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FSA accused of ramping up fines

Compliance consultant Adam Samuel has accused the FSA of “over-fining” following analysis showing the Upper Tribunal significantly reduced or overruled at least seven enforcement cases since January 2010.

Speaking at the FSA’s enforcement conference in London this month, acting director of enforcement and financial crime Tracey McDermott claimed that since January 2010, the FSA has only lost one enforcement case that was referred to the Upper Tribunal.

However analysis of Tribunal decisions published since the start of 2010 shows there have been at least seven cases referred to the Tribunal where either the case was lost outright or bans or penalties were removed or reduced.

In one case, the FSA sought to fine Dresdner Kleinwort trader Jason Geddis £25,000 and ban him from the industry for engaging in market abuse. In August, the Tribunal ruled a censure was more appropriate than a fine or ban and that the FSA had “misjudged the facts of the case”.

In another case, the regulator proposed a fine of £100,000 against Graham Betton for his role in a share-ramping exercise devised by his employer SP Bell. In May 2011, the Tribunal ruled Betton took part in the scheme over fears he would lose his job rather than greed and reduced the fine to £25,000.

Compliance consultant Adam Samuel says: “The FSA has not only been over-fining but seems not to have a basis for fines it can defend at Tribunal.

“Judging fines is not an easy science, however, the string of cases in recent years in which the Tribunal has reduced fines would at least suggest the FSA ought to think internally about why this is happening.”

The FSA declined to comment.

finesgraph

 

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There are 7 comments at the moment, we would love to hear your opinion too.

  1. “Speaking at the FSA’s enforcement conference in London this month, acting director of enforcement and financial crime Tracey McDermott claimed that since January 2010, the FSA has only lost one enforcement case that was referred to the Upper Tribunal.

    However analysis of Tribunal decisions published since the start of 2010 shows there have been at least seven cases referred to the Tribunal where either the case was lost outright or bans or penalties were removed or reduced.”

    That would be clear, fair and not misleading then.

  2. Julian Stevens 20th July 2012 at 9:52 am

    On the one hand, Adam Samuel cites at least SEVEN fines imposed by the FSA that the Upper Tribunal has significantly reduced or overruled since January 2010 whilst, on the other, Tracey McDermott claims that in the same period the FSA has only lost one enforcement case referred to the Upper Tribunal.

    The table in the article shows six cases where the FSA’s proposed fine was significantly reduced and two that were thrown out altogether. On one of them, the FSA was deemed to have “misjudged the facts of the case”. That’s a rather large and odd disparity, is it not?

    So from where is Ms. McDermott getting her data? As usual, “The FSA ~ that self-proclaimed democratically accountable bastion of openness and transparency ~ declined to comment”. Says it all really, doesn’t it?

    Perhaps this is another instance ~ or rather another series of instances ~ where the FSA was “focussed on other things” and “in retrospect” may have got it wrong.

    Are any apologies from the FSA likely to be forthcoming? Any compensation for the victims of these unjustly harsh impositions and for the time and money expended in challenging them? Any statement of intent to try to do better on future cases? The FSA declined to comment.

  3. What strikes me is, in the FSA eyes you are GUILTY and dealt with, and fined it seams by just plucking a nice round figure out of the air, only if you fight to prove your innocent or contest the severity of the punishment by a third party do you stand any sort of justice.

    Personally I see no signs of this stopping weather its the FSA or soon to be FCA etc etc lets face it with Mr Ozzy Osbourne,s fingers in the pie they will need all the fines, levies, fees they can muster if they what to be blessed with having some nice bonuses to share around the board room.

  4. Aw come on chaps be reasonable.
    There are the bonuses to consider, the six figure salaries and not forgetting the Christmas parties, expensive hotels, taxi fares and first class travel. After all they have to find the money somewhere and poor old Tracy can’t even afford a hairdresser.

  5. Stop degrading Ozzy Osborne, he has no link with the other Osborne. I would Trust Ozzy more than him

  6. This shows the arrogance of the FSA, that they feel they can treat people in whatever manner they like & do whatever they like without ANY recourse. We all accept they have a job to do and like most advisers, I agree we need regulation, no doubt about it but the way in which it as carried out that is an absolute disgrace. The whole thing needs scrapped and started from scratch with competent people at every level with relevant qualifications for the role they are in along with CPD to ensure they keep up to date with those they regulate. If they cannot demonstrate a level of competence which is verified by an independent panel they must be retrained to an acceptable standard laid down by the industry. Then we will start to see a regulator who knows what they are doing and will actually help the industry prosper, not flounder as it is now and will in the future.

  7. As Marty (whoever he might be) suggests and as I have suggested before, the whole regulatory system needs to be taken apart a piece at a time and its many flaws scrutinsed carefully by an independent body before being put back together in a way that will ensure considerably more accountability and less scope to abuse the regulator’s powers.

    All this talk about “scrapping” the FSA and replacing it with the FCA and the PRA is nothing of the sort. All that’s happening, really, is that the FSA is being partitioned with no real attempt being made to put right all the things that are manifestly wrong with it.

    I haven’t seen a list of the proposed revisions to the FSMA that aim to produce an improved body of legislation but most of what seems to be going on is just tinkering at the edges rather than what’s really needed, namey a radical overhaul.

    Will there be a cap on what the FCA is permitted to spend on stationery (£1m last year)?

    Hospitality (£567,000 last year)?

    Bonuses (£20m+ as last reported)?

    Expenses (prescribed limits routinely breached)?

    Accommodation (as in the justification for housing 4,000 people in one of the most expensive office premises in the country)?

    The FSA’s overall operating budget (now £560m)?

    Adair Turner’s annual remuneration of £500,000 for being what appears to be primarily an apologist for the FSA’s endless succession of failures and oversights)?

    And what about all the phoney Cost:Benefit Analyses (for the RDR, originally £600m but now approaching £2Bn)?

    Or the FSA’s patently phoney “consultations” (when it deigns even to bother with them ~ none was undertaken prior to the launch of the MAS), the feedback on which is never published for all to see and to debate in open forum, despite the FSA’s claim to being an open and transparent regulator?

    The massive pay-offs for the likes of Clive Briault or the lavishly remunerated 6 months of “gardening leave” for the likes of Margaret Cole and Hector Sants?

    Who imposes on these activities any sort of restraint or requirement that they be properly justified?

    As was said of the PIA before it, the FSA is just an unbridled monster with complete freedom to ride roughshod over anyone or any body that dares to try to stand in its way. Hector Sants admitted as much when he appeared before the TSC in March 2011 and more of less told Andrew Tyrie: That’s what the FSMA allows us to do so, if you don’t like it, get the law changed ~ if you think you can.

    That cannot possibly be a remotely healthy state of affairs in what’s supposed to be a parliamentary democracy. Can it? Yes, the industry does need regulation, but not like this.

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