The FSA is to make sure that firms which break the rules pay a price in terms of their reputation rather than by increasing the levels of fines.
Chairman Callum McCarthy, speaking at an international financial services conference in London last week, emphasised the significance of the damage to a firm's reputation which results from enforcement action, adding that fines can have a limited impact on companies with high turnovers.
The latest FSA annual report shows that fines by the regulator climbed to a record £12.4m in the last 12 months.
He said that fines will still have a significant enforcement role but that naming and shaming may play a bigger role. The regulator plans to be more selective in the number of cases where it resorts to a fine or takes other enforcement action.
McCarthy said this would ensure that enforcement policy was executed correctly and efficiently, with the FSA placing equal importance on knowing which cases should not be pursued as well as those which should.
He said: “What is of possibly greater importance is the public attention paid to an enforcement decision – the damage to reputation, brand and future business arising from high publicity cases, as well as the linked compensation when this arises.
“Enforcement is part of the FSA's toolkit, not the most important. We use it to support our general approach of promoting markets for financial services which are fair and efficient. Its purpose is forward-looking.”