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.”