FCA financial fines in tenfold increase, number of bans drop
Only 18 people were banned from working in the financial services industry by the FCA in the past year – the lowest since the financial crisis, according to the data provided by RPC.
According to London-headquartered professional services firm RPC, just 18 people received so-called ‘prohibition orders’ from the regulator over the year to 30 September 2017, compared with 25 in the corresponding period in 2015/16 and 28 in 2014/15.
RPC’s figures showed prohibition orders peaked at more than 70 per year during the financial crisis and its immediate aftermath.
Richard Burger, a partner at RPC, said the FCA’s approach of punishing individuals rather than institutions – which it calls constructive deterrence – seemed to be paying off.
He said, “The sector should not mistake the fall in prohibition orders as the FCA starting to go soft; the regulator will not hesitate to ban individuals if it uncovers misconduct.
“The FCA has made it clear that senior individuals are now responsible for misconduct in their firms, and it looks like the loud voicing of that threat is now paying dividends. The FCA will hope to see a far-reaching change in behaviour in the financial services sector as the senior managers and certification regime extends across all parts of the sector next year.”
This tough approach will be extended in 2018, as many thousands of less-senior financial services workers will be brought into the scope of the FCA’s senior managers and certification regime (SMCR).
This regime that was introduced in March 2016 makes individuals responsible for failings in the conduct and competence within financial services firms, and includes substantial fines and other penalties. So far it is only applied to senior leaders in larger financial services businesses.
“The new SMCR will put many more individuals working in Financial Services onto the FCA’s radar. The FCA’s ‘constructive deterrence’ business plan relies on holding virtually everyone, not just senior managers, to account. SMCR and its conduct rules will cover most financial services staff in some way”, added Burger.
“We may well see more behavioural change next year as the Senior Managers Regime is extended to almost the entire sector.”
“There is always a lag between the commencement of an enforcement investigation and a public outcome. Seeking the prohibition of an individual is not a step taken likely by the FCA. Under the FCA’s new enforcement process, the whole of the FCA investigation is subject to strict legal scrutiny before meaningful settlement discussions begin with an individual.”