FSA increases fines by 23%

The Financial Services Authority has increased the average size of its fines this year by 23%, as it tries to crack down on wrong-doing in the financial services sector.

Its annual report, publsihed today shows it levied 17.43m in financial penalties during the year.

However 13,960,860 was paid by Citigroup Global Markets Limited and 3,469,140 by 16 other individuals or companies. In 2004/05, the total was 22.25m, of which 17m was paid by the Shell Transport and Trading Company and 5.25m by 30 firms or individuals.

The Regulatory Decisions Committee also considered 172 new cases this year. Of which 46 related to authorisation refusals, nine to mortgage and general insurance applications, 109 to enforcement cases, and four to breaches of the Listing Rules. There were also four cases involving civil/criminal proceedings.

While the FSA’s enforcement division closed 227 investigations during the year. Of these, 81 concluded with the use of powers, such as prohibition, financial penalties and variations of permissions and 146 without the use of powers. Private warnings were issued in 12 of these 146 cases.

The FSA stresses in its report that it aims to promote efficient, orderly and fair financial markets, both wholesale and retail and to help the retail consumer for financial services obtain a fair deal. It is also looking to improve its business capability and effectiveness, so as to make the FSA easier to do business with.

Callum McCarthy, chairman of the FSA says: The past year has been one of continuity for the FSA. The economic environment in which we operate has continued to be benign; there have, I am glad to say, been no major changes to the FSAs responsibilities, and, as a consequence, we have been able to deal steadily with the many tasks which fall to us.

Central to our work is a concern to measure how successfully we affect the world we set out to influence. This is not a trivial or an easy task. But in the last year we have made significant progress. Our assessments of the extent of market conduct problems and of the true nature of financial capability among adults in the UK provide new standards against which to measure progress. And our work, conducted jointly with the practitioner panel, to establish a better understanding of the additional costs imposed by regulation, shows our determination to measure and then consider further the justification of the costs we impose.

This project exemplifies our overall approach to our programme of better regulation, including our determination to withdraw from regulation which we judge no longer to be justified, and to shift the balance of the regulatory regime from specific and detailed rules towards general principles.
He goes on to say that it is determined to be fair as well as proportionate in its regulation.”

He adds: The review of the FSAs enforcement procedures we completed last year shows that when we recognise failures in our processes we will seek to remedy them. I regret that it took so long for us to recognise the legitimacy of concerns expressed to us that these processes were not fair to those subject to them. I am glad that the changes made by the FSA board have been widely accepted as dealing with the previous problems.

It is in our interest as much as that of those we regulate that all our processes are, and are seen to be, fair and efficient. We have put in place systems designed to make it easier for those affected by our decisions, whether supervisory or enforcement, to comment on how those decisions have been made and implemented. I hope that those we regulate will not be inhibited from making intelligent and constructively critical use of these systems.”