City regulator to punish wrongdoers more harshly under new plans

19th December 2014


The City watchdog will be forced to come down harder on financial companies that flout its rules.


The government is planning to overhaul the Financial Conduct Authority (FCA) enforcement process after a review.


It has published recommendations, which would also apply to the bank regulator the Prudential Conduct Authority (PRA), to scrap discount on fine for early payment and working with the regulator in investigations. Often a fine will be reduced by up to 30% if companies who have done wrong co-operate with the regulator.


The government said it wants to make sure enforcement decisions taken by the FCA are fair and transparent and present ‘credible deterrence’.


The FCA said earlier this month that it would review how it penalises wrongdoers and calculates fines.


The scrapping of penalty discounts is just one of 39 recommendations made. They also include a faster procedure for moving wrong doers into the Upper Tribunal and increased publication of the reasons the regulator is starting investigations.


The government report said: ‘The outcome will be increased efficiency through greater discipline, and a faster understanding for all participants in the case, leading to a better prospect of early resolution.


‘Alongside this, firms and individuals should be expected and encouraged to admit wrongdoing at an early state. And discounted financial penalties should only usually be available within in the initial settlement window.’


Currently, those under investigation are given the opportunity to reduce their fine at three stages, equating to a reduction of 30%, 20% and 10% depending on how early they admit their failings.


Chancellor George Osborne said the changes would enhance the FCA and PRA’s capacity to deal with misconduct.


‘The review sits alongside the significant steps that the government has already taken to improve standards in banking and financial services, including by replacing the failed tripartite regulatory system,’ he said.


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