The FCA has published details of the financial penalties imposed during 2020 showing a significant fall on previous years in the number of penalties imposed and aggregate value. It also calls for greater resources to help tackle frauds and scams.
In 2020 the FCA imposed 11 fines totalling £192,570,018. Despite the number of fines reducing significantly there was still a range in the issues which resulted in penalties being imposed. Firms were fined for client asset rule breaches, unfair treatment of retail banking customers, unsuitable pensions advice, misconduct in the wholesale broking and investment banking sectors, unfair treatment of mortgage and consumer finance customers, breach of the short selling disclosure rules, unfair treatment of customers in the claims management sector and one market abuse case concerning an individual.
Financial penalties are only part of the range of regulatory responses available to the FCA. The fact that there has been a significant fall (over 50%) in the aggregate value compared to 2019 does dispel the myth that the ambition of the FCA is to generate revenue from the enforcement actions it brings. The FCA has also brought proceedings against unauthorised firms and fraudulent introducers to secure restitution orders in favour of customers. A significant number of prohibitions and cancellations of permissions were also issued.
What is perhaps more significant is the fall in the number of Final Notice issues which involved a financial penalty. Covid-19 will undoubtedly have impacted the ability of the FCA to pursue enforcement action efficiently and effectively. However, of the cases concluded, many of those related to events which took place a number of years ago in respect of (largely) admitted failings and where remedial action was taken promptly. That on its face makes it difficult to understand why it has taken so long for matters to be concluded. Such delays unfortunately increase costs and in the retail sector can hinder the completion of remedial steps which is not in the interests of the protection of consumers. Firms who have made mistakes and accept their failings generally want to address matters openly, cooperatively and swiftly. Over the last few years lessons have been learned and there has been a change in approach to issues of compliance and culture in many organisations who have put these front and centre of how they operate.
The next round of enforcement statistics will be interesting given that the figures published earlier in 2020 showed a significant increase in new cases commenced compared to those that had been closed during the year. It will be surprising if this trend changes in 2021.
Also what is significant and particularly depressing is the extent to which the FCA’s resources are having to be directed to addressing fraud and scams which have continued to increase unabated and where the FCA’s enforcement armoury can be of limited utility. In the first week of 2021 the FCA has issued 11 warnings regarding clone firms targeting consumers and 2020 saw a significant increase in investment and other frauds in the financial services sector. It is therefore unsurprising that Mark Seward, Executive Director of Enforcement at the FCA, has begun the year calling for the provision of greater resource to focus on tackling fraud and the need for “saturation” coverage as to the nature and extent of scamming activity.