The FSA says the framework links fines more closely to income and will take effect from March 6.
The framework sets out that fines will be based on up to 20 per cent of a firm’s revenue from the product or business area linked to the breach over the relevant period, up to 40 per cent of an individual’s salary and benefits including bonuses from their job relating to the breach and there will be a minimum fine of £100,000 for individuals involved in serious market abuse cases.
The FSA says its new policy is part of its principle of credible deterrence through imposing harder hitting penalties that reflect the scale of a firm’s wrongdoing.
The setting of financial penalties will be based on the following steps:
- Removing any profits made from the misconduct
- Setting a figure to reflect the seriousness of the breach
- Considering any aggravating and mitigating factors
- Achieving the appropriate deterrent effect
- Applying any settlement discount
FSA director of enforcement and financial crime Margaret Cole says: “Despite industry opposition we have decided to implement these proposals as we believe enforcement penalties are a powerful tool to help change behaviour in the industry.
“We imposed record fines in 2009, but this new approach further amplifies the deterrent effect of our penalties and sends a powerful message to firms which makes it clear that non-compliant behaviour will not be tolerated.”
Cole adds: “We have repeatedly seen breaches in particular areas where insufficient account has been taken of previous enforcement action. As well as delivering increased levels of fines, we believe that our new framework offers substantially more clarity and transparency around the penalty-setting process and will reap rewards in terms of an increase in compliant behaviour.”