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FSA: It is easier to take on the ‘little guys’

Tracey McDermott

FSA head of enforcement Tracey McDermott has admitted it is easier to go after the “little guy” rather than take on the big banks.

Speaking to the Parliamentary Commission on Banking Standards yesterday, McDermott rejected suggestions that the FSA lacks integrity and is too close to the banks.

PCBS chair Andrew Tyrie asked McDermott whether it is easier for the FSA to go after the “little guys” and McDermott replied: “I would accept it is easier”.

Tyrie slammed the regulator for letting “the big fish swim straight past” FSA rules and acting as a “toothless tiger”. Labour peer Lord John McFall hit out at the regulator for not taking on senior bankers.

McFall said: “You as an organisation have failed to tackle those at the top. You are playing at a middle level and groping around at trying to hold people to account.

“It needs some dramatic statement from the FSA saying ‘we have been missing in the past and captured by the banks and we will do something to demonstrate our independence’. I suggest that the integrity of the FSA has been lacking over PPI or holding people to account.”

McDermott said the FSA has attempted to hold senior staff to account but has been unable to do enough under its rules.

She said: “We have taken action against senior individuals at large firms. It is a relatively small number even though we have worked quite hard. We often find we start asking questions and no one can tell us who is in charge.”

McDermott said there are three obstacles to taking on senior bankers, including the fact that many decisions are made by a committee so finding responsibility can be “difficult”, complex structures mean it is difficult to find out who is in charge and FSA rules mean there is a high evidence threshold to punish individuals.


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There are 31 comments at the moment, we would love to hear your opinion too.

  1. This appears to be somewhat out of context, she was answering a deliberately guided question honestly.

  2. Don’t we know it?

  3. The FSA: It’s not their fault. After all, if you are not accountable to anyone then how can you be to blame for anything?

    What will the sanction be for the FSA’s failure?

    A knighthood?

    Expenses paid helicopter rides?

    A Final Salary pension that none of the saps they leech their fees from can access (and I mean IFAs and their clients)?

    Guaranteed jobs in the city they are meant to regulate?

    If this isn’t a corrupt system, I would ilke to see what one looks like.

  4. “We often find we start asking questions and no one can tell us who is in charge.”

    What is the point of a register of controlled functions if those that take on that responsibility are not held to account? The fact that there is a committee involved is irrelevant. You can delegate authority not responsibility.

  5. Shocking. But she’s just stating what we little guys already knew.

  6. Oh dear

    Not really good enough on any level.

    Responsibility = CEO in the absence of anyne else.

    Banks and other mega institutions have lots of money so it makes it more worthwhle to go after them than small fry who might just fold at the first ill wind.

    Having said that TM isn’t saying they do therefore go after small fry more often,just that it is easier (i.e. statement of the obvious – no news)

    Ian Coley
    Medical Investment Services

  7. What a disgraceful and shameful admission although we all knew this already. The Law is the law, right is right and wrong is wrong irrespective of the size or financial clout of the offending party.
    P.S. wheres Hector.

  8. Roman Duzinkewycz 30th January 2013 at 3:41 pm

    Can’t believe that someone has actually admitted to the fact that the FSA have ignored the actions of the banks? Can’t believe this woman is for real As head of enforcement (made up title anyway) I guess there will be another golden farewell payment – blind leading the blind – when will someone in power take this up and punish the real villains? Answer – never of course. She will leave soon I’ll bet.
    Waste of time and energy.

  9. I wonder what sort of feedback the FSA would have given to those that sold Arch Cru products (etc) had they used a similar line…

    Naturally larger organisations have more complex structures and more people involved, but one would assume that this would go to the heart of systems and controls rules, which I though applied to all, irrespective of size or complexity. Certainly it must be harder to regulate a larger organisation, but surely the point being raised is that the amount of resources allocated to small fish is rather daft when considering the damage big fish can do.

  10. “FSA rules mean there is a high evidence threshold to punish individuals.
    Unless you are John Calland IFA (little guy harrassed for 10 years by FSA, FSCS & FOS)
    Be afraid, be very afraid, unless you work at Barclays.

  11. @ Ian Coley
    If they do not, therefore go after the small guy, how would TM know it was easier?
    They just run around threatening IFAs’ hoping to sound fierce and competent and to fool the public into thinking they are a worthwhile organisation.
    The treasury and MPs, McFall in particular and Tyrie included are useless. They know all this and do nothing.
    What a waste of time and money these hearings are.
    When will someone grow some and make this quango accountable?

  12. One thing the FSA seems to be remarkably good at is disingenuousness. I seem to recall numerous articles where it was reported that individuals were fined or disbarred from working in financial services – so please explain what’s so difficult.

    McDermott stated that the FSA has attempted to hold senior staff to account but has been unable to do enough under its rules. Why is that? Is there one rule for bankers and another rule for the rest?

    For example – from the FSAs own website “The Financial Services Authority (FSA) has fined Samuel Kahn £1,094,900 and obtained a High Court injunction restraining him…”
    And also
    The Financial Services Authority (FSA) has fined Rameshkumar Goenka, a Dubai based private investor, $9,621,240 (approximately £6 million)

    According to other reports: The FSA handed down £12.9 million in fines against individuals in 2011 (to December 16), breaking the record it set last year of £8.8million by 47%, says City law firm RPC (Reynolds Porter Chamberlain LLP).

    So McDermott’s assertion looks pretty lame against this. Or have I misunderstood something?

  13. You simply cannot make this up!!

    “McDermott said there are three obstacles to taking on senior bankers, including the fact that many decisions are made by a committee so finding responsibility can be “difficult”, complex structures mean it is difficult to find out who is in charge and FSA rules mean there is a high evidence threshold to punish individuals”.

    Who ever is in the committee is responsible!!

  14. Yeah, don’t we know. Unfortunately, it isn’t the little guys who do the most damage. It’s the bullies with the expensive lawyers to protect them.

    FSA = Not fit for purpose.

  15. Anyone that hasn’t clicked onto the fact that this is corruption at the top level needs to have theor heads examined. Why on earth would an FSA chairman say H Sants want to take to task his future GENEROUS employer. Goldman Sachs, BOE, Federal Reserve, JP Morgan they are running the show and their corruption holds no bounds.

  16. I would still like to know the answer to the following questions:

    Who made the decisions to reduce fines for banks involved in LIBOR and PPI

    Why has no senior executive been banned, fined and indeed prosecuted for their involvement in miss selling of PPI or the fixing of LIBOR.

    Why has there never been an investigation into the FSA in respects to their admission that they have not investigated banks.

    If senior FSA staff have been found to be at fault the not carrying out proper investigations them why of these individuals not banned fined and indeed prosecuted.

    Those that say that you cannot be prosecuted by law, there are pieces of the legislation that cover tipping off of an investigation and failure to report. The fact is that failing to investigate banks has also meant that the FSA has failed in its four statutory objectives and when you read these they are an absolute joke.

    • market confidence – maintaining confidence in the UK financial system;
    • financial stability – contributing to the protection and enhancement of stability of the UK financial system
    • consumer protection – securing the appropriate degree of protection for consumers; and
    • the reduction of financial crime – reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime.

    On all four of these the FSA has frowned and surely there should be a royal open enquiry to find out the reasons why!!!!!

  17. @matty 3:36 pm

    Fair point, let’s face it it doesn’t take much to get us riled up!

  18. I’m afraid much of the FSA’s enforcement is to do with headline making (note making, not grabbing). Someone should count the number of FSA articles in the financial press each day compared to, say “new product launch” or something constructive, and you’d soon realise what a Gobby Outfit the FSA has become. Annual press output of Bafin the German regulator, about one announcement a month; Weekly BileDump from the FSA, about two a day. The whole press is clutterly uttered with FSA this, FSA that, that most people, including all the detrimentalised consumers awaiting the so-called regulator’s protection, consider them a joke organisation. Yes, really they do.

    Probably the most self-defeating thing they do is go for hopelessly mispaced hyperbole to try and overegg their feeble activity. Check out every Final Notice banning small mortgage brokers for fiddling a few earninsg figures on their applications. Each time it concludes…”and with these two applications that led to a whole £100,000 too much being lent, Mr Mortgage Broker, through his unscrupulous behaviour was putting at risk the stability of the entire financial system”, says Marg. Cole/Tray McD.

    The ENTIRE system? It really does make them look stupid, because it shows that you cannot tell the wood from the trees. The problem is, that 99% of all the public bo**ockings they administer, are the small guys so they just don’t get a chance to show the world how important they are. Resulting public perception: unimportant and stupid.

  19. Presumably the rules are not good enough [more than a little worrying that the FSA admits this of itself] or the people are not good enough.

    With regard to the banks and their commitee approach, leaving aside controlled function responsibility, if a committee decides then same committee takes the credit or the blame. They do take payment when all is said and done. If Fred the Shred can be de-nobled then surely the FSA can do something in that department.

    In the meantime, bashing smaller organisations is OK where it’s due but not as a proxy or smoke screen for failing to deal with the catastrophic issues.

  20. This merely confirms what most people suspect. The question now becomes “what are the Government going to do about it?”

  21. If the FSA’s register does not tell them who is in charge then I will provide a list of its directors for a tenner.

  22. She is right ! it is easier to go after the little guy, so this comes as no suprise, we all know the FSA’s stance of picking the low hanging fruit first. This is what is so wrong about The FSA and the people in charge the big boys just carry on making the same big mistakes and carry the bigest risk, the FSA sit back and moan “we havn’t got enough power we need more”

    The FSA are just 3rd year bullies to scared to attack the 4th and 5th formers but have more than enough weight to scare the shit out of the 1st and 2nd years.

  23. Odd how the FSA find it hard to hold senior bank staff to account….just follow the money and where ex FSA staff are now in Banking positions, or will be and you will find the answer.
    Barclays was a major player in banking misspelling and fraud but was fined millions less than other comparable banks, 3 mill is a Hec of a good deal!

  24. headunderthe parapet 31st January 2013 at 1:45 pm

    It’s particularly interesting that McFall has recognised that the FSA has been “captured” by the banks.

    This is an extremely significant statement because in this context the term “captured” means that the FSA has been infiltrated and unduly influenced by those whom they should have been overseeing and policing. We in the financial services industry suspect this as being the case, but to have an MP acknowledge this might be a first.

    Unfortunately I don’t expect this to lead to anything because government itself has been subject to this type of corruption in the guise of lobbyists and interest groups for many years. I’m afraid they’re all too busy snuffling about in the trough and looking after their own self-interest to worry about the impact that such high level corruption will have on a few IFA’s.

  25. Maybe IFA’s should set up committies when making investment decisions.

  26. I was just wondering if anyone would like to form a committee with me?
    Next time the FSA comes knocking we’ll just tell them that we are a committee and therefore do not have to play by their rules.
    Anyone? Any takers?

  27. Lets face it – the further up the food chain you go the greater the reward for less responsibility.

  28. Just a couple of observations in respects to FSA rules and company structures.

    1. The FSA makes the rules and companies should comply to them not the other way around.

    2. What is the point of having the approved appropriate appointment person system if you can’t hold them to account. SYSC 2.1

    3. If the company structures are too complicated and surely the FSA should either remove licences or give instructions for the company to be broken up into simpler structures.

    4. There is no point in having a regulator that does not have the necessary powers to enforce the above.

    5. Company directors and chief executives should be held personally responsible for the cultures of their organisations and if it is discovered that serious fraud is committed under their tenure due to the cultures they help promote then they should face sanction

  29. Corruption from elected dictatorships – should quite easily be slotted in to a small remote part of Africa!
    Seriously, this sort of questioning gets nowhere and an independent or public enquiry should now be automatic when you just consider the scale of wrondoings.

  30. There we have it, it is easier to put a small business out of business than it would be to pursue the real culprits who have ripped off consumers for decades and continue to do so (New Libor rate anyone”)

    The decline in the IFA sector is now assured to the point where those who are left in a years time may not be able to fund the FCA.

    Ah well, no loss then!

  31. Perhaps we should call on the French. When they are finished in Mali, they can come to britain and sort out the fsa. Dictatorships always bully those least able to defend themselves. Vive le France.
    Vote UKIP.

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