City law firm Reynolds Porter Chamberlain has calculated that the average fine handed down by the FSA in the financial year 2008/09 came to £497,000 compared with £212,000 in the previous financial year. Even after taking out fines handed down worth more than £1m, it found that the average fine still increased 20 per cent from £111,000 to £133,000.
The number of fines handed out by the financial regulator more than doubled also over 2008/09, to a record 55. The FSA also prohibited more individuals or firms, 46, from carrying out regulated activity than in all previous years put together.
RPC regulatory partner Jonathan Davies says: “The FSA has been under significant public and political pressure this year for failing to foresee problems with failing banks and financial institutions. It has reacted to criticism by instituting a ‘get tough’ approach.
“The FSA is taking an aggressive approach towards mortgage advisors, probably because falling house prices have exposed fraudulent market practices which remained hidden when prices were rising.”
Davies says that more than a year can pass after the regulatory lapse of a firm or individual before the FSA publishes a ‘final notice’ of any consequential enforcement activity it took.
As a result, he says that many credit crunch fines have yet to surface. He says: “Any enforcement activity against financial institutions or their directors who failed as the credit crunch took the ground from under them will not feed through in FSA fines until next year or even the year after that. It seems likely that enforcement activity will continue to increase for several years to come.”