Analysis of the FCA’s enforcement database shows that fines handed down by the regulator this year (to 7 December 2018) fell to £27.6m from £229.5m ($292m, €256.3m) in 2017.
Of this, £1.3m was levied against individuals, with companies fined £26.3m.
This, however, doesn’t paint the full picture, according to Charles Kuhn, partner at Clyde & Co. “Last year there were a number of record-breaking fines against companies that somewhat skewed the figures.”
He highlighted Deutsche Bank’s £163m penalty in January 2017, which was an FCA record for money-laundering failures. Similarly, Rio Tinto was given another record-breaking fine of £27m in October 2017 for listing-rules breaches.
Individuals taking bigger hits
The research by Clyde & Co, which won best international law firm at International Adviser’s Global Financial Services Awards, shows the average fine for an individual this year has almost trebled to £186,000, up from £63,000 in 2017.
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 (SMR) is testament to this and the statistics demonstrate that this approach might be starting to bear fruit.”
SMR puts the onus on managers to take responsibility for their own actions and those of their staff.
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 rules came into effect in March 2016.
FCA denies changing tack
A spokesperson for the FCA, however, refuted the suggestion that it is more heavily targeting individuals: “There has been no change in our approach to misconduct or financial penalties.
“We remain committed to investigating and holding firms and individuals to account for misconduct and ensuring wrongdoers pay for the costs of remediation.
“In fact, the FCA is doing more enforcement not less – over the last year alone there has been a significant increase of 75% in the number of investigations we have commenced.”
Foot firmly on the gas
This point is also emphasised by the Clyde & Co research, which found that the number of cases the FCA had opened at 1 April 2018 was a record high of 504, up from 410 in the previous 12-month period.
Last year, the FCA’s head of enforcement, Mark Steward, announced that the regulator would be opening more cases sooner, but should not be afraid of dropping them if there is no evidence of wrongdoing.
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.”
Total value of fines levied by the Financial Conduct Authority by calendar year.