Number of fines imposed by City regulator drops by 40%

Dog Detective

The number of fines given out by the main City regulator to senior executives in the financial services sector for misconduct or breach of rules has dropped by 40% in the past four years.

The figures will raise concerns that the Financial Conduct Authority (FCA) is failing to crack down hard enough on bad practice despite all the concerns raised over Libor and other scandals.

Eighteen fines were handed down in 2013 to individuals in senior management positions, down from 30 in 2010, according to figures obtained through the Freedom of Information Act by the London law firm, Reynolds Porter Chamberlain (RPC).

The figure for last year means fines were imposed on 0.03% of the 55,000 people who perform a "significant influence function" (SIFs) such as chairman or chief compliance officer.

Richard Burger, partner at RPC, said the fall was surprising. "By setting its sights on individual senior managers and board directors, the FCA hopes that the threat of being held personally accountable will ensure they act in a fit and proper manner and prove an effective deterrent to misconduct. Accountability for senior individuals has been seen as the sharp end of the regulator's spear, so some will be surprised that more fines haven't come through the pipeline yet."

But the FCA denied that the City regulator was going soft on the City. "Holding individuals to account is clearly an area where we have put a lot of resources. It was also an area that the parliamentary commission on banking standards found that we needed to improve upon, so we will be making more proposals soon," said an FCA spokesman.

Meanwhile sources said the figures needed some interpretation because a lot of the earlier fines had been imposed for similar mortgage fraud cases. The FCA had since taken on more difficult, time consuming cases and this partly explained the fall in numbers. RPC does not include the number of prohibitions and public censures, they also pointed out.

The City regulator has taken action against 43 individuals – of which 18 were SIFs – over the past financial year. This includes more than £3m in fines and 32 prohibitions. The FCA has also published seven warning notice statements in relation to conduct by individuals.

RPC admits that bringing successful cases against individuals can be harder than against firms because companies wish to resolve cases quickly and limit commercial as well as reputational damage. Individuals are increasingly taking insurance cover, which gives them the funds to fight FCA cases more robustly.

"Individuals have got so much more to lose and so they are much more willing to fight allegations of wrongdoing tooth and nail," said Burger. "Not only are there substantial fines at stake, their reputation and career are on the line. Even if they are not given a lifetime ban, the chances are they'll never work in the City again," he added.

Powered by article was written by Terry Macalister, for The Guardian on Sunday 20th April 2014 19.45 Europe/London © Guardian News and Media Limited 2010


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