Financial Conduct Authority  

FCA fines against individuals almost treble

FCA fines against individuals almost treble

The value of fines handed down by the FCA has decreased by 88 per cent in a year but the penalties slapped on individuals has trebled in size.

This is according to research from law firm Clyde & Co. 

Analysis of the FCA's enforcement database by Clyde & Co showed that fines dished out by the regulator so far this year fell to £27.6m, which is a drop from £229.5m in 2017.

According to the research, fines levied against individuals this year made up £1.3m, while those against companies totalled £26.3m.

Charles Kuhn, partner at Clyde & Co, said: "The sharp drop in the value of fines over the last year does not paint the full picture. Last year there were a number of record-breaking fines against companies that somewhat skewed the figures."

Last year, Deutsche Bank's £163m penalty in January 2017 was an FCA record for money-laundering failures. Similarly, Rio Tinto was given a £27m fine in October 2017 for listing-rules breaches, another record.

However, despite this year's drop, the research also showed that the average fine for an individual this year has almost trebled to £186,000, which is up from £63,000 in 2017.

Mr Kuhn added: "City executives should certainly not be breathing a sigh of relief. The FCA has made a conscious effort to put the onus of responsibility on individuals. The introduction of the Senior Managers Regime is testament to this and the statistics demonstrate that this approach might be starting to bear fruit."

Clyde & Co explained that the Senior Managers Regime (SMR) has placed the onus on managers to take responsibility for their own actions and those of their staff.

This means senior managers and key non-executive directors risk fines or bans from the industry unless they can show they took all reasonable steps to prevent wrongdoing within their teams.

There is also a parallel criminal offence of recklessly mismanaging a financial institution that fails.

The analysis by Clyde & Co also found that the number of cases the FCA had open at 1 April 2018 was a record high of 504, up from 410 in the previous 12-month period.

This follows on from last year, when the FCA's head of enforcement, Mark Steward, announced that it would be opening more cases sooner but that it should not be afraid to dropping them if there is no evidence of wrongdoing.

Mr Kuhn said: "The FCA has its foot firmly on the gas. However, it has come under some criticism over taking too long to prosecute and with a record number of cases in the pipeline some are questioning the regulator's capacity to handle so many investigations.

"Eventually, these cases will be concluded and we could see a continual uptick in the level of fines levied against individuals.

"Especially, as a number of the cases in the pipeline involve examination of the conduct of senior managers, which will of course test whether the SMCR might result in heavier punishments for individuals."