Regulation  

FSA fines put US in the shade

Data from the FSA and its American counterpart, the Financial Industry Regulation Authority, showed the City watchdog issued 57 penalties valued at a total of £313m in 2012, compared with $68m (£42.1m) by Finra in the US.

Mary Stevens, manager of regulatory content for Wolters Kluwer, said the main reasons behind fines in the UK during 2012 was Libor fixing, which the Securities and Exchange Commission investigated in the US, raising £219.5m.

Other reprimands related to market abuse, fraud, senior management systems and controls, advice, client assets, treating customers fairly and anti-money laundering.

Article continues after advert

Ms Stevens said: “It is clear by the heightened level of financial penalties currently being issued against offenders globally that regulators have upped their game.”

Other than Libor fines, high-profile enforcement by the FSA during 2012 included a £3.5m fine for Martin Currie for failing to manage a conflict of interests and a £9.5m fine for BlackRock for client money breaches.

Advisory firms were also targeted regarding sales of unregulated collective investment schemes.

In the US Finra bought 1541 disciplinary actions against registered individuals and firms, levying fines totaling more than $68m (£42.1m).

Paul Murdock, director of consulting and professional services for Wolters Kluwer, said the different levels of fines between the UK and US was because America had a number of state and federal regulators. He said: “Regulation as a general matter in the US is market driven, as opposed to UK which is prudential regulation by the FSA.”

Richard Ketchum, chairman of Finra, said disciplinary highlights included cases involving complex products such as exchange-traded funds, structured products and non-traded real estate investment trusts, as well as research analyst conflicts, inadequate disclosure and mispricing.

Adviser view

Colin Rothery, adviser for West Yorkshire-based Throgmorton Financial Services, said: “Regulators tend to focus on the wrong people. Regulatory actions should focus more on providers. That would be for the benefit of the client and stop such huge and disproportionate fines.”

Finra 2012 fines

Citigroup Global Markets, Morgan Stanley & Co, UBS Financial Services, and Wells Fargo Advisors for selling leveraged and inverse ETFs without reasonable supervision and not having a reasonable basis for recommending the securities.

Merrill Lynch for supervisory failures relating to the sales of structured products to retail customers

David Lerner Associates in an action related to the non-publicly traded Apple Reits involving suitability and supervision violations.