Trends in Regulatory Enforcement in UK Financial Markets Reports

31 July 2019
By Erin B. McHugh

NERA Economic Consulting maintains a proprietary database of fines and non-pecuniary enforcement by the Financial Conduct Authority (FCA). In our annual Trends in Regulatory Enforcement in UK Financial Markets reports, we present detailed analysis of these data, supplemented with data on redress schemes agreed with the FCA and fines associated with Deferred Prosecution Agreements (DPA) agreed with the Serious Fraud Office (SFO), to reveal trends that may not be apparent from a review of individual cases.

In our 2018/19 year-end update, NERA Associate Director Erin B. McHugh provides a number of insights into the FCA’s recent enforcement activity, including:

FCA fine activity increased in the second half of 2018/19, bringing aggregate fines imposed on firms and individuals to £227.3 million for the full financial year. This total was more than three times the aggregate amount of fines in the prior financial year.
Consistent with the pattern observed in 2017/18, the vast majority of firm fines in 2018/19 were imposed in the second half of the financial year, likely due to efforts by the regulator and firms to resolve matters before year-end.
In the first three months of 2019/20, fines against firms totalled £46.7 million, much higher than the £0.9 million in firm fines during the same period last year. If we again observe a (further) upswing in firm fines in the second half of the financial year, we may be on track for aggregate firm fines in 2019/20 to substantially exceed those in the two prior financial years.

Additional data on the number and amount of fines by period (including by category of alleged misconduct) are outlined in the table below.

			2019/20*	2018/19	2017/18	2016/17	2015/16	2014/15	2013/14

Total Number of Fines			3	17	16	19	32	51	49

	*Individuals*		0	9	10	12	15	24	22
		Market Integrity Violations	0	2	5	3	0	3	4
		Customer Protection Failures	0	2	0	4	9	11	7
		Compliance Failures	0	3	4	4	5	8	3
		Other Fraud or Misconduct	0	2	1	1	1	2	8

	*Firms*		3	8	6	7	17	27	27
		Market Integrity Violations	0	0	3	1	2	2	3
		Customer Protection Failures	2	6	2	6	10	12	22
		Compliance Failures	1	2	1	0	5	13	2
		Other Fraud or Misconduct	0	0	0	0	0	0	0


Aggregate Fines (£ Millions)			46.7	227.3	69.9	181.0	890.2	1,410.3	420.8

	*Individuals*		*0.0*	*80.2*	*0.9*	*0.9*	*16.2*	*7.1*	*3.9*
		Market Integrity Violations	0.0	0.0	0.6	0.1	0.0	0.6	1.3
		Customer Protection Failures	0.0	0.5	0.0	0.1	14.9	2.0	1.0
		Compliance Failures	0.0	79.6	0.2	0.7	1.3	1.9	0.1
		Other Fraud or Misconduct	0.0	0.0	0.0	0.0	0.0	2.7	1.5

	*Firms*		*46.7*	*147.1*	*69.0*	*180.1*	*874.0*	*1,403.1*	*416.9*
		Market Integrity Violations	0.0	0.0	31.5	0.0	226.8	105.6	127.0
		Customer Protection Failures	1.2	85.2	3.0	180.1	337.6	89.4	146.7
		Compliance Failures	45.5	61.9	34.5	0.0	309.5	1,208.1	143.2
		Other Fraud or Misconduct	0.0	0.0	0.0	0.0	0.0	0.0	0.0

*From April 2019 to June 2019.