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Trends in Regulatory Enforcement in UK Financial Markets Reports

Wed Jan 16 00:00:00 UTC 2019
Erin B. McHugh and Kanchan Pathak

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 mid-year report, NERA Associate Director Erin B. McHugh provides an in-depth analysis of the first six months of the regulator’s 2018/19 financial year, including: 

  • The continuing increase in the FCA’s use of non-pecuniary enforcement measures against firms, as well as redress schemes agreed with firms to compensate victims of alleged misconduct. 
  • The increasing proportion of fines issued against individuals rather than firms. With the Senior Managers and Certification Regime (SM&CR) coming into full effect in 2019, we may continue to see increased enforcement activity against individuals going forward.
  • The FCA's current focus on the timeliness and accuracy of capital market disclosures, as evidenced by recent enforcement actions and ongoing investigations. Using a hypothetical example, we explain how economic experts estimate economic loss due to an alleged misrepresentation or omission by a company. 

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

      2018/19* 2017/18 2016/17 2015/16 2014/15 2013/14
                 
Total Number of Fines 7 16 19 32 51 49
                 
  Individuals 5 10 12 15 24 22
    Market Integrity Violations 1 5 3 0 3 4
    Customer Protection Failures 2 0 4 9 11 7
    Compliance Failures 1 4 4 5 8 3
    Other Fraud or Misconduct 1 1 1 1 2 8
                 
  Firms 2 6 7 17 27 27
    Market Integrity Violations 0 3 1 2 2 3
    Customer Protection Failures 2 2 6 10 12 22
    Compliance Failures 0 1 0 5 13 2
    Other Fraud or Misconduct 0 0 0 0 0 0
                 
                 
Aggregate Fines (£ Millions) 2.5 69.9 181.0 890.2 1,410.3 420.8
                 
  Individuals 0.9 0.9 0.9 16.2 7.1 3.9
    Market Integrity Violations 0.0 0.6 0.1 0.0 0.6 1.3
    Customer Protection Failures 0.5 0.0 0.1 14.9 2.0 1.0
    Compliance Failures 0.3 0.2 0.7 1.3 1.9 0.1
    Other Fraud or Misconduct 0.0 0.0 0.0 0.0 2.7 1.5
                 
  Firms 1.6 69.0 180.1 874.0 1,403.1 416.9
    Market Integrity Violations 0.0 31.5 0.0 226.8 105.6 127.0
    Customer Protection Failures 1.6 3.0 180.1 337.6 89.4 146.7
    Compliance Failures 0.0 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



*From April 2018 to September 2018.