The FCA and the future of credible deterrence in the financial markets

5 July 2012

At the FSA’s Enforcement Conference on 2 July, Tracey McDermott, acting director of the Enforcement Crime Division set out the FSAs record over the last 2 years and confirmed that there will be significant changes in the way in which the FCA regulates in the future: many of those changes are already starting to take place within the FSA.

Since January 2010 the FSA has:

  • Published 260 final notices and 16 decision notices (following power given in 2010)
  • Imposed penalties in excess of £248m, including £29m on individuals
  • prohibited 129 individuals from the industry
  • Obtained redress in excess of £290m (not including PPI) for customers of regulated firms
  • Secured criminal convictions against 10 individuals for insider dealing, with another 10 currently standing trial for market offences
  • Fought 22 disciplinary cases in the tribunal and succeeded in 16 (awaiting decisions in 5)
  • Dealt with almost 2,000 requests for assistance from overseas authorities
  • Taken action to tackle the threats presented by unauthorised business.

The FSA had experienced some failures during this period but she noted that a good enforcer cannot operate if it is not prepared to lose: this does not mean making rash or ill-considered decisions, however it was recognised that intervening earlier will be a test of that resilience and self-confidence.

Future FSA and FCA objectives include:

  • Effective enforcement, particularly focusing at senior management failures related to risk management, inappropriate sale of products and failures to prioritise the interests of consumers
  • Quicker response to emerging issues and increased early interventions by working with supervision and others on both thematic and firm specific work
  • Utilisation of new tools, such as the power to make rules to ban products on a temporary basis, and existing tools, such as own initiative variation of permission (OIVOPs)
  • Low tolerance for firms and individuals that are repeat offenders
  • Protecting the integrity of the markets through policing the wholesale as well as the retail markets
  • Educating customers in how to avoid losing money to fraudsters.

As the FSA faces its final months in existence, it is clear that a path has already been set for the FCA to be a more rigorous, active and pre-emptive regulator, for sanctions to increase (both for firms and individuals) and for increased use of criminal prosecutions even for the more difficult cases.

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