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Regulator triples fines as a deterrent

The FSA set out plans this week to treble fines with a new framework for calculating financial penalties.

The regulator say the new framework will be more “consistent and transparent” and “better reflect the scale of the wrongdoing”. It will also ensure that any profits made from the breaches are clawed back.

The FSA says where the likelihood of detection is relatively low, such as in a small firm, the penalty must be high in order to achieve credible deterrence.

Under the new proposals, fines will be closely tied to a company’s earnings and based on up to 20 per cent of the firm’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.

FSA director of enforcement Margaret Cole says: “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.”

The consultation will close on October 21 and any new policy is likely to apply to breaches committed after February 2010.

Highclere Financial Services partner Alan Lakey says: “The worry for firms is that the FSA will impose high fines where advisers forget to tick a box but clients are not adversely affected.”

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