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Massive FCA fines are the ‘new normal’

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The era of record regulatory fines has been branded as “the new normal” as the level of penalties dished out by the FCA hits a total of £1.5bn.

The figures have been published as part of the latest Global Enforcement Review by Kinetic Partners, part of consultancy firm Duff & Phelps.

It found that the number of fines in 2013/14 fell from 51 issued by the FSA to 46.

But the average value of fines was driven two and a half times higher in 2014, from £9.9m to £36.8m.

Fines against individuals totalled £2.9m in 2014, compared to £5m the previous year.

Kinetic Partners managing director and global head of regulatory consulting Monique Melis says: “2014 saw a significant spike in the severity of financial penalties virtually across the board, as regulators have been getting tougher on both firms and individuals.”

She says average fines have been driven up by enforcement action relating to Libor and foreign exchange manipulation.

She adds: “We are now entering an era of regulatory enforcement in which the ‘new normal’ consists of exceptionally severe penalties and a growing focus on individual bad actors, the aim of which is to impact and change the culture of firms.”

Money Marketing reported last week on the lack of transparency in how the Treasury spends the fine money it receives from the FCA, which totals almost £3bn since April 2012.

Advisers have called for this money to be diverted to fund the Financial Services Compensation Scheme.

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  1. I agree that fines are on the increase and that trend will continue. My recent experience is that the regulators and in particular, the FCA continues its bullish path towards “fear-based”, or as the FCA prefers to portray it, “deterrence focused” investigation and enforcement processes. It remains a significant concern that this bullish attitude is not always backed-up by sound logical approaches to the investigation process and/or in the use of proof to which it points as evidence of failings by firms. The standards vary wildly and in such a high stakes “game” such variation is patently unacceptable. It has been said before, but he regulators must improve their approach or expect greater challenge from investigation targets in the face of the prospect of the “massive fines” referred to here.

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