FCA’s Enforcement in 2020 – Analysis of the Year-end Stats
16 December 2019: The UK Financial Conduct Authority has issued fines of £391.8m so far this year, which is notable when compared to the total of £60m in 2018. Standard Chartered topped the league with a £102m fine for financial crime control failures (and the bank had to pay $1.1bn for sanctions and AML abuses globally such as a diplomat opening an account with $500,000 of cash from a suitcase). Citi was up there too with a £44m penalty for regulatory reporting failure.
The real contributor to the total was, however, £163m for mis-selling of financial products. £63m of penalties represented companies that mis-reported financial data (Goldman Sachs was fined £34.3m for failing to provide complete and timely data on 213m transactions over 10 years; UBS was fined £28m for mis-reporting failures).
It has taken some time for these enforcement actions to work their way through the system; many were very complex to bring and pursue.
There has been a rise in actions related to a failure to disclose the risk of, and suitability of, higher risk financial products (eg mini-bonds) as consumers seek better returns in a low interest-rate environment. Standard Life took a £30.8m hit for mis-selling pension annuities. Carphone Warehouse was slapped with a £29.1m fine for mis-selling insurance. One individual got a whopping £76m fine for his role as chief executive of the now defunct ‘death bond’ firm, Keydata.
FCA still has close to 700 investigations open and the average settlement time has now increased to 29 months based on data for 2018 and 2019.
The total is the highest racked up by the FCA since 2015 when it issued £905m in fines. 17 of the fines this year were for more than £10m compared to just two over that amount last year. The FCA has often preferred to use its enforcement tools to identify harm or potential harm and work with firms to remove or correct the cause or outcomes without formal enforcement. It differs from other regulators and self-regulatory organisations, particularly in the US, in that regard. However, “this appears to be changing and the FCA has just added the Senior Managers & Certification Regime or SMCR to its toolbox,” says Sam Tyfield [etc] “and we should expect to see a larger number of penalties and bans in the coming years pour encourager les autres (otherwise known as ‘improving culture and conduct in the industry)”.
The FCA has often preferred to use its enforcement tools to identify harm or potential harm and work with firms to remove or correct the cause or outcomes without formal enforcement. It differs from other regulators and self-regulatory organisations, particularly in the US, in that regard. However, “this appears to be changing and the FCA has just added the Senior Managers & Certification Regime to its toolbox,” says Sam Tyfield, partner at Vedder Price, “and we should expect to see a larger number of penalties and bans in the coming years to set an example for others (otherwise known as ‘improving culture and conduct in the industry)”.
