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FSA fines more than double to record £88m

The Financial Services Authority handed down a record breaking £88.4m in fines in 2010, eclipsing the record it set last year of £34.8m by 154%, says City law firm Reynolds Porter Chamberlain LLP.

RPC says that the record fines are clear evidence that the FSA’s more intrusive regulatory approach is hitting firms hard.

Richard Burger, of RPC, says: “The FSA has been much more aggressive this year.  The FSA has had new political masters to impress this year but we may have reached the point where this level of regulation could be having a negative effect on the financial services sector.”

The RPC says the number of fines handed out by the FSA  more than doubled to 88 from 40 last year, with the average size of fines up 15.5% to  £1,005,000 from £870,000.

The number of large £1m+ fines has also increased from 8 to 13.

RPC says that the fines are set to rise next year as a new FSA penalties policy bites.  In March the FSA introduced a new policy which increased the fines for businesses and individuals. The change only affects conduct which happened after the new policy was introduced so very few 2010 fines will have been charged under the new regime.

Burger says: “The FSA handed down record fines this year, but with more cases coming through its new financial penalty policy in the year ahead, it looks like the FSA could break its enforcement record yet again.

“The FSA fines have been escalating without this new policy and financial services firms will want to know when the FSA will reach a limit.

“Such has been the radical change in the FSA’s activity over the last two years that it would be useful to know just how far the government wants the FSA to go in terms of piling on the pain for the financial services sector.

“With two new regulators set to replace the FSA, each with its own enforcement department, will the Prudential Regulation Authority and the Consumer Protection and Markets Authority be competing to impose the higher fines?”

Burger says the amount of fines handed down by the FSA this year is just the tip of the iceberg.  The vast majority of firms never get fined by the FSA but there is a huge cost for many of them in defending investigations by the FSA.  

He adds: “Often those investigations are dropped without any further action because there has been no wrong-doing, as with the FSA investigation of RBS’s management decisions during the run-up to its bail out in the financial crisis.”

According to RPC, the controversy over the FSA’s decision not to publish the results of its investigation into RBS has revealed how FSA enforcement investigations often fail to find any evidence of wrongdoing.

Burger adds: “Unlike in formal legal proceedings, there is no possibility of firms recovering the costs of defending themselves successfully when they are investigated by the FSA.With the regulator taking a highly aggressive approach, regulated firms are very concerned about this hidden and unaccountable burden.”
 
 

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Comments
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  • QuoMan 22nd December 2010 at 9:09 am

    Anonymous | 21 Dec 2010 12:34 pm
    Enforcement cases, fines etc, are published on the FSA’s website.

    Anonymous | 21 Dec 2010 5:00 pm
    Good grief, thank goodness you’ve never worked in financial services. You are illiterate – or are you in disguise?

  • Julie Seatn 21st December 2010 at 5:00 pm

    The FSA strikes me as being a currupt institution- I do not work (and never have)in teh Financial Industry, but as a mre consumer The Fsa appear to be doing the consumer more harm than good, I hev spoken with many a colleague who share my view of the FSA. I have paid off my mortgage now but when I did have a mortgage I dealt with a couple of very good mortgage advisers I aso deal witha Financial Adviser who works alone- who has given me advice that I have always been happy wit. If at any time I did not trust the individuals advise I would have shopped around- The public are for most part able to detect a rogue when they step inot our paths, It is clear that teh FSA is not as interested in protecting teh consumer as It is in raking in money from struggling little firms who amke teh occassional mistake I for one know that I have made many mistakes at work but thankfully i have not has my life ruined as a cost for tehese mistakes . I feel sorry for Financial Advisers who are being duped and robbed by this wholly unfair and baiased “REGULATOR”.

  • Dazed & Confused 21st December 2010 at 2:10 pm

    Yes, that will definitely cover the parties, and should see the bonuses guaranteed for a job well done in killing an industry!

  • Leslie Squires 21st December 2010 at 12:34 pm

    Interesting figures, but how much was attributed to the the City Financial Institutions, Banks and IFAs. Lets name and shame.

  • David Parkinson 21st December 2010 at 11:15 am

    That should pay for the Parties then!