UK market regulator plans bigger fines, link to income

July 6, 2009

British Financial Services Authority Chairman Adair Turner

 By Myles Neligan  
 LONDON, July 6 (Reuters) –  Britain’s Financial Services Authority (FSA) plans to triple some of the fines it imposes on financial sector wrongdoers as part of a crackdown on offences such as mis-selling and insider dealing. 
 The bigger fines are designed to deter firms and individuals from breaking market rules by making the costs of doing so prohibitively high, the FSA said in a statement.

  “By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules,” FSA director of enforcement Margaret Cole said.
   “These proposals are an important step in pushing forward our ethos of credible deterrence.”
   The FSA, frequently criticised for failing to tackle insider dealing, has pledged to adopt a more “intrusive” approach to regulation in the wake of last year’s global banking crisis.
   The watchdog is hiring 280 new supervisory staff, and its chief executive, Hector Sants, warned in March that “people should be very frightened of the FSA”. 
   “The FSA had been coming to the view even before the credit crisis that it needed to do more to ensure that its fines act as a deterrent,” said Calum Burnett, head of banking and finance litigation at law firm Allen & Overy.
   “This move heralds potentially big increases, and individuals will be hit hard, too. Senior managers are already increasingly under the FSA’s spotlight, and this will add to their personal exposure.”
   Under the proposed new regime, financial penalties would be linked more closely to income, and would be set at a level designed to achieve “the appropriate deterrent effect”, the FSA said.
   Individuals found guilty of market abuse offences such as insider dealing would face a minimum penalty of 100,000 pounds ($162,700), while those guilty of other breaches would have to hand over up to 40 percent of their salary and bonuses.
  Companies that break the rules would be fined up to 20 percent of the income they make from the relevant product or activity.
   The FSA imposed a total of 28.4 million pounds in fines in the year to March 31, 2009, up from 4.5 million pounds the previous year.
   The biggest fine from the watchdog to date is the 17 million pound penalty it slapped on oil giant Royal Dutch Shell in 2004 for overstating its oil and gas reserves.
   The draft rules on fines are open for consultation until Oct. 21, and the FSA expects the new regime to apply to offences committed after February 2010. (Editing by Will Waterman)

See also:

FSA: examples of how the fines would work

Financial Times blog: FSA proposal equals means testing



No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see