13Oct

The number of people banned by the Financial Conduct Authority (FCA) from working in financial services roles rose to 27 in 2015, the first such rise in four years. Although the figure is way below the record high of 72 in 2010, the fact that the number of bans has risen when compared to 2014 suggests that the watchdog is placing more emphasis on individual accountability.

The data was compiled by law firm Reynolds Porter Chamberlain, and the firm’s partner Richard Burger suggested that taking action to ban individuals may be a more effective deterrent than fining the firm, something that in many cases has a big impact on a firm’s ordinary shareholders.

Mr Burger commented:

“Many at the FCA believe that it is prohibition orders, fines against individuals and prison sentences that act as the best deterrent. However, these are harder to come by than some expect.

“There is still enormous pressure from politicians and other commentators on the FCA to bring more enforcement cases.”

He added that in recent years the regulator’s enforcement division has had to devote considerable resources to its investigations of banks’ rigging of LIBOR and the foreign exchange markets. Now that the investigations into wrongdoing in this area appear to have finished, Mr Burger suggested that the FCA is now able to carry out a greater number of investigations.

“Now work in that area has been wound down, it has freed up enforcement staff to pursue other matters,” added Mr Burger.

These figures are consistent with data previously issued by another law firm, Clyde & Co. Its data showed that the FCA imposed £17 million of fines on individuals in the 2015/16 financial year, a massive increase from the equivalent figure of £7 million in 2014/15.

Clyde & Co partner John Whittaker said:

“Although it is difficult to draw firm conclusions from just three years of statistics, it does suggest that the regulator now appears to be turning its focus towards individuals. This is supported by recent regulatory changes which are aimed at holding individuals to account for any behaviour that strays outside of the regulator’s rule book.

“The senior managers’ regime has sent shockwaves throughout the financial services industry. In the past senior figures at financial services companies have largely managed to avoid punishment for their own and their team’s actions. That has now all changed.

“Companies will be hoping that the new rules help to ensure employees play by the book but are not put off from taking calculated risks in order to boost profits.”

The FCA introduced the Senior Managers & Certification Regime (SM&CR) – which Mr Whittaker referred to in his comments – in the banking sector in March 2016. It will apply to all authorised firms from 2018. However, the latest information on the enforcement action the FCA is taking shows that, even under the existing regime, the era of individual accountability has already arrived.

At present, all individuals carrying out ‘approved persons’ roles need to be individually ratified by the FCA before they commence their duties. Under the SM&CR, the firms themselves will need to carry out their own assessment on at least an annual basis.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.