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Insider traders, market manipulators and financial fraudsters face much bigger fines in the future under new plans revealed by the City watchdog today.
The Financial Services Authority (FSA) said it wanted to create a bigger deterrent against City crimes and its new rules would effectively treble the scale of many fines it imposes.
“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,” said Margaret Cole the FSA's director of enforcement.
She described the new scale of fines as using a more “consistent and transparent framework for calculating financial penalties” than the current regime.
The new rules will see firms fined as much as 20% of their income from the product or business line which is found to be in breach of rules.
That would mean substantial increases on fines that have been issued in the past. For example, under the new plans, Thinc Group ,which was fined £1.28 million last year for failings in its subprime mortgages business, would have actually received a fine of between £4 million and £7 million.
Similarly, Alliance & Leicester's £7 million fine (discounted from £10 million) a year ago for failures in its telephone selling of payment protection insurance, would come in much higher at somewhere between £30 million and £35 million.
Individuals who are found guilty of non-market abuse breaches of FSA rules could face being fined up to 40% of their salary and benefits including bonuses.
A new minimum level of fines for market abuse including insider trading will be set at £100,000.
This would take actions against individuals to new levels.
The biggest ever fine against an individual was the £750,000 imposed on former GLG hedge fund manager Philippe Jabre who was found guilty of short-selling shares based on inside information. Even that fine was almost certainly a fraction of Jabre's career earnings at GLG.
The next highest fine for market abuse on an individual was for the former British ambassador and Falkland Islands Governor Richard Ralph. He was fined £118,000 after admitting to insider trading in Monterrico Metals, an AIM-listed mining company which he chaired.
Cole said: “These proposals are an important step in pushing forward our ethos of credible deterrence. 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.”
The new rules are up for consultation and are expected to come into force next February.
Reader views (13)
But how about doing your job in relation to everyday financial advisers who advised not for the benefit of the client, but to primarily benefit their pockets?
You require reams of records to be kept, but do nothing to stop the churning and bad advice givers who are more interested in benefiting themselves than the client.
It seems to me that you are more into to making good sounding sound bites than actually doing anything the abuses, and when complaint is made, more concerned in exonerating the provider than delivering a just decision.
Given the information that has come out about the FSA's role in the financial collapse (failure to take action, knowing of the bubble being about to burst), better that they be renamed NFFP (not fit for purpose) and be consigned to the bonfire.
- Hugh, Middx
Bet they never fine anbody. This is window-dressing. It's the banks wot rule this country NOT the govt!
- Michael Spencer, Toronto, Canada
Come off it with the middle class imposing heavier fines on greedy rogueish barrow boys! No one is going to swallow the line that it was the lesser classes in the banking trenches who brought us down when clearly it has been the corporate generals who are culpable.
Even Madeoff didn't manage to nearly destroy an entire economy in the way that the incompetence of US and UK banking leaders did - virtually all of whom are products of each country's elite secondary and tertiary schooling systems (asking serious questions of what actual leadership these people have been taught if any).
Taxpayers (and ex taxpayers who have been made redundant) will only take Government and regulators utterances seriously when they start suing the likes of Goodwin and Hornby and their fellow directors in a time when never have so many been bankrupted by so few.
- Jim, London
Mike from London sums it all up!
plus how do we monitor those who are monitoring (as said by Mr.Port)? I think it'll be another Parlimentry style party, but in a different form....yeehaa!!
another big joke really, what a waste of time. i'm sure the newspapers will love to hear more.
- Peter Cheung, ludlow
So they are going to make the fine's bigger. What is the point? They will just nick more! It's the culture of thieving and nothing is done about it. Look at the 3 Lloyd's bankers, done nothing wrong in UK but have to do time in America for theft of assets. "Who's got it wrong Boss"
- Mike, London
The FSA doing something? Pardon me if I have a quick chuckle.
- Minnie Ovens, London, UK
Any fine they imposed on them; will be dwarfed by the profitable thefts committed by them.
If you want to clean up the Financial Sector; make it a minimum 20 years jail on conviction, and full confiscation of all assets owned by them and their spouses etc; then you might see an honest financial sector once again, but punny fines will just be considered as another form income tax by the fraudsters, much like an asbo is to a hooligan.
Jack Straw is hard on old man Ronnie Biggs; let’s see him get hard on his friends for a change.
But don't hold your breath where Jack is concerned; he is a man for all seasons.
- Mickinlondon, london.
The FSA Ha Ha Ha.
Please dont make me laugh.
They are a joke.
- James, Singapore
And what are the regulators doing about senior bankers who are primarily responsible for the current economic recession ? Nothing whatsoever.
It's very easy for the regulator to want to give the impression of appearing tough on the usual suspects of hedge funds and traders, who are almost presumed guilty until proven innocent.
Perhaps this is why one satirical magazine refers to the FSA as the Fundamentally Supine Authority. In an age where a certain bank took 'tough' action against an individual for making money without following normal procedure, the same bank required taxpayers money to survive a crisis of its executives making, yet those executives walked away very wealthy, the regulators might wish to consider looking at the very top for actions which are doing far more damage to the wider economy, than any insider trading scandal has to date
- John, Twickenham
So, from the outfit that completely failed to take notice or action of all the City and BOE warnings about Northern Rock and RBS.....
- Sandy, London
As a regulatory body you should have implemented this procedure many years ago and not after the horse has bolted.
- Frank, Copenhagen, Denmark
I bet the crooks are shaking in their boots, nobody upping the fines if you can't catch them and successfully prosecute them. The FSA's record for successful prosecutions compared to the SEC's is simply diabolical.
- Matthew, Ware, Herts
And who is monitoring the monitors.?
- Mr S.Port, London
