FSA individual fines up by 47% in 2011

The FSA handed out a record-breaking £12.9m in fines against individuals in 2011.

The penalties slapped on individuals exceeded the equivalent 2010 figure of £8.8m by 47%, according to an analysis carried out by City law firm RPC (Reynolds Porter Chamberlain LLP).

As well as the total value increasing, the average individual fine paid also more than doubled from £149,358 last year to £313,655 this year with the largest penalty totalling more than £6m.

But the total figure for fines was down 25% on the £87.7m recorded in 2010 to £65.5m – the first fall since the credit crunch.

RPC partner Richard Burger said: “The FSA is targeting high-profile individuals in hard to prosecute cases. The figures show that the focus of the FSA’s enforcement strategy is to bring regulatory issues closer to home for company directors and other approved persons.”

“The FSA’s approach is based on making company directors feel that the buck stops firmly with them, which has a huge deterrent effect.”

“Even if the FSA’s enforcement team has got it wrong and a director or other FSA-approved person has not broken the rules, the reputational damage for the individual can be significant. This kind of regulatory crackdown makes directors feel like they are in personal jeopardy.”

“These fines are of life-changing proportions for company directors.”

“The fall this year can be attributed to the FSA focusing on individuals who never get fined the substantial, multimillion-pound fines that FSA regulated businesses do. The FSA’s focus on enforcement activity against individuals means that the total value of fines has fallen – but it doesn’t mean the FSA has taken its foot of the accelerator.”

But in a sign that regulated businesses are increasingly deciding to co-operate with the FSA during an investigation, 2011 saw a big jump in the number of fines reduced due to co-operation, 76% attracting a discount for co-operation compared to just 58% in 2010.

Burger said: “The cost to regulated firms of defending themselves during FSA investigations remains extremely high. When they find out that they are being investigated, they have to take a very objective look at the strength of their case.”

“They have to look at factors like potential reputational damage, the management time that will be spent on the investigation and whether they will have to undertake an expensive review of their previous business practices to identify possible failures.”

“More businesses are deciding to co-operate, perhaps because the FSA is seen as having sharper teeth.”