)

in the case of a document that is posted, 48 hours after the time of posting;in the case of a document that is sent by fax before 1630 hours on a business day, thedate of confirmation of transmission provided that a copy of the faxed document is posted
or delivered to the person to be served at his proper address;in the case of a document that is sent by fax on a non-business day or after 1630 hours on
a business day, the next day following the date of confirmation of transmission provided
that a copy of the faxed document is posted or delivered to the person to be served at his
proper address;in the case of a document that is sent by email or other electronic transmission before
1630 hours on a business day, on that day;in the case of a document that is sent by email or other electronic transmission on a nonbusiness day or after 1630 hours on a business day, on the next business day after the
day on which it was sent; and(f)in the case of a document that is left at the proper address of the person to beserved, the date on which the document was left at such address.

Schedule 5
Principles of Enforcement Action
1. Enforcement proceedings may be brought in respect of conduct that may be regarded as: (i)discreditable; (ii) detrimental to the interests of the Society, members, underwriting agents or
Lloyd’s policyholders or others doing business at Lloyd’s; (iii) a breach of: the Lloyd’s Acts or
Byelaws; (iv) a requirement of the Council; or (v) a direction or order of the Enforcement Board,an Enforcement Tribunal or the Appeal Tribunal.
2. Lloyd’s enforcement jurisdiction includes members, managing agents, members’ agents andtheir directors, partners and workers with the following sanctions being available: permanent or
temporary ban from the Lloyd’s market; public censure; and/or a fine. The FCA and the PRA
also have enforcement powers in respect of those that operate in the Lloyd’s market. The FCA
and the PRA will use their enforcement powers in some cases according to the FCA’s policy
set out in their Decision Procedure and Penalties manual(http://fshandbook.info/FS/html/FCA/DEPP) and in the Enforcement Guide(http://fshandbook.info/FS/html/FCA/EG) and in the PRA’s approach to enforcement: statutory
statements of policy and procedure(http://www.bankofengland.co.uk/pra/Pages/supervision/regulatoryaction/enforcement.aspx).
3. Lloyd’s has entered into co-operation arrangements with FCA(http://www.fca.org.uk/static/documents/fca-lloyd-agreement.pdf) in order to ensure that, where
FCA and Lloyd’s are responsible for regulation, an effective working relationship is maintained.
These arrangements, inter alia, provide for: the sharing of information; the avoidance of
unnecessary duplication; and the factors for deciding when Lloyd’s or FCA would bringenforcement action.
4. The Market Supervision and Review Committee (“MSARC”) is the committee responsible forthe investigation and enforcement of disciplinary matters by Lloyd’s in the Lloyd’s market. In
determining whether the facts and matters in any particular case should be the subject ofproceedings, MSARC will have regard to all relevant matters including any previous guidance
given by the Lloyd’s Appeal or Disciplinary Tribunal, for example as to the meaning of
misconduct.
5. The principles set out below, whilst not a comprehensive list of the circumstances in which
Lloyd’s might take enforcement action, describe types of conduct that are likely to result in suchaction. Previous Lloyd’s disciplinary cases (cited by reference to their Lloyd’s Case numbers)
are also mentioned 1, providing examples of each of these types of conduct. It should be notedthat the cases are for illustrative purposes only and a decision to take enforcement action inany particular circumstances will take into account all the relevant facts.

1

The descriptions of cases below are not intended to be a substitute for the full facts and matters as provided in the relevantcase bulletins or tribunal decisions.

Principle 1

Any act of dishonesty.

It has been made clear in a number of previous Appeal Tribunal and Disciplinary Tribunal cases thatdishonesty has no place in the Lloyd’s market. For example, the President of the Appeal Tribunal
has stated – “the message must go out again from the Lloyd’s Appeal Tribunal that dishonesty will
never be tolerated in the Lloyd’s market” (Case no. LDB/9712/38).
Principle 2

The misappropriation, or causing or permitting the misappropriation, ofmoney or other property (especially for direct or indirect personal gain).

This principle is demonstrated in the cases below:•

In Cases no. LDB/9702/2 MLP and LDB/9902/06, two underwriters who had
misappropriated stolen cars recovered by their syndicates were banned from the Lloyd’s
market.

•Disciplinary cases of discreditable conduct against Brokers often involved themisappropriation of funds for indirect personal gain. For instance, in Case no.
LDB/9708/18, premiums were retained for reinsurances that had not been placed with
underwriters. The Broker was banned from Lloyd’s.

•

An example of direct gain in a Broker case is provided by Case no. LDB/9810/17. The
Broker was found guilty of discreditable conduct and banned from Lloyd’s formisappropriating funds in an Insurance Broking Account.

•

In Case no. LEB/0909/1 allegations that a Lloyd’s underwriter had misappropriated money
belonging to the syndicate’s capital provider and its service company (by describing
payments as “director’s loans” but which had not been authorised) and had diverted
substantial sums due under a reinsurance recovery due to the syndicate from a third party,
for personal gain, were grounds for charges of discreditable conduct. (The case wasstayed due to the death of the defendant prior to the hearing).

•

In Case no. LEB/0905 an underwriter and assistant underwriter took confidential
underwriting documents from their previous to their new employers. Both admitted
discreditable conduct and were suspended from transacting insurance business at Lloyd’s
for 6 and 3 months respectively.

Principle 3

The creation or use, or causing or permitting the creation or use, offalse or misleading documents or other information.

This principle is demonstrated in the cases below:•

In Case no. LDB/9401/4, an active underwriter was found guilty of discreditable conduct,
publicly censured and fined, for providing misleading documents to syndicate auditors andapproving misleading syndicate accounts.

•

The use of false or misleading cover notes/slips/debit or credit notes etc for indirect gain
was a common theme in many discreditable conduct Broker cases. For example in Caseno. LDB/9708/18, a Broker who issued false cover notes, was banned from the Lloyd’s
market.

•Principle 4

In Case no.6256 a former finance director of a Managing Agent with responsibility for thesyndicate’s year end process including signing the Data Accuracy Statement required forthe purposes of the Statement of Actuarial Opinion failed to take reasonable steps toensure that an adequate standard of documentation was maintained in respect of certainof the syndicate’s reserving processes and as a result failed to put himself into a position
to be able to ensure that accurate and complete information had been provided to thesyndicate’s external actuaries. He was publicly censured for misconduct and provided anundertaking not to apply for a position as a director of a Lloyd’s firm for three years.
Breach or causing or permitting a breach of a person’s fiduciary or agency
obligations related to the conduct of business in the Lloyd’s market (forexample, by making or permitting the making of a secret profit or failing toaccount for monies).

This principle is demonstrated in the cases below:•

In Case no. LDB/0511/01, an active underwriter was found guilty of discreditable conduct
in that he accepted personal inducements which he failed to disclose to his employer. He
was banned from the Lloyd’s market.

•

In Case no. LDB/0105/03, a deputy active underwriter failed to disclose relevant interests,
in this case in a coverholder, and to account for secret profits. As a result he was banned
from the Lloyd’s market.

•

The making of a secret profit was commonly the basis for disciplinary action against
Brokers. In Case no. LDB/9705/13, the Chairman of a Lloyd’s Broker, admitted
discreditable conduct, being his knowledge that a secret profit had been taken and he wasbanned from the Lloyd’s market for 6 months.

Principle 5

Failure or causing or permitting a failure to deal openly and honestly with, orprovide clear and accurate information to, members, policyholders,counterparties or other relevant parties.

This principle is demonstrated in the cases below:•

In Cases no LDB/0805A and LDB/0805B there was a failure by the directors of aManaging Agent to provide external parties i.e. capital providers with necessary
information. They were banned from the Lloyd’s market and subject to a fine and censure.

•

In Case no. LDB/0112/09, a Managing Agent failed to disclose relevant information tomembers about imminent transactions of potential financial consequence and admitted
discreditable conduct. A fine and censure were imposed.

•

In Case no. LDB/9705/11, a Managing Agent admitted misconduct for failing to inform
members of an increase in syndicate stamp. The Managing Agent was publicly censured.

•

In Case no. LDB/9712/40, a Managing Agent failed to produce the required information inits syndicate accounts and was found guilty of breaches of the Syndicate Accounting
Byelaw. It was banned from acting as a Managing Agent.

Principle 6

Any act or omission, or the causing or permitting of any act or omission,
capable of damaging Lloyd’s brand, licences or the Central Fund or otherwise
likely to bring Lloyd’s or the Lloyd’s market into disrepute.

This principle is demonstrated by the following:•

In Case no. LDB/0310/05, the director of a Managing Agent was fined for agreeing to pay
to a Lloyd’s Broker a sum in excess of that which might otherwise have been paid by wayof brokerage in order to secure the employment of one of the Broker’s employees. The
director’s conduct was considered to present “a risk of harm to Lloyd’s policyholders, theSociety its members or others doing business at Lloyd’s”.

•

The Co-operation Arrangements between FCA and Lloyd’s dated June 2013 provide thatthe factors which would tend towards a disciplinary case being conducted by Lloyd’s,
rather than FCA, include cases where the conduct in question poses significant risks to
Lloyd’s reputation, licences and the Central Fund.

Principle 7

Failure or causing or permitting a failure to manage or safeguard properly,honestly or prudently monies or other assets held on behalf of policyholders or
members in accordance with the terms of any applicable trust or agreement.

This principle is demonstrated in the cases below:•

In Cases no LDB/0805A and LDB/0805B, although not the subject of the settled cases, theLloyd’s notices of censure explained that the proper safeguarding of PTF assets was offundamental importance “and that the use of PTF assets for the purposes of funding
capital raising is an improper use of such assets”.

•

The misuse of accounts was commonly the basis for disciplinary action against Brokers.
For example in Case no. LDB 9711/37/B, the Managing Director of a Broker dishonestly
misused funds held in an Insurance Broking Asset account as an incentive to obtainbusiness and was banned from the Lloyd’s market for one year.

Principle 8

Failure or causing or permitting a failure to deal with Lloyd’s in an open, honest
and transparent manner or to ensure that Lloyd’s is promptly informed of any
matter which it reasonably ought to know.

This principle is demonstrated in the case below:•

In Case no. LDB/0112/09, a Managing Agent failed to disclose to Lloyd’s important
information about the prospective sale of the issued share capital of its parent company
and was publicly censured and fined.

Principle 9

Failure or causing or permitting a failure to organise and control the business ofan underwriting agent in a responsible manner or to maintain proper records
and systems for the conduct of its business and the management of risk.

This principle is demonstrated in the cases below:•

In Case no. LDB/0205/08, a Managing Agent was publicly censured and fined. The
Managing Agent admitted a number of failures to manage responsibly and control its
business, including: lack of proper records and systems in relation to its US credit life
business; inadequate controls over coverholders; inadequate systems for monitoring
premium receipts; inadequate checks as to business written by reference to its businessplan etc.

•

In Case no. LDB/0103/02, misconduct was admitted by the Managing Agent, which was
publicly censured and fined, for failing to prevent an unauthorised third party fromconducting Lloyd’s business as an unapproved coverholder.

•

In Case no. 6256 a Managing Agent and three of its former directors admitted misconductarising out of a failure to maintain sufficient systems and controls including themaintenance of an adequate standard of documentation in relation to certain of the
syndicate’s reserving processes. Each of the defendants was publicly censured with the
CEO and active underwriter each also undertaking not to apply for a position as a directorof a Lloyd’s firm for two years and the finance director undertaking not to apply for such a
position for three years.

Principle 10

Any act or omission or permitting any act or omission amounting to –a)b)

Principle 11

the harassment (whether sexual or otherwise) or bullying of anotherperson or persons; ordiscrimination against a person or persons on the grounds of race,
gender or sexual orientation.

Conducting Lloyd’s business or representing a Lloyd’s business when –a)b)under the influence of alcohol where it leads to unprofessional
behaviour; orunder the influence or in possession of illegal drugs.

Schedule 6Standing Instruction for settlement proposals submitted to the Enforcement Board underparagraph 2.2.13 of the Enforcement Requirements

1. The terms of any proposed settlement submitted to the Enforcement Board will be in writing
and be agreed by the Representative of the Council and the Defendant and shall include thosematters stated at paragraph 2.2.12 of the Enforcement Requirements –a. State the charge or charges admitted by the Defendant;b. State the facts agreed between the parties which relate to the charges being admitted;
c. State the sanctions which the parties agree that the Enforcement Board may impose
on the defendant (including the terms of any notice of censure); andd. Contain a draft order for costs which the parties agree that the Enforcement Board may
make.
2. In addition, other than (i)(ii)

cases of an “administrative nature”; or
where the facts and circumstances make it inappropriate or irrelevant,the Enforcement Board will expect the written settlement documentation to include sufficient
information regarding –a. any background information as may be relevant in order to ensure the admitted
misconduct is put into a proper and fair context;
b. which, if any, of the MSARC’s principles of enforcement (see Schedule 5 of the
Enforcement Requirements) apply;
c. whether the defendant has financially benefitted from the admitted misconduct (and if
so whether the defendant has, or has agreed to, repay or account for that benefit);
d. whether any members, policyholders or third parties have been adversely affected by
the misconduct (and if so whether any restitution has been made or offered);e. the defendant’s disciplinary history including in particular details of any similar
offences;
f. whether the defendant has co-operated during the inquiry and enforcement process;g. the approach that has been taken in assessing the costs figure and to what extent thedefendant has been given credit for settling the case;h. any other mitigating factors;
i. any other aggravating factors;
j. information regarding as to any criminal and/or civil and or other regulatory or
disciplinary proceedings arising out of the same facts;
and in the case of a defendant who is an individual k. the defendant’s employment history in the Lloyd’s market;
l. the impact of the settlement proposals on the defendant (taking into account where
possible the defendant’s career prospects);

and in the case of a defendant which is a firm m. whether the firm identified, reported and mitigated the admitted misconduct; andn. the impact of the settlement proposals on the defendant’s business.
3. In deciding whether to approve, reject or suggest modifications to the settlement proposals
submitted to it, the Enforcement Board will ordinarily require the parties (including their legal
representatives) to attend before it in order to seek from the parties additional information aboutor clarification of the proposed settlement. Where it does so it will, where possible, provide theparties advance notice of the matters to be covered at that hearing.

Schedule 7
MSARC framework for the imposition of sanctions
Introduction
1.

The Market Supervision and Review Committee (“MSARC”) is the Lloyd’s committee responsible
for bringing enforcement proceedings against those subject to Lloyd’s enforcement jurisdiction.
In Lloyd’s Market Bulletin Y4202 MSARC set its “Principles of enforcement” which indicate thetypes of conduct that are likely to result in MSARC bringing enforcement proceedings against afirm or individual2.

2.

Where MSARC decides to bring proceedings then, under the terms of the Enforcement Byelaw,
the parties to enforcement proceedings may agree settlement terms in order to resolve the casewithout the need for a contested hearing before an Enforcement Tribunal. The terms (ie thesanctions) to be offered to a defendant for settlement are determined by MSARC and will then be
negotiated by the Representative of the Council (on behalf of Lloyd’s) with the defendant.

3.

Any settlement agreed between the Council of Lloyd’s and a defendant is then subject to the
independent consideration of the Enforcement Board, which may confirm, reject or propose
modifications to the terms of a settlement.

4.

The purpose of this note is to set out MSARC’s approach in establishing the appropriate level ofsanctions when prosecuting enforcement cases. This framework will be used to –a.

establish the proposed sanctions to be offered for settlement purposes.

b. in the event that settlement cannot be reached, to inform Lloyd’s when making submissions
as to sanctions to the Enforcement Tribunal hearing the case.
This framework includes specific discounts for early settlement. The framework also refers to
Lloyd’s approach to costs recovery.
It should be stressed that it is for guidance only and in individual cases MSARC may consider it
appropriate to vary the application of this framework.
5.

2

MSARC’s policy regarding the imposition of fines on managing agents for late or incorrect
submission of prescribed returns is separately set out in Market Bulletin Y4527).

The current principles of enforcement are set out in Schedule 5, Chapter 5 of the Underwriting Requirements

The available sanctions
6.

Under the Enforcement Byelaw (at Part G), the sanctions that may be imposed on a defendant
include the following (although not all these sanctions will be available in respect of all
defendants) –a. the exclusion or suspension from membership of the Society;b. the revocation or suspension of a firm’s permission to act as an Underwriting Agent,Approved Run Off Company or Lloyd’s Broker;
c. the revocation or suspension of a person’s right to transact or be concerned or interested in
the transaction of insurance business at Lloyd’s;d.

the revocation or suspension of an individual’s permission to enter the Underwriting Room;e.

a fine;f.

a notice of censure;g. a declaration of an individual’s unfitness or unsuitability to act as a director, partner orcompliance officer;h.

an order of restitution.

7.

In practice, the sanctions that have in previous cases (and will therefore in future) be mostnormally considered as part of the settlement of enforcement proceedings are c, d, e, f, g and habove. Accordingly, this note primarily relates to the approach to be taken in deciding the level ofthe sanctions to be sought under those heads.

8.

It is likely that the application of this framework will lead in many cases to higher levels of fines orother sanctions than has previously been the case given that penalties will be based upon the
defendant’s “relevant income”. However, each case will need to be considered on its merits.

9.

In addition, Lloyd’s will continue to seek reimbursement of its internal and external costs fromdefendants in respect of investigating and prosecuting enforcement proceedings3. This will apply
in both contested cases and in cases that are settled.

10.

In preparing this framework regard has been had to the “step approach” adopted by both the
Financial Conduct Authority as set out in its Handbook (at DEPP) and the Prudential Regulatory
Authority (in the Prudential Regulatory Authority’s Approach to enforcement - statutory statementof policies and procedures).

3

See part K of the Enforcement Byelaw

Overriding principles
11.

In assessing the sanctions, MSARC has agreed that the following overriding principles will apply
in all cases –a.

sanctions should promote high standards of regulatory and/or market conduct;b.

sanctions should promote confidence with members (capital providers) and policyholders;c. sanctions should have a suitable deterrent effect (both on the specific firm/individual and onothers in the market generally);d.

sanctions should be fair, proportionate and should reflect the individual facts of a case;e. sanctions should take into account the previous conduct of the defendant and, in the case of
an individual, should take into account their seniority or experience;
f. sanctions should ensure that policyholders, members and those that work in the market, areprotected from firms or individuals who may cause them loss or detriment. The market generally
needs to be protected from those that may damage its reputation. Accordingly Lloyd’s seessuspension in appropriate circumstances as a primary enforcement tool;
12.

Whilst account will be taken of any relevant previous Enforcement Tribunal decisions theseshould not be regarded as constituting binding precedents and the application of this framework
may result in higher sanctions being sought. Account may also be taken of developments infinancial services regulatory practice generally and specifically in applying this framework Lloyd’s
may take account of the rules and guidance contained in DEPP/the PRA’s statutory statements.

13.

As is described in more detail below, MSARC’s approach, when considering the applicablesanctions will be to seek a public censure and also to consider whether an order of restitution
should be made. MSARC will then determine which (if any) further sanctions should apply and inparticular whether suspensions or fines should be sought.

Public Censure
14.

4

MSARC will seek a public censure in all cases of misconduct4 . This is critical to ensure that themarket is made aware of conduct that Lloyd’s believes to be unacceptable and as a deterrent
against further similar misconduct. The censure notice will aim to set out a clear summary of thefacts and matters relating to the wrongdoing, the standards breached, the charges admitted andthe sanctions imposed. Lloyd’s recognises that censures will have a serious effect upon adefendant especially given that censures in respect of the most serious misconduct may remainon Lloyd’s website indefinitely (for instance where the sanctions include an indefinite ban fromthe market).

Other than in the very limited circumstances set out in the Enforcement Requirements

Restitution (“Disgorgement”)
15.

Where the misconduct has led to the defendant accruing a specific profit and/or having caused aloss to an innocent third party then MSARC will always consider whether an order for restitution
is appropriate and can be properly made. The financial position of the defendant will not
ordinarily of itself be a reason not to make an order for restitution that would otherwise be made.

Suspension and fines
16.

After public censure, suspension and/or fines are likely to be the most usual sanctions sought.

17.

In the context of Lloyd’s enforcement proceedings, the sanction of revocation or suspension of aperson’s right to transact business in the Lloyd’s market is considered to be the primary
enforcement sanction for the more serious forms of misconduct5. This is because exclusion orsuspension from the market helps protect the market from the activities of the defendant. In thecase of a time-limited suspension, the period of suspension will allow the defendant an
opportunity to consider their misconduct, undergo any necessary remedial training and takesteps to demonstrate that they have adequately rehabilitated themselves.

18.

In other cases a fine will be considered an appropriate sanction without a suspension also being
imposed. In suitable cases both a suspension and a fine will be considered appropriate.

19.

In determining the level of suspension or fines to be offered for settlement purposes MSARC will
adopt the following 5 step approach –Step 1: Consider the seriousness of the breach to set the applicable range of sanctions

20.

MSARC will first have regard to the seriousness of the alleged misconduct in assessing therange of the period of suspension (or whether a permanent suspension is appropriate) and also
the starting level of a fine.
Sanctions against firms

21.

In assessing the level of fine for a firm, MSARC will establish a fine based on the seriousness of
the alleged misconduct. Where appropriate, in proceedings against a Lloyd’s managing agent,
MSARC may determine a fine as a percentage of the firm’s “relevant revenue.” Relevant revenuemeans the amount of premium income generated by the managing agent from a particular
product line, class or business area for the relevant underwriting year(s) of account during which
the misconduct occurred6. However, MSARC recognises that there may be cases wherepremium income is not an appropriate indicator of the harm or potential harm that a firm's
misconduct may cause, and in those cases MSARC may use an appropriate alternative(such as the loss caused by the misconduct).

5

The sanction referred to at paragraph 6(c) above. In such cases Lloyd’s would also seek a sanction to prevent the individual

having access to Lloyd’s premises (ie the sanction referred to at paragraph 6(d) above)
6

Regard may be had to the percentages of “relevant revenue” see DEPP6.5A.2

22.

In the most serious cases MSARC would consider whether the firm’s approval as a managing or
members’ agent should be suspended or revoked7.
Sanctions against Individuals

23.

In assessing the length of suspension for an individual, MSARC will have regard to theseriousness of the alleged misconduct in accordance with the table below.

24.

In assessing the level of fine for an individual MSARC will deal with the assessment of the fine inaccordance with the table below. This calculates the fine based on a percentage of theindividual’s “relevant income” depending on the seriousness of the alleged misconduct.
(“Relevant income” is the gross amount of all benefits received by the individual from theemployment or role in connection with which the misconduct occurred during the year or years
in respect of which the misconduct occurred8. Relevant income shall include salary, bonus,
pension contributions and any share options relating to such employment or role.)

Level of misconduct(including
indicators)
1. Discreditableconduct (involving
dishonesty or lack ofgood faith)
2. Discreditableconduct (involving
reckless misconduct)

Period of suspension
from transacting
Lloyd’s business andfrom the RoomTotal and permanentsuspension

Starting level forbenchmark of fine (%of “relevant income”)

Public Censure?

40%

Yes

Five years – permanent 30%
suspension

Yes

3a. Discreditable
3a. Two – five years
conduct involving
suspension“gross” or very serious
negligence
3b. Detrimental
conduct (at the higher
level of this charge)

20 %

Yes

3b. Zero – two years
suspension
and/or a declaration of
an individual’s
unfitness or
unsuitability to act as adirector, partner orcompliance officer of a
Lloyd’s firm (either
indefinitely or for a set
period)7

Enforcement proceedings may also be brought against a Lloyd’s broker and the only sanction would be to revoke its

registration as a Lloyd’s broker
8

In the case of a “one-off” act of misconduct the relevant income shall be for a period of 12 months

4. Detrimental
conduct or otherbreach of Lloyd’s
requirements (not at
the higher level of thischarge)Zero – 1 year

10%

Yes

5. Detrimental
No suspension
conduct or otherbreach of Lloyd’s
requirements (where
misconduct committed
inadvertently and no
actual harm caused)

0%

Yes

25.

In the past Lloyd’s has been prepared to accept public “undertakings” from individuals in lieu ofthe formal suspension sanctions imposed under the Enforcement Byelaw. Lloyd’s will notgenerally agree to such undertakings as part of a settlement other than in exception cases.
Suitable undertakings may in appropriate cases form part of a settlement with a firm.
Undertakings will not be accepted in lieu of a fine.
Step 2: Mitigating and aggravating factors

26.

MSARC will then consider any relevant mitigating and aggravating factors that are relevant inorder to establish whether to adjust the level of sanctions from step 1.

27.

Factors to take into account at this step may include –a. whether there was any direct or indirect benefit to the defendant arising from the misconduct;b. whether the defendant cooperated during the investigation by Lloyd’s;
c. whether the defendant identified and reported the misconduct and took timely steps tomitigate its effect;
d. whether the misconduct took place over a prolonged period, involved repeated activities of
misconduct or was a “one-off” isolated act;
e. whether the defendant was a director or held any other senior position or position of trust in
the relevant firm;
f. whether the defendant’s actions involved or implicated other individuals especially morejunior individuals (whether knowingly or not) in the commission of the misconduct;
g. whether the defendant’s actions harmed or risked harming policyholders, members or others
doing business at Lloyd’s;
h. whether the action involved a breach of, or having caused or permitted a breach of, any
applicable fiduciary duty;

i. whether the defendant has any previous regulatory or disciplinary convictions or relevant
criminal convictions;j. whether Lloyd’s has previously issued guidance or previous cases regarding the conduct inquestion;k. whether the defendant’s actions harmed or risked harming the reputation, licences or brandof Lloyd’s;
l. whether the misconduct harmed or risked harming the Lloyd’s Central Fund;m. the defendant’s personal financial position (although this will not ordinarily be taken into
account when considering an order of restitution).
28.

MSARC will accordingly make any adjustments to the sanctions that were assessed under
Step 1.
Step 3: Adjustment for deterrence29.

If MSARC considers the sanctions arrived at after Steps 1 and 2 are insufficient to act as acredible deterrent either against the defendant who committed the misconduct or others fromcommitting other further or similar acts of misconduct, then MSARC may increase the length ofsuspension or the level of the fine.
Step 4: Consider whether both a suspension and a fine are appropriate

30.

MSARC will in accordance with Steps 1 to 3 assess the applicable level of suspension andamount of any fine. MSARC will then consider whether it is appropriate to impose both asuspension and a fine. In doing so MSARC will decide whether the combined effect of both asuspension and a fine is likely to be disproportionate, in view of the nature of the misconduct.

31.

In the event that MSARC considers that the overall impact of the sanctions would be
disproportionate, it will decide whether the suspension and/or fine should be reduced or should
not apply.
Step 5: Settlement discount

32.

MSARC will consider what, if any, settlement discount should be offered to the defendant for
settling at an early stage (in particular before any defence to the charges has been served).

33.

In circumstances where the appropriate sanction includes a permanent suspension from themarket, then no discount on that suspension will be offered (although any additional fine may bediscounted).

34.

In any other cases a reduction in the length of suspension or a reduction in the fine of up to 30
per cent may be agreed. In the event that a case settles after a defence has been served thenthe maximum discount available would be 10 per cent.

Costs35.

In addition to the sanctions that will be sought in a settlement, Lloyd’s will also seek an order forcosts.

36.

Under the Enforcement Byelaw, costs may be sought against any person who was the subject of
an inquiry. Costs may also be sought in respect of the Council’s costs incurred in theinvestigation, preparation and presentation of an enforcement case. (In the event that a case iscontested an order for costs may also include the costs of the Tribunal).937.

MSARC is of the view that it is inappropriate for the Society to bear the costs associated withinvestigating and bringing proceedings against a defendant. Accordingly, Lloyd’s will always
seek, as part of any settlement an order for costs to recover the full amount properly andreasonably attributable to the specific defendant. This will include in-house costs, external legal
costs and other reasonable disbursements.

38.

Clearly early settlement will reduce the level of costs sought. Lloyd’s may take into accountevidence of hardship in determining the level of costs sought but for the avoidance of doubt
Lloyd’s will not reduce the level of costs as a consequence of the of level of the fine.

Review of this policy
39.

MSARC will keep this policy under review and may amend or replace this policy from time totime.

May 2014

9

Enforcement Byelaw, paragraphs 40 and 41

Schedule 8

Consolidated fining policy for Lloyd’s returns
This Consolidated Fining Policy applies to the Lloyd’s Returns listed in the Appendix attached to thisdocument. The list of Lloyd’s Returns to which this Consolidated Fining Regime applies may beamended by MSARC from time to time.
It is a requirement of the Council of Lloyd’s that Lloyd’s Returns are correctly completed and submitted
on time.
Failure to submit a Lloyd’s Return on time is a breach of the relevant Lloyd’s Byelaw and may therefore
result in a fine being imposed.
MSARC wishes to set out its policy for imposing fines in such cases:
1.

Where a Managing Agent has reason to believe that it may be unable to submit a Lloyd’s
Return on time it must contact the relevant Lloyd’s individual at the earliest opportunity inadvance of the deadline to discuss the matter. Failure to do so will be a factor Lloyd’s will take
into account in deciding whether a fine is appropriate.

2.

MSARC may in its discretion impose a fine in respect of Lloyd’s Returns which are submitted
by the deadline but are either inaccurate or incomplete. In deciding whether to exercise that
discretion MSARC will have regard to whether the Managing Agent itself identified theinaccuracy and brought the matter to Lloyd’s attention at the earliest opportunity.

3.

Where MSARC is satisfied that a fine is appropriate then the following fining regime will be
implemented in respect of the late, inaccurate or incomplete submission of a Lloyd’s Returnother than where MSARC is satisfied that an alternative fine is appropriate:
Per Lloyd’s Return per syndicate – flat fine £20,000
Per Lloyd’s Return per syndicate – additional fine per working day late £1,000

4.

Before imposing a fine, Lloyd’s may first issue a Managing Agent with a warning letter and, in
this regard, Lloyd’s has issued guidance on the procedure it will follow in Market Bulletin Y5265

Persistent delays will lead to further disciplinary action.
These levels of fines will be reviewed by MSARC from time to time.
This Consolidated Fining Policy has been agreed by the Market Supervision and Review Committee.

Appendix – Lloyd’s returns
This Appendix lists the Lloyd’s Returns to which the Consolidated Fining Policy for Lloyd’s Returns
applies:
Performance Management Data Return
Quarterly Monitoring Return - Part A
Quarterly Monitoring Return - Part B
Realistic Disaster scenario
Realistic Disaster scenario - light
Syndicate Reinsurance Structure
Syndicate Business Forecast
Syndicate Information Statement
UK TaxLloyd’s Capital Return
Gross Quarterly Return
Technical Provisions Data
Quarterly Solvency Return (QSR)
Quarterly Asset Data Return (QAD)
Annual Solvency Return – Part A (ASR)
Annual Solvency Return – Part B (ASB)
Annual Asset Data Return – (AAD)

Schedule 9
Lloyd’s overseas returns fining policy
This Policy applies to the regulatory returns and compliance reports listed in the Appendix attached tothis document (“Returns”). The list of Returns to which this Policy applies may be amended by MSARC
from time to time.
It is a requirement of the Council of Lloyd’s under this Policy that Returns, whether required to be filedwith Lloyd’s or an overseas regulator, are correctly completed and submitted on time.
Whilst Returns may be submitted by Service Companies, Coverholders or other entities in respect ofbusiness in overseas countries or territories (“Intermediary”), this requirement of Council applies to theManaging Agent who is ultimately responsible in respect of the business to which the Return relates.
Failure to submit a Return on time is a breach of this Policy and may therefore result in a fine being
imposed.
Lloyd’s may also recoup any fine imposed on it by an overseas regulator as a result of the latesubmission of a Return.
Restitution of fines imposed by an overseas regulator on Lloyd’s
Lloyd’s will require a Managing Agent in accordance with paragraph 5 of the Overseas Underwriting
Byelaw to pay to Lloyd’s directly or reimburse Lloyd’s in respect of fines which may be imposed upon
Lloyd’s by an overseas regulator as a result of a failure to meet the deadlines for submission of the
Returns.
Lloyd’s own fines
In addition to the recouping of any fine imposed by the overseas regulator, MSARC wishes to set out its
policy for imposing Lloyd’s own fines on a Managing Agent in such cases:
1.

Where the Intermediary or Managing Agent has reason to believe that it may be unable tosubmit a Return on time it must contact the relevant Lloyd’s individual at the earliest opportunity
in advance of the deadline to discuss the matter. Failure to do so will be a factor Lloyd’s willtake into account in deciding whether a fine is appropriate.

2.

MSARC may in its discretion impose a fine in respect of Returns which are submitted by thedeadline but are either inaccurate or incomplete. In deciding whether to exercise that discretion
MSARC will have regard to whether the Intermediary or Managing Agent itself identified theinaccuracy and brought the matter to Lloyd’s attention at the earliest opportunity.

3.

Where MSARC is satisfied that a fine is appropriate then the following fining regime will be
implemented in respect of the late, inaccurate or incomplete submission of a Return other thanwhere MSARC is satisfied that an alternative fine is appropriate:
Per Return per syndicate – flat fine £20,000
Per Return per syndicate – additional fine per working day late £1,000

4.

Before imposing a fine, Lloyd’s may first issue a Managing Agent with a warning letter and, in
this regard, Lloyd’s has issued guidance on the procedure it will follow in Market Bulletin Y5265

Persistent delays will lead to further disciplinary action.
These levels of fines will be reviewed by MSARC from time to time.
This Policy has been agreed by the Market Supervision and Review Committee.

Appendix – Lloyd’s Overseas Returns fining policy
This Appendix lists the regulatory returns and compliance reports to which the Overseas Returns Fining
Policy applies:
Singapore Regulatory Returns as prescribed under the Insurance (Lloyd’s Asia Scheme)
Regulations
Hong Kong Risk Return
Hong Kong Claim Return
Australian Reinsurance Pool Corporation (ARPC) Quarterly Return
Australian Reinsurance Pool Corporation (ARPC) Annual Return
Annual and Quarterly Non-XIS Returns
US Trading Quarterly and Annual Regulatory Returns
Listing of Lloyd’s Syndicates as Eligible Surplus Lines Insurers in the United States Annual Return
US Terrorism Risk Insurance Act of 2002 (“TRIA”), as amended ("TRIPRA 2015") - TRIA Reporting
NAIC’s International Insurers Department “IID” Annual Filing
Canadian Trading Quarterly and Annual Regulatory Returns
Canadian Provincial Returns
Annual Motor Insurers’ Bureau of Ireland Audit
Quarterly Danish Guarantee Fund
India - IRDAI - Annual Reinsurance Registration
China Reinsurance Registration - Quarterly Return
India Regulatory Returns as prescribed by IRDAI Regulations
Lloyd’s India Compliance Report