NERA Releases Mid-Year Financial Conduct Authority Trends Report

20 October 2014

FCA Fines Against Firms Reach New Record; Fines Against Individuals Fall Sharply

London -- The Financial Conduct Authority (FCA) and its predecessor, the Financial Services Authority, have imposed more than £1 billion in fines over the past two-and-a-half years. This compares to less than £320 million in fines imposed over the entire decade prior to 1 April 2012, according to a report by NERA Economic Consulting, Trends in Regulatory Enforcement in UK Financial Markets: 2014/15 Mid-Year Report.

Over the 2013/14 financial year, the FCA handed down £420.8 million in fines to individuals and firms, and £427.3 million in 2012/13. Fines for the 2014/15 financial year, which ends on 31 March 2015, are on pace to reach their highest level to date, with a total of £221 million imposed as at 30 September 2014. These record fine levels have been driven by a handful of large fines imposed on financial institutions, including several fines in connection with alleged manipulation of LIBOR and other benchmark lending rates.

However, fines against individuals have fallen substantially, both in number and aggregate amount, a trend seemingly at odds with the FCA's emphasis on enforcement against individuals as an integral part of its "credible deterrence" strategy. Since reaching a peak in 2011/12 of £19.9 million, total fines against individuals have declined to £3.9 million in 2013/14 and £1.7 million in the first-half of 2014/15.

"Fine levels could remain high as the FCA begins to impose penalties for foreign exchange manipulation," said Robert Patton, NERA Associate Director and author of the study. "At the same time, it is unclear if and when enforcement activity against individuals will return to the higher levels observed a few years ago."

Trends in Regulatory Enforcement in UK Financial Markets 2014/15 Mid-Year Report analyses trends based on NERA's proprietary database of fines and other enforcement activity by the FCA and FSA. The report also provides a discussion of recent developments in enforcement and looks ahead to how fines and enforcement may evolve in light of emerging conduct issues and relevant legal and regulatory changes.

Additional Highlights

  • Nine of the 10 largest ever fines have been imposed since the beginning of the 2012/13 financial year.
  • Five of the panel banks that set LIBOR and other interbank rates have been fined by the FCA in connection with allegations of manipulation of those rates, as have two brokerage firms. Going forward, LIBOR fines may be imposed on individuals as well.
  • The number of fines against firms has been fairly stable over the past few years, even as the aggregate amount has grown, with 26 fines imposed in 2012/13, 27 in 2013/14, and 12 in the first half of 2014/15, on pace for 24 by the end of the financial year. The mix of types of conduct for which firms have been sanctioned has been fairly stable, though fines for Unsuitable Investments and Mis-Selling have increased somewhat, while fines for Compliance Failures have declined.
  • Consistent with the overall decline in fines against individuals, fines and fine amounts for Insider Dealing have declined recently.
  • The FCA's Revised Penalty Framework, which applies to fines sanctioning conduct that occurred wholly or mostly subsequent to 6 March 2010, has been used to determine fine amounts in a growing proportion of cases and may have contributed to the growth in fines against firms.

NERA's "Trends" Series

NERA has been analysing trends in enforcement and shareholder class action litigation for more than 20 years. In addition to this report, NERA publishes annual US and Canada Trends studies.

Trends in Regulatory Enforcement in UK Financial Markets 2014/15 Mid-Year Report can be downloaded from:

Media Contacts

Benjamin Seggerson
Senior Manager
+1 202 466 9232

Robert Patton
Associate Director
+44 20 7659 8620

About NERA

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