Trends in Regulatory Enforcement in UK Financial Markets

Mon Jul 11 16:24:38 EDT 2011
By Robert Patton et al.

UK financial enforcement activity has reached record levels as measured by the number and aggregate amount of fines imposed. However, according to this new NERA report examining trends in regulatory enforcement in UK financial markets, behind these headline figures is a more nuanced picture.

Trends in Regulatory Enforcement in UK Financial Markets shows that, aside from a handful of recent fines among the largest ever imposed, the average size of fines has actually declined slightly. The FSA is imposing more fines than ever before, but not across the board: while enforcement has targeted certain conduct, such as unsuitable investments and mis-selling, market abuse cases against firms remain rare.

In addition to a detailed analysis of trends since April 2002, the authors provide background on the role of financial penalties in enforcement, discussion of recent developments in enforcement, and a look ahead to expected changes in enforcement policy in the UK.

Key findings include:

  • Aggregate fines assessed by the FSA rose to £98.6 million in the 2010/2011 fiscal year from £33.3 million in 2009/2010. 
  • The number of fines nearly doubled in 2010/11 as compared to the previous year, for both firms and individuals. For individuals, the number of fines assessed in 2010/11 was more than 10 times the average over the six years prior to 2008/09, before the FSA adopted a more assertive enforcement stance. 
  • The increased number of fines, imposition of several very large fines, and increase in the number and size of fines against individuals starting in 2008/09 are consistent with a shift from "light touch" enforcement to a tougher "credible deterrence" approach and a recent enforcement focus by the FSA on sanctions against individuals.

For additional information, and to search summary statistics on UK trends data, visit www.EnforcementTrends.com

NERA’s "Trends" Series

NERA has been analysing trends in enforcement and shareholder class action litigation for more than 15 years. Two reports analysing trends in US Securities and Exchange Commission enforcement actions are published each year. In addition, NERA publishes semi-annual reports analysing shareholder class action litigation trends in the US, and annual reports on trends in Australia, Japan, Italy, and Canada.