FSA fines could treble in size

The FSA has published a new framework for penalties under which fines could treble in size.

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:

  1. Removing any profits made from the misconduct
  2. Setting a figure to reflect the seriousness of the breach
  3. Considering any aggravating and mitigating factors
  4. Achieving the appropriate deterrent effect
  5. 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.”


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There are 41 comments at the moment, we would love to hear your opinion too.

  1. You might wish to consider sending this to all Directors!

  2. john shackleton 1st March 2010 at 11:57 am

    Good news – I assume therefore that the FSA will be fined £43 Million plus several indivdual fines of £100k for the total falings on regulating Keydata?

  3. A deliberate and life-endangering breach of health and safety legislation now seems to be a cheaper option than well-intentioned but poorly structured financial advice.

  4. They need to treble their fees in order to line their own pockets and be in a position to give even bigger bonuses to their staff next year. Surely there is nothing wrong in that!!!!!

  5. Good on you FSA! My question though, is how much is the FSA going to pay for years of neglecting their supervisory duties and leading us headlong into unsuitable lending and a credit crunch?
    Also, if they want to enforce the rules, then they need to make the handbook language much clearer – clear, fair & not misleading – at present it carries just too many contradictions and abiguity.

  6. Should be enough to cover Hector’s leaving bash then.

  7. The FSA live in a fantasy world where reality has no place. They wield a big stick and have not the slightest idea how hard this business is these days. Still it will bring money into their coffers as they have no need to worry about cashflow etc. just thinking up ideas of how to crack down on a once successful industry. God help us all

  8. Could someone tell me how to get out of this bloody madhouse?

  9. I trust this will extend to those banks and providers putting employed advisers under enormous pressure to ‘stack ’em high and sell ’em cheap’ with the financial products offered thus following the fact find to fit the product approach.

  10. Thats the way to do it, ignore your own failings and hit out at everyone else in frustration. The FSA continues to display a fundemental lack of understanding of these issues, unless of course this is targeting the banks, which I very much doubt as they have the financial clout to fight back. This is so funny it beggars belief. The lunatics are running the asylum.

  11. Government stops funding FSA. FSA increases fees and fines to brokders. Brokers cannot pay fees etc and go out of business. who funds it then?
    The sham that is the FSA needs root and branch reform now

  12. What with less and less IFAs remaining in this business post RDR, there need to find a way to increase their revenue.

  13. Isnit it interesting – all of the comments (including mine) have been posted anonymously. Doesn’t that tell you something about the mistrust we all have of this ogre of a regulator?

  14. Just wait until the FSA becomes the CPA under the tories. The thin end of the wedge for IFA’s will become very thick very quickly. The banksters wll win as usual.

  15. Moderator: would you please correct the typo on the first word of the comment I have sent: should of course be ‘Isn’t’.


  16. Seems like desperation to me as they can’t think of anything better to do (except of course doing what we pay them to do without hindsight).

    Time for a “Class Action” against the FSA if you ask me as they need to admit and pay for their mistakes before judging and sentencing the rest of us.

  17. More money for FSA – As well as increasing the fees by 33% they are trebbling the fines. what do they do with these fines anyway. there are alot less people for them to supervise yet they put up costs and fines? Wish we could work our business like that. 🙁

  18. Firstly it is strange that we have gone Anonymous. Is this because we are frightened of the repercussions of saying what we feel about the FSA. If this is the case Big brother has taken over. Secondly, I do not think that the new system has been set up other than to pay the massive costs of running the FSA. Apart from Governments/ Councils and Quangos I do not know of any other business that can increase its costs without losing business. Whilst they can keep doing this they will never budget properly and instead of assisting the industry to improve things will just look at how they can fine everybody to increase their income.

  19. The fines do not go to the FSA – they go into the general tax ‘pot’.

  20. Well they do have to pay for their expenses claims somehow!

    In a reply to me about FSA expenses, David Cameron said, “I believe that the FSA has become too far removed from the businesses it is supposed to regulate and this is one of the reasons a Conservative government would abolish it.”

    Almost persuades me to vote Conservative!

  21. More silliness from a regulator that seems to have lost the strategic plot and is focussing solely on balancing its books.

    Can the FSA point to any research that indicates the current level of fines are not sufficient deterrent? Or that increasing them would improve consumer protection? It strikes me the level of fine is largely immaterial, it is the chances of getting caught that will dictate whether a dishonest adviser embarks on a particular course. If they thought they would be caught they wouldn’t do it.

    Where I suspect the majority of us find ourselves is that we believe at the time we are giving the advice that it is honest, correct and reflects the client’s wishes and aspirations. It is iniquitous that several years down the line this same advice is being measured against entirely different criteria and deemed to be misselling.

    In the real world there is the concept of criminal intent which ensures innocent mistakes do not result in criminal convictions. To be fined for an unintentional error of judgement is one thing, to be fined at a level that threatens livelihoods – for no improvement in consumer protection – is an abuse of position of an overly-powerful regulator over a largely fragmented and voiceless adviser constituency.

    Here’s hoping that the FSA realise sooner rather than later that the stick is a poor motivator when compared to the carrot.

  22. Classic. In East Germany, before the Wall came down, the Stasi gradually became unable to control the public by mere threat of expropriation, coercion and ultimately state sanctioned violence. State sanctioned terror. As it became increasingly obvious that Communist/Fascist Bureaucratic Totalitarianism had failed, they simply gave up on terror and reverted to type by simply shooting people, dead.

    As the Stasi, as the FSA, the bastard child of another Statist Corporatist Bureaucratic failure. They have reverted to type and are metaphorically looking to shoot people, now that their terror has been unmasked.

    This is appalling evidence of the increasing destruction of liberty and the enchroachment and arbitrary judgement of the tyranny of the Bureaucracy on everyone’s lives.

    They must be stopped for the good of us all, especially our clients.

  23. So based on the FSA missing the largest corporate loss ever with RBS will they pay 20% of that plus also hand back the bonuses of £20 million they paid to themselves back in June last year!

  24. Who wants to be an IFA? Very few and it is likely that anyone who remains in business will well and truly shaft clients to survive. Nice one, FSA!

  25. sorry if this sounds patronising, this is not my intention.What happens to a child who is brought up in a home where clear gudelines & boundaries are given & good behaviour is rewarded ? Compare this with a home where the parent is unpredictable, where the punishment often outweighs the crime and where fear is the overriding principle ? Such a home often contains neurotic parents who believe that the only way to gain respect and obedience is through heavy handed punishment, coupled with fear of disobeying or even misinterpreting (often ambiguous) rules.
    The child grows up to have no respect whatsoever for such oversight and indeed often grows up to have such an overwhelming distaste for any type of authority that he will do anything to get out from under it.Escaping this oppressive authority brings a freedom, which in some ways, is indescribable. I have no intention of staying with this neurotic authority post RDR and I simply cannot wait to taste the freedom albeit limited, in that I will still be abused due to lack of a long stop. No matter, at least my daily living will not be dominated by fear and loathing .

  26. Suzanne Lubenko 1st March 2010 at 1:29 pm

    So will the FSA become more like HMRC and begin imposing fines for everything falling outside a strict delineation of what constitutes compliance – deadlines and all – and so make a contribution to Exchequer funds in that way? I think that’s the way it’s heading ….

  27. Imagine a Doomsday scenario. Gordon Brown returned to office allowing the FSA to continue their quest to destroy independent Financial advice. All so they can hand it all over to their friends and ex /future colleges the Bankers.

    Will the last IFA to leave the country please blow the candle out.( Electricity will be a luxury for the chosen few by then)

  28. Hears a novel idea – what if the press ignored the FSA. IFA’s returned all FSA correspondence to sender (written across it and unopened) Junkmail return to sender. would they just wither and go away???

    Hope springs eternal – doesn’t it?

  29. Just like that other government agency the DVLA – they needed to increase revenue from fines to make themselves self financing.

    Never mind if the fines are fair or reasonable.

    Maragret Cole and her greedy staff are a disgrace as wel as being unable to distinguish between a mistake and malice. All the same to them.

  30. You don’t have to be an IFA to have this lot of parasites come after you. IFA’s stop being paranoid the FSA are out to get us all.

  31. I hope Money Marketing will forward all these comments to the FSA and get them to really see what life is like outside their fortress at Canary Wharf.
    I don’t know what the Tories plan with their Consumer Protection Authority but surely it can’t be any worse than the FSA…. the closest thing to Nazism in their attempted policy to liquidate the small brokers

  32. That should cover the hotel bills then!

  33. The difference between Labour FSA and Tory CPA is : a change from FS to CP – the A stands for A*******s and they all remain!

  34. Mark @ 2.36 yes It could & probably will be worse under the tories & the cpa. mark hoban thinks the banks are just great because his mother gets great service from them and has announced that regulation under a tory government will cost more. Do not be fooled into thinking that the tories, lib dems or any other politicians, will improve our lot if elected.
    We are at the mercy of this unelected out of control quango and no one is willing to stop it.
    The CPA will be the FSA with new initials but WORSE.

  35. Charles Bunbury 1st March 2010 at 3:48 pm

    Until the immunity from paying damages is removed the FSA.GOV.UK will maintain its position as JUDGE, JURY and EXECUTIONER. Stop sending these comments they are just water off a duck’s back. Put you money where your mouth is and donate the commission from your next two cases to get rid of them once and for all.

  36. Just some simple questions. The Royal Bank of Scotland (God help us) commits a very naughty crime under the which as 20% of profit penalty amounts to £millions. The RBS is 74% owned by the public.

    Who pays the fine?
    Who authorises the payment?
    What sort of massive field day will be gifted to the national press?

    The Courts are the only body that should be allowed to impose fines. Not a discredited group of people authorised by their paye employment at the FSA.

  37. Crazy gang IFA member 2nd March 2010 at 12:14 pm

    Record fines last year ? More to come ? Currency markets sliding, General Election

    The Perfect Storm.

    Greece is nice this time of year, mind you, perhaps we should emigrate to a non EU country.

  38. An excellent start.
    And if that doesn’t work they can bring back flogging.
    And then, the ultimate, deport them to the New world. Oh, I almost forgot – Capital Punishment – then we know there won’t be any repetition.

  39. So the banks miss-selling pensions would lose 20% of their commission on that tranche of business and the manager and director concerned would lose 40% of their salaries?

    Yeah, right!

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