The number of firms being found guilty of wrongdoing by the Financial Services Authority (FSA) has fallen in 2005, law firm Simmons & Simmons has said.
The FSA denies it has reined back its investigations
It calculated that the number of firms censured so far this year is 19, compared with 81 for the whole of 2004.
Late last year the FSA was criticised by an independent tribunal for "defective" enforcement procedures.
But the FSA insisted that the fall reflected market conditions rather than a policy of it acting more cautiously.
"We don't judge ourselves by how many fines we impose. The number and level of fines simply reflects what is going on in the market," FSA spokesman Rob McIvor told BBC News.
"At certain times we carry out more investigations, while at other times there are fewer cases in the system."
Mr McIvor added that any suggestion that the FSA was running scared and had reined in enforcement action was "half-baked, wishful thinking."
Last December, insurer Legal & General took the FSA to the Financial Services and Markets Tribunal over a fine imposed for mis-selling endowments.
It was the first time a major bank or insurer had taken the City regulator to the tribunal.
The insurer alleged during its submission to the tribunal that the FSA investigation had been unfair.
The tribunal concluded that mis-selling had taken place but in far fewer cases than had been presumed by the FSA investigators.
As a result, the tribunal said that the fine imposed on Legal & General should be cut from £1.1m to £575,000.
But the tribunal, while cutting the fine roughly in half, decided that the FSA's decision to impose a fine had not been unreasonable and that L&G should pay its own legal costs.
However, the tribunal reiterated its view that the FSA's approach to the case had been opaque and subjective.
Following the tribunals decision a review of the FSA's enforcement procedures was announced.
The results of the review are due to be published in July.