The FCA issued a total of over £1.4bn in fines in 2014 against a total of 37 firms. This is a massive 210 per cent increase on the £474.2m issued in fines in 2013.
The increase has been driven by the total £1.1bn in fines imposed on five banks over foreign exchange rate rigging in November. These fines represented the largest ever penalties handed out by the FCA, with Citibank fined £226m, HSBC fined £216m, JP Morgan fined £222m, Royal Bank of Scotland £217m and UBS £234m.
Stripping out the forex fines, here we look at what other enforcement cases were generating headlines this year, and which firms paid the heaviest price.
10. Stonebridge International Insurance – £8.3m
Aegon-owned Stonebridge International Insurance was fined £8.3m by the FCA in August over failings in the way it sold accident insurance.
Between April 2011 and December 2012, Stonebridge used outsourced sales staff that encouraged people to buy more expensive products and did not give clear information, while post-sale support staff discouraged customers from cancelling policies.
Stonebridge had to carry out a past business review affecting up to 486,000 customers. When the firm was fined it had already paid out £400,000 in redress to affected customers.
9. Santander – £12.4m
Santander was fined £12.4m in March over poor investment advice following a mystery shopping exercise. The investigation found that Santander investment advisers told customers commission of almost 8 per cent was “irrelevant” and failed to ensure recommendations were suitable. It also found that 22 per cent of Santander advisers provided misleading product information and 28 per cent provided misleading information about costs.
8. Royal Bank of Scotland – £14.5m
RBS and subsidiary NatWest were hit with a £14.5m penalty in August for serious failings in the way the banks provided mortgage advice. In two sales reviews from 2012, the regulator says in over half the cases the suitability of the advice was not clear from the file or call recording. Only two of the 164 sales reviewed were deemed to meet the standard required.
In mystery shopping exercises carried out by the lenders themselves, there were examples of advisers giving personal views on the future movement of interest rates. The FCA says this was “highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage for them”.
7. Invesco Perpetual – £18.6m
Invesco Perpetual was fined £18.6m in April for fund management failings and for exposing investors to greater levels of risk than they expected. Investors affected included those in Invesco’s giant income funds previously managed by Neil Woodford.
Between May 2008 and November 2012, Invesco did not comply with investment limits, designed to protect consumers by limiting their risk exposure, on 15 funds with over £35bn invested and representing 70 per cent of the group’s assets. Losses ran to £5m with compensation paid to the funds.
Woodford’s new fund, the CF Woodford Equity Income fund, launched in June, raising a record £1.6bn.
6. State Street – £22.9m
The FCA imposed a £22.9m fine on State Street back in January over charging for changes to asset portfolios without agreeing the charges with clients. Clients were charged substantial mark ups on top of the agreed management fee or commission for the company’s “transitions management” service, which supports structural changes to portfolios such as removing an asset manager.
Between June 2010 and September 2011 the FCA found that State Street UK’s transitions management business deliberately overcharged six clients a total of $20.2m.
5. Barclays – £26m
Barclays was fined £26m in May for failings related to gold fixing, including failing to manage conflicts of interest and systems and controls failings.
Former Barclays trader Daniel Plunkett tried to gain $1.75m and cheat a customer out of millions through gold fixing. He was a director on the bank’s precious metals desk and was found to have exploited weaknesses in Barclays’ systems on 28 June 2012 in order to profit at a customer’s expense. This happened just one day after Barclays was fined £290m over manipulating Libor.
4. HomeServe – £30.6m
In February the FCA issued what was its largest ever retail fine to insurance broker HomeServe for misselling policies and not investigating complaints. The regulator said the firm’s board was insufficiently engaged with compliance matters while senior management were reluctant to address risks to customers if there was a cost implication involved.
The FCA added that HomeServe, which sells home emergency and repairs insurance cover, developed a “profit driven culture” and was “taking advantage” of customers.
3. Barclays – £38m
A second appearance for Barclays, this time for failing to properly protect £16.5bn of client assets. This was the highest ever penalty imposed by either the FCA or the FSA for client money breaches. Barclays failed to properly apply client asset rules when opening 95 custody accounts in 21 countries. As a result, the bank’s records did not correctly reflect which company within its investment banking division was responsible for the assets in the accounts. Barclays also failed to set up appropriate legal arrangements with these companies.
The regulator said as a result clients risked incurring extra costs, lengthy delays or losing their assets had the bank become insolvent.
2. Royal Bank of Scotland – £42m
Another repeat offender, in November RBS was fined over an IT failure in 2012 that left customers unable to pay bills or access cash from their accounts. For the first time the two regulators took joint enforcement action, with the FCA fining the bank £42m, and the PRA fining it £14m.
In June and July 2012, a software upgrade saw 6.5 million RBS, NatWest and Ulster Bank customers face disruption to account services for two weeks. That year RBS set aside £175m to compensate those affected.
1. Lloyds Banking Group – £105m
The biggest FCA fine of 2014 outside of the forex cases was against Lloyds Banking Group back in July. The bank was fined £105m by the FCA for trying to manipulate Libor and the amount it had to pay to the Bank of England to access the Special Liquidity Scheme, which was set up to support banks during the financial crisis.
At the time this was the joint third highest fine imposed by the FCA or the FSA. Overall Lloyds was fined a total of £218m, including a £62m penalty to the US Commodity Futures Trading Commission and £51m to the US Department of Justice. It also had to pay the Bank of England £7.76m in compensation for the reduction in SLS fees received by the Bank as a result of Lloyds’ failings.
In a statement the Bank of England said: “The Bank put the SLS in place to help banks get through the worst of the financial crisis. The fact that Lloyds and Bank of Scotland, the largest beneficiaries of this assistance, manipulated their three-month GBP repo rate submissions in order to reduce fees is highly reprehensible and clearly unlawful.”