28May

Changes to the Gambling Commission’s Regulatory Panel

28th May 2020 Bahar Alaeddini 355

On 18 May 2020, the Gambling Commission announced planned changes to its Regulatory Panels. In its introduction it explained:

“Due to changes in the gambling market and gambling regulation, the cases that are heard by Regulatory Panels are becoming increasingly complex and legalistic. consulting on a number of proposals to ensure that Regulatory Panels are best equipped to deal with…evolving casework.”

Proposed changes

The Gambling Commission proposes:

To employ four to six adjudicators, who are legally qualified, solely for the purposes of sitting on Regulatory Panels. The “presumption” is that they will provide legal advice to the Regulatory Panel, although the Gambling Commission will retain the option for a legal adviser to attend. This legal advice would be shared as part of the Regulatory Panel process, in the same way as at present.
Reconstitute the Regulatory Panel quorum as follows: (a) operating licences: one Commissioner and one Adjudicator; and (b) personal licences: one Adjudicator.
To use a Regulatory Panel “occasionally”, if asked by Gambling Commission staff to provide “steers” on regulatory settlement proposals (delegation of approval will remain with Executive Directors) and financial penalties.

These changes are believed to provide a “cost-effective” way of conducting hearings, with the Gambling Commission claiming the following advantages:

they provide “a broader range of combined experience and ensure such skills do not atrophy by being regularly utilised”;
Regulatory Panel members will have greater availability to hear cases;
shorter waiting times for hearings;
other regulators adopt similar models; and
cost savings “meaning that costs awarded against the losing party will be lower overall”.

The consultation provides basic details of costs (approximately £1,000 per day per Adjudicator) and potential savings. However, the likely calibre and experience of an Adjudicator is unclear.

“Increasingly complex and legalistic”

The consultation provides no evidence to demonstrate that “the cases that are heard by Regulatory Panels are becoming increasingly complex and legalistic”. Other than published decisions, and procedural rules, no information is publicly available on the work of the Regulatory Panel, including the number of cases heard or matters referred, the number of hearings and the waiting times.

In our experience and in general, it is a misconception to say cases have become “increasingly complex and legalistic”. Any case that reaches the Regulatory Panel will be substantial and complex, and often, legalistic. Revocation, suspension and a hefty fine are on the table, so what is wrong with that?

There is no denying that the firm’s work has become more complex, but this boils down to a noticeably changed approach to gambling regulation in Great Britain, influenced by various factors. Factors include a new Chief Executive, high turnover of Gambling Commission staff, not providing reasonable periods of time to licensees (but giving itself months on end) and – regrettably – procedural issues and failings by the Gambling Commission, which jeopardise the right to a fair and proper hearing.

Erosion of independence

Regulatory Panels provide an important opportunity for applicants and licensees to attend an oral hearing to challenge decisions made by Gambling Commission staff.

The independence of employed Adjudicators, recruited and appraised by the Gambling Commission, is questionable, encroaching on its supposed “values” (as set out in its Corporate Strategy 2018-2021) to be:

fair
accountable
professional; and
consistent.

The very purpose of the Regulatory Panel is to give the applicant/licensee the opportunity to challenge a “minded to” decision reached by Gambling Commission staff. This is a critical control and protection, which is being weakened – by the Gambling Commission – in this consultation. The Regulatory Panel is the only quasi-independent option available to an applicant/licensee. Although it is still the Gambling Commission making the decision it is invaluable and must be protected.

The consultation does not include an adjudication governance framework, which could go some way in addressing independence concerns by ensuring decisions are fair, with clear separation of the Regulatory Panel from the Gambling Commission’s Licensing, Enforcement and Legal departments. It also does not specify which regulatory models and regulators were examined. As I mentioned in my earlier blog on 1 May 2020, many other regulators use registrant or industry panel members – not employees – who bring with them a wealth of knowledge and independence, assuming potential conflicts are managed.

By way of example, approximately half of the Financial Conduct Authority’s Regulatory Decisions Committee’s 18 members come from finance or financial services backgrounds. The other half have esteemed legal, governance, policy or academic backgrounds. Independence is further emphasised by the FCA handbook stipulation that:

none of the members are employees; and
the committee has its own legal advisers and support staff.

Independence is likely to be further eroded by changes to quorum. Presently, a Regulatory Panel must be made up of at least two Commissioners, although normally it will comprise three Commissioners. Under the proposed arrangements there will, at most, be one Commissioner, with no Commissioners sitting on hearings relating to personal licences. The latter will be considered by a single Adjudicator, who will receive one day of training annually, presumably from the Gambling Commission. It is unimaginable that the Gambling Commission would consider one day of training annually to be sufficient education for anyone working in the gambling industry!

Taking a cynical view, Adjudicators may be guided by the Gambling Commission’s recommendations, further eroding independence of the Regulatory Panel.

Unfairness

The loss is not simply one of independence. The proposed reduction to a maximum of one or two panel members is unjust. A Regulatory Panel of one Commissioner, as opposed to the standard three, particularly for operating licence hearings, will undoubtedly impact on the fairness of the hearing and regulatory decision. Surely, particularly in complex matters, there is a strong argument for retaining that number, not reducing to one Commissioner? What happens if a Regulatory Panel of two is spilt on the decision? Who has the binding vote? Is it the Adjudicator because they will “ordinarily” provide the legal advice to the Regulatory Panel? Presently, one Commissioner presides over the proceedings, but all three have equal decision-making powers.

How will the Adjudicator manage the role of legal adviser to the Regulatory Panel whilst also being a member? By way of comparison, the Solicitors Regulation Authority uses an Adjudication Panel; however, it has a minimum of two members and will normally comprise three, excluding the independent legal adviser.

“Me, myself and I”

A Regulatory Panel of one member is not a panel. The Cambridge Dictionary defines a panel to mean “a small group of people chosen to give advice, make a decision or publicly discuss their opinions”. It is therefore misleading to suggest a single Adjudicator considering personal licence hearings would establish a Regulatory Panel.

In such hearings there may be an argument that a decision made by a new-style Regulatory Panel fails to be “independent and impartial”, in accordance with the Human Rights Act 1998.

The future

Disappointingly, the consultation, which closes on 26 June 2020, signals another marked change in regulation. If introduced, there will be an unescapable loss of diversity, given the Commissioners’ varied backgrounds, and the principles of fairness and natural justice will be compromised.

Ultimately, the Regulatory Panel should be about making good decisions in the public interest, following a fair process. A new or modernised process should not be pursued at the expense of the quality and fairness of the outcome. Poor quality decisions that are not robust or consistent will result in more cases being appealed.

It seems to us that the Regulatory Panel has been functioning well providing independence, fairness and much needed separation from the executive arm of the Gambling Commission, which is embroiled in the day to day business of the investigatory and review work and, quite understandably, can lack perspective. A legitimate failing is the length of time taken to constitute Regulatory Panels, but surely there are better ways to address this, for example, with more Commissioners? Instead, the cynic might be tempted to conclude that the Gambling Commission does not like the decisions the Regulatory Panel is reaching.

In conclusion, the proposed changes do not offer a practical vision for adjudication that is consistent with good regulatory and legal practice. There is nothing to suggest that fairness has been a consideration. The only consideration appears to be about saving cost, time for the Gambling Commission and Commissioners, and speeding up the process. In doing so, the duty to act fairly has been sacrificed.

01May

New Gambling Commission Commissioners

1st May 2020 Bahar Alaeddini 329

The Gambling Commission recently announced the appointment of four new Commissioners with immediate effect. Terry Babbs, Brian Bannister, Jo Hill and Sir Martin Narey were appointed as Commissioners for five years from 30 April 2020. There are now 11 Commissioners, including the Chair, Bill Moyes. Together, they form the Gambling Commission’s Board of Commissioners (the “Board”).

The Gambling Commission describes the Board as follows:

“They provide experience and knowledge from a wide range of sectors and industries. It is responsible for ensuring that we fulfil our statutory objectives. The Board sets the overall strategic direction, including helping to put consumers at the heart of what we do. The Board’s work helps us to ensure the licensing objectives are met.”

Given their strategic importance to the Gambling Commission’s work and their licensing, regulatory and enforcement functions, it is worth taking a closer look at each Commissioner’s background, the Board and Regulatory Panel.

Commissioners

Basic biographies for each Commissioner are available on the Gambling Commission’s website. It is interesting to note the strong focus on consumers, mental health and the vulnerable. This could be coincidental; however, it seems most unlikely. The Cabinet Office public appointment advertisement sought three (not four) candidates, including “a candidate with experience in consumer protection, communications and/or public affairs and regulation.” The additional criteria for Commissioners required experience of at least one of the following:

expertise in organisational HR strategy and policy, including senior executive remuneration;
expertise in consumer protection;
expertise in communications and public affairs;
experience of working within a legal or regulatory framework; or
the procurement of major publicly funded projects and the subsequent management of such projects.

The composition of the Board does not seem particularly balanced when the Gambling Commission is responsible for the regulation of commercial gambling in Great Britain. What about requiring candidates, or at least one, to have “lived experience” of gambling or technology? My former employer, the Health & Care Professions Council, has registrant and lay Council members, which would be much fairer. The Financial Conduct Authority’s Board is largely made up of members with financial services backgrounds and the Advertising Standards Authority’s Panel members come from marketing and commercial backgrounds.

Brief overview of each Commissioner’s background:

Terry Babbs has held executive roles in the private and public sectors, including at Tesco. He is also the Senior Independent Director at the General Dental Council.
John Baillie is a Chartered Accountant and former Partner of KPMG. He was a member of Reporting Panel of the UK Competition and Markets Authority for nine years.
Brian Bannister is the Executive Director for Strategic Insight and Influence at the Law Society and previously held roles at PwC, including as UK Director of Public Affairs, responsible for Government, regulator and stakeholder relations.
Carol Brady MBE has held various roles in trading standards and is now Chair of the Claims Management Regulation Unit for the Ministry of Justice and Managing Director of her own consultancy business. She was awarded an MBE in June 2016 in recognition of her services to consumers and better regulation.
Stephen Cohen has over 37 years’ experience in asset management and recent experience as Chair of a fintech software business. He also sits on the Board of the Health & Care Professions Council (my former employer) and the JPMorgan Japan Investment Trust plc.
Jo Hill is currently Executive Director of Strategy and Risk at the Pensions Regulator. She has held various roles at the Financial Conduct Authority and is also a Trustee of the Money and Mental Health Policy Institute.
Dr Bill Moyes was appointed as Chair in September 2016. He is also Chair of the General Dental Council. He had a long career in the Civil Service and has held leadership roles in five national regulators.
Sir Martin Narey had a long career in the Civil Service, including as the Director General of the Prison Service and leading the Probation Service. He was Chief Executive of Barnardo’s until 2011, previously sat on the Council of the Advertising Standards Authority and is a Government adviser on children’s social care. He was knighted in 2013 in recognition of his services to vulnerable people.
Trevor Pearce CBE QPM spent 40 years in local policing and national agencies, including the National Crime Squad, Serious Organised Crime Agency and National Crime Agency.
Jonathan Scott retired as Senior Partner and Chair of the law firm, Herbert Smith Freehills, and continues as a Consultant to the firm. He is also a Non-Executive Director of the Competitions Markets Authority.
Catharine Seddon spent 20 years as a film maker and has held judicial roles, including as a Magistrate. She holds various roles, including on the Legal Services Board and at the Pensions Regulator, and sits on Mental Health Tribunals.

Board of Commissioners

Commissioners are appointed by the Secretary of State for Digital, Culture, Media and Sport. As set out in paragraph 2.7 of the Gambling Commission’s Corporate Governance Framework, they have individual responsibilities as members of a public body, including to act in good faith and in the best interests of the Gambling Commission.

Paragraph 2.6 provides:

“The Board of Commissioners has corporate responsibility for ensuring that the Commission fulfils the aim and objectives set out in legislation and complies with any statutory or administrative requirements for the use of public funds. Other important responsibilities of Commissioners are:

ensuring that high standards of corporate governance are observed at all times
establishing the overall strategic direction of the Commission within the relevant statute and the policy and resources framework agreed with the responsible Minister
ensuring that the Commission operates within the limits of its statutory authority and any delegated authority agreed with DCMS, and in accordance with any other conditions relating to the use of public funds
ensuring that, in reaching decisions, the Commission takes into account any guidance issued by DCMS
appointing, with the Secretary of State’s approval, a Chief Executive (including the terms and conditions of employment)
ensuring that a distinction is made and set down in writing between strategic planning and management, which are the responsibility of the Commission, and day-to-day management issues which have been delegated to the Chief Executive.”

Board meetings normally take place in Birmingham at the Gambling Commission, but may also take place elsewhere, if appropriate, and by telephone or video conference. There are six Board meetings scheduled in 2020. Board papers are supposedly available on the Gambling Commission’s website, although none appear to be available after June 2017!

Regulatory Panel

Pursuant to its delegated statutory powers (in paragraph 8 of Schedule 4 of the Gambling Act 2005), the Gambling Commission has a Committee of Commissioners, on which any Commissioner may sit, which is known as the Regulatory Panel.

The Regulatory Panel must be made up of at least two Commissioners, although normally it will comprise three Commissioners.

The Chair of the Gambling Commission (currently, Bill Moyes) will, if present, preside at all meetings of the Regulatory Panel. Otherwise, he may designate a Commissioner to chair.

Examples of cases considered by the Regulatory Panel:

Determination of operating or personal licence applications. This could be following a referral from the Gambling Commission or, in cases where a “minded to refuse” letter or “minded to grant with condition” letter has been sent, the applicant wishes for the case to be heard before a Regulatory Panel.
Determination of a change of corporate control application where the licensee has received a “minded to revoke” letter and wishes for the application to be determined by the Regulatory Panel.
Reviewing the Gambling Commission’s decision to suspend a licence, either at the outset or during a review.
Determination of an operating licence review following a “minded to” letter setting out the Gambling Commission’s preliminary conclusions. Personal licence reviews take place before a Director of the Gambling Commission.

Additionally, the Regulatory Panel may also determine a case in replacement of other persons with delegated powers, such as the Chief Executive or a Director. Full details of the Gambling Commission’s delegation of licensing and regulatory decisions can be read here.

Much of the Gambling Commission’s compliance and enforcement work is not considered by the Regulatory Panel because regulatory settlements are reached between the licensee and Gambling Commission. If regulatory settlements become less attractive – such as increasingly punitive penalty packages – the Commissioners and, their “knowledge and experience” may become much more relevant to gambling businesses and the work that we do.