Underneath the top 10 - What can the FCA's 2015 fine data really tell us
Understanding external events and assessing the risk of occurrence within our own organisation forms an important part of any risk management framework. In the consideration of Regulatory Risk, the analysis of FCA enforcement activity provides us with an insight into the failings of other industry participants and an indication of which way the regulatory lens is focused.
There are plenty of cases to consider and it is well known that the number and magnitude of regulatory fines has sharply increased over the past decade. In 2007 fines totalled just ￡5m, however by 2012 the figure exceeded ￡300m, peaking in 2014 at ￡1.4bn. This past year the figure sat at a little over ￡905m. Whilst commentators may highlight a year on year fall in the region of 38% little should be read into this, particularly given that the 2014 figure was substantially inflated by fines handed out to 5 Banks relating to the same FX spot fixing issue - each being fined in excess of ￡200m.
In 2007 fines totalled just ￡5m, however by 2012 the figure exceeded ￡300m, peaking in 2014 at ￡1.4bn.
Of the ￡905,219,078 of fines issued during 2015, the top 10 accounted for ￡889,341,704 – a figure in excess of 98%. These fines and the stories behind them have rightly grabbed the column inches, however what of the other 29 fines, and what can they tell us about the direction of focus for the FCA's supervisory team for 2016.
The stand out figure from this cohort is that 22 out of the other 29 fines, representing a total cost of ￡6,689,474, were issued directly against individuals and not firms. Of this subset, 9 fines related to individuals breaching Principles of the Statement of Principle and Code of Practice for Approved Persons, accounting for ￡4,568,500 in fines. Compared to the 3 similarly classified fines issued against individuals during 2014, this statistic looks to support the regulators strong messaging regarding individual accountability that was so prevalent during 2015.
For the individuals concerned, not only are the fines substantial, but these are often accompanied by bans, preventing them from performing any function in relation to any regulated activity in the financial services industry.
During 2015 - ￡6,689,474 in fines were levied directly against individuals
As the focus upon personal accountability looks set to increases throughout 2016, for senior individuals and particularly those impacted by the introduction of the Senior Management Regime, the message is clear- the FCA mean's business. With the announced expansion of scope for the Senior Management Regime, it is clear that this is a trend set to continue.
Headlines from the 2015 fine data published by the FCA:
- 22 of 39 fines issued during 2015 were levied directly against individuals
- Fines against individuals reached ￡6,689,474
Of the 22 fines issues against individuals:
- 9 fines directly related to failures under APER
- 8 fines related to Principle level breaches
- 4 fines related to market abuse
- 1 fine related to a failure to demonstrate effective compliance, systems and controls
How can we help.
At AG we are well placed to support you navigate and respond to the regulatory agenda, guiding you with an industry leading level of Legal and Compliance Financial Regulation expertise.
For an informal discussion about how we can support you review and enhance existing Governance arrangements at an enterprise level, or in the provision of direct assurance for Senior Individuals, please feel free to contact us:
Brian McDonnell – Partner
020 7160 3512 // 07725 352917
Neville Cotton – Compliance Director (non-lawyer)
020 7160 3396 // 07872 675584
Sarah Herbert – Compliance Director (non-lawyer)
020 7160 3429 // 07730 193861
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Senior Technical Accounting Manager at TfL
9 年Great article Neville!