Plans for FCA to withhold fine discounts delayed in Lords


New rules that could have allowed the FCA to withhold discounts to firms who settle on fines early, but do not take action to stop misconduct, have been put on hold as the regulator reviews its stance on financial penalties.

An amendment to the Criminal Finances Bill was proposed by Liberal Democrat Peer Lord Sharkey late Tuesday to ensure that firms who received discounts on FCA fines for early settlement followed through with any internal disciplinary proceedings the regulator had requested, or they would not be entitled to a portion of the discount.

Since the FCA was created, firms have saved a total of £1.2bn on fines through early settlement, and are eligible for a discount of up to 30 per cent if they reach an agreement with the regulator early on.

Sharkey said the amendment would help his concerns that the FCA is “under-resourced, underpaid, undervalued and overburdened”.

He said: “It effectively automates, or nearly automates, the process of compliance with settlement conditions. It removes the need for substantive re-investigation by the FCA and, instead, places a burden on the offending firm to demonstrate compliance. It offers a powerful financial incentive for doing so at no additional cost to the FCA or to the taxpayer.”

Sharkey’s amendment was then backed by Labour peer Lord Mendelsohn, who argued it was an “important gap” in the FCA’s process.

Responding to the amendment, Home Office junior minister Baroness Williams of Trafford said that she and other peers had held discussions with the FCA on the matter.

She commended the “ingenuity” of an automatic system, but said that “having consulted with operational partners and Treasury officials, the Government’s view is that the existing regime gives the FCA the flexibility to apply penalties and impose requirements on a case-by-case basis.”

She added that the Government feared fewer firms would settle early with the regulator if their discounts were not guaranteed.

“We are concerned that this amendment would weaken the incentives for firms to settle early with the FCA, given that the settlement would not be final, subject to the full discount being granted. As a result, they might instead choose to engage the FCA in costly and protracted action rather than all being involved in focusing on remedying the underlying issues.

“There might be ways of enhancing the existing regulatory system; the FCA is, in fact, conducting a review of its penalties policy at present, and I know that it would welcome the opportunity to continue this discussion with both noble Lords.”

Sharkey agreed to withdraw the amendment.