Page last updated at 11:28 GMT, Monday, 6 July 2009 12:28 UK

City wrongdoers face bigger fines

FSA headquarters
Fines for miscreants will be much stiffer from next year

The Financial Services Authority (FSA) wants to impose much bigger fines on firms or individuals who cheat their customers or engage in insider dealing.

It says its current level of fines have not been high enough to deter wrongdoers and the new fines will treble its penalties in some cases.

Firms could be fined 20% of turnover, with individuals liable to penalties of 40% of their salary and bonuses.

Individuals guilty of "market abuse" will be fined a minimum of £100,000.

In the last financial year the FSA imposed a record £27.3m in fines, up from just £4.4m the year before.

It also banned a record 58 people from carrying out jobs it regulates, compared to 30 the year before.

'Real difference'

Margaret Cole, the FSA's director of enforcement, said her organisation needed a stronger deterrent.

"By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules," she said.

"Moving to this new framework will enable our enforcement policy to continue making a real difference to consumers and to changing behaviour in the financial services sector," she added.

The FSA's proposed new scale of fines is going out to consultation with the plan likely to be implemented in February 2010.

"The new plans reflect the FSA's determination to change behaviour and address concerns that firms are repeatedly failing to improve standards e.g. in relation to mis-selling to consumers and market misconduct," it said.

"They will also ensure that fines better reflect the scale of the wrongdoing and that any profits made from the breaches are clawed back," it explained.

Fines

The past financial year has already seen a tougher approach from the FSA.

It fined or banned 23 fraudulent mortgage brokers, with some being investigated and arrested by the police, and three being fined more than £100,000 each by the regulator.

Fines totalling £9.5m were levied on 20 firms for exposing customers to the risk of bad advice.

The mis-selling of payment protection insurance led to 10 firms being fined for mis-selling payment protection insurance (PPI), with the Alliance & Leicester being fined a record £7m.

So far a total of 20 firms have been fined £11.8m over PPI.

Charges of market abuse led to fines of nearly £5m, including a £4m fine on the Winterflood market making firm.

And three firms were fined a total of £735,000 for not publishing price sensitive information to stock market investors quickly enough.

"Continuing breaches in market conduct appear to have convinced FSA that action against individuals has a greater deterrent effect than merely going after their employer," said Alison McHaffie of city law firm Cameron McKenna.



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