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FCA: ‘Era of bumper fines is over’

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The FCA says it expects it to be harder to collect sizeable fines from financial services firms following the introduction of the senior managers regime.

Speaking at the Practising Law Institute’s annual regulation seminar in London yesterday, FCA director of enforcement and market oversight Mark Steward said the total level of fines has reduced since the “halcyon” days of larger fines in the past.

He said: “The FCA and its predecessor has imposed more than £3bn in financial penalties over the last five years:  most were imposed before 1 April 2016.

“As several news stories recently pointed out, since that date, the aggregate level of fines appears to have reduced markedly or, at least compared to the halcyon years prior to that date.”

Steward said these fines were brought about through firms agreeing early settlements, which he said is unlikely to continue under the senior managers regime.

The senior managers regime was introduced for banks in March, and requires firms to assess whether senior managers are fit and proper on at least an annual basis. It is expected to be rolled out to all regulated firms, including advisers, from next year.

Steward says: “A different dynamic has been created by the senior manager’s regime. First, we don’t expect senior managers to agree so readily to pay high fines to resolve cases. We expect there will be more contest and more litigation.

“Secondly, firms may well be reluctant to spend such high sums to resolve investigations where those resolutions do not also resolve cases against senior managers who may also be in our cross-hairs.

“And thirdly, there lurk latent tensions in the way in which firms may self-report misconduct or cooperate with the FCA where senior managers in the firm may also be or become subjects of investigation for the same matters.”

He said the size of the fines did not mean the FCA was less serious about enforcement, and said the important thing was how quick the regulator was at detecting misconduct.

He added: “What is important, in this context, is not the size of the outcome but the perception that detection and responsive action are both inevitable and speedy.

“And while there is an undoubted public interest in cases resolving themselves through agreement, I would like to make early detection rather than early settlement our primary virtue.

“This is not the soft option, by any means.”



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. What ?

    Is “Halcyon” really the most appropriate word he can come up with ?

    “denoting a period of time in the past that was idyllically happy and peaceful.”

    Or is he more fixed on TV he need to concentrate on his job, not “in words” at the time

  2. Well that’s the kiss of death, its a bit like, the days of boom and bust are over.

    As for reporting and identifying misconduct, lets hope the future responses are quicker and managed better then the past.

  3. £3b in 5 years. Wow. Enough to build around 20,000 affordable homes. How much of that benefits the victims of failed advice or misselling? Or reduces the FSCS burden on the non polluter advice firms? Or does it find its way into the hands of the regulator and the Treasury? But then again, when there are 225 employees of the FCA earning more than £100k and 26 earning more than £200k they can probably do with all the money they can muster.

    • In days gone by, the FCA was obliged to use fine money to offset the overall levy burden imposed on the rest of the FS community, which seemed both logical and fair. Then the Treasury decreed that it would confiscate the lot, ostensibly to support injured members of the armed forces, which is laudable enough. But, with the FCA having been given more or less free rein to impose fines of whatever size it fancied, the sums collected have been so huge that most of them have simply been used in the same way as any other additional tax revenues, mainly from the banks. The government, as is so often the case, told us one thing but, in practice, did another and the Treasury is now fumbling about trying to get the FCA to come up with ways in which the costs of advice can be brought down so as to make it [advice] more accessible to people or modest means.

      Unless and until the Treasury starts allowing the FCA to keep and use (at least the majority of) its fine income to offset its overall levy bill and unless and until the FCA enacts measures to reduce the volume of uninsured liabilities for bad advice falling onto the FSCS (starting with an admission that its own failures in this area are the root cause of this particular problem), the relentless increases in our FCA and FSCS levies simply aren’t going to stop. How can they?

      As I’ve posted elsewhere, Andrew Bailey may have been parachuted into the FCA (Tracey McDermott never really got a look in) as a new broom but, thus far, he’s seems to have done little more than sweep the FCA’s various piles of crap from one side of the room to the other in an attempt to disguise the fact that discussions surrounding proposals for product levies and getting providers to chip in to the FSCS aren’t really going anywhere. Product levies will need to be risk-graded (who will do that? Surely not the FCA?) whilst providers are highly likely to object to sharing the costs of funding a scheme designed to compensate investors for losses incurred as a result of bad advice.

      It’s a classic Grade A mess.

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