The FSA says the plan reflects its determination to change behaviour and address concerns that firms are repeatedly failing to improve standards.
The regulator says it will also ensure that fines “better reflect the scale of the wrongdoing” and that any profits made from the breaches are clawed back.
Under the new proposals, fines will be linked more closely to income and be based on up to 20 per cent of the company’s income from the product or business area linked to the breach over the relevant period.
Fines will be based on up to 40 per cent of an individual’s salary and benefits, including bonuses, from their job relating to the breach in non-market abuse cases.
In market abuse cases individuals will face a minimum fine of £100,000.
The total fine imposed will also take into account other factors such as the desired deterrent effect and any settlement discount.
FSA director of enforcement Margaret Cole says: “These proposals are an important step in pushing forward our ethos of credible deterrence. By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules.
“Moving to this new framework will enable our enforcement policy to continue making a real difference to consumers and to changing behaviour in the financial services sector.”
The consultation will close on October 21, 2009 and any new policy is likely to apply to breaches committed after February 2010.