Large regulatory fines for firms may become a thing of the past as the senior managers regime rolls out across the industry, according to the Financial Conduct Authority.
In a talk to the Practising Law Institute on Thursday (19 January), Mark Steward, the FCA's head of enforcement said because of the focus on individual responsibility at a senior level within firms, which has come about because of the Senior Managers Regime, there could be less of a focus on large-scale fines against companies.
"We don’t expect senior managers to agree so readily to pay high fines to resolve cases. We expect there will be more contest and more litigation," he said.
"Secondly, firms may well be reluctant to spend such high sums to resolve investigations where those resolutions do not also resolve cases against senior managers who may also be in our cross-hairs."
According to Simon Morris, financial services partner with law firm CMS, the Senior Managers' Regime, which came into force for the largest firms last year and may be rolled out more widely from 2018 onwards, could make firms more reluctant to settle.
Instead, individuals will be held to account under the new regulations. Mr Morris said: "Blockbuster fines grab headlines and drain bank resources but on their own achieve little else.
"The FCA rightly recognises that it’s all about individual responsibility, and is right to say that the focus will now be on the senior managers who actually commit – or more often fail to stop – the immensely damaging misconduct that undermines public confidence in financial institutions.
"Individual penalties have a sniff of reality and the 'that-could-be-me' factor that corporate fines can never achieve. A fine of £100,000 plus a ban on an individual banker will have 10 times the deterrent effect of yet another half-billion pound fine on the same firm."
In September last year, FTAdviser produced a Guide to the Senior Managers Regime, which qualifies for 60 minutes' worth of structured CPD.
The guide highlighted how the new rules on reporting, hiring and whistleblowing were affecting the largest firms - and how the regulations would affect advisers in 2018 onwards as the rules are rolled out more widely across the UK financial services industry.
At the time, Keith Richards, chief executive of the Personal Finance Society (PFS), commented: “The regime will not come into force for the wider financial services sector until 2018 so firms have some time to prepare for the additional administrative processes that will be required.
“Those who plan for the upcoming changes and embrace change are more likely to benefit from the new regime and develop their organisations into accountable, transparent and successful firms.”
simoney.kyriakou@ft.com
