Financial firms that fall foul of the U.K’s lead regulator face a three-fold increase in fines under its plan to get tougher with wrongdoers.
The Financial Services Authority (FSA), which said recently it wanted firms to
be more frightened by its enforcement powers, said its
proposed new penalty regime reflected its determination to change behavior.
The regulator said it was responding to concerns that financial institutions were repeatedly failing to raise their standards and comply with its regulations on mis-selling products to consumers and market misconduct. It wants to ensure that fines better reflect the scale of the wrongdoing and that any profits made are clawed back.
Under the new penalty regime, the regulator would change the way it calculates the size of a fine. A firm could be fined up to 20 percent of the income it generates from a product or business area where wrongdoing is discovered.
In market abuse cases, individuals could be fined up to 40 percent of their salary and benefits (including bonuses), with a minimum penalty of approximately $162,000.
“By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules,” said Margaret Cole, director of enforcement at the FSA.
Among the largest fines ever imposed by the FSA was a $7.87 million penalty for insurance company Aon. The regulator found that it had failed to have sufficient internal controls in place to prevent $7 million of “suspicious payments” being made to overseas firms and individuals. The fine included a 30 percent discount because the company cooperated with the FSA.
The new penalty regime is subject to consultation until October.