Financial Conduct Authority  

FCA insists penalties 'not intended to punish'

FCA insists penalties 'not intended to punish'

The Financial Conduct Authority has detailed how companies and individuals can "materially reduce" fines handed down by the regulator as it insists penalties are "not intended to punish". 

Speaking at the City and Financial Global event in London this week Mark Steward, executive director of enforcement and market oversight at the FCA, said while the absence of crime and misconduct in the market was a "noble cause", it was ultimately "hopelessly unlikely". 

But, Mr Steward said, financial penalties were intended to act as a deterrence and not intended to punish, with "no element of retribution" involved.

He said: "The decision-maker needs to ensure a price for the contravention is sufficiently higher than any gain or benefit was, is or might be in the future.

"As you know, there is no maximum financial penalty in these cases which means the assessment of a penalty does not start with a predefined yardstick.

"It is often said that where there is a maximum penalty, there is an invitation to compare the facts as they are found with the counterfactual ‘worst possible case’, enabling the decision-maker to judge the present case on a spectrum. 

"This is not possible in instances, as in our cases, where there is no maximum and individual circumstances and situations differ markedly."

Last year the FCA imposed financial penalties totalling more than £310m on firms which had also paid, or are paying, associated compensation of more than £231m.

Mr Steward said there had been several cases in which the regulator "materially reduced" its fines, even further than the automatic discount of 30 per cent applied in cases which are resolved at an early stage. 

He said: "We encourage firms to respond to this incentive by going beyond what we expect and taking immediate, unprompted steps, in consultation with us, to thoroughly and quickly ameliorate harm caused by their conduct failures.

"Indeed, the discretion here is important given the wide-ranging circumstances that need to be taken into account."

The enforcement director said the FCA took a number of factors into account when weighing up discounts, including whether a breach of rules was deliberate or reckless, how long it lasted and its impact on confidence and trust in the markets.

The regulator will also consider the amount of benefit or loss avoided in the process and if revealed "serious or systemic weaknesses" within a company. 

rachel.mortimer@ft.com

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