THE Financial Services Authority has secured far fewer scalps and imposed lower fines on rule-breaking firms since the botched Legal & General case.
The apparently softer stance of the chief City regulator is revealed in an analysis by the City law firm Simmons & Simmons. It comes just days before the Strachan Review is due to make recommendations on the future of the FSA’s powerful enforcement arm.
The FSA’s enforcement actions — quasi-judicial judgments against wrongdoers — numbered 81 last year. But in the first five months of this year they have dwindled to 19, an annualised rate of just 48.
The FSA was reducing penalties. Stripping out the extraordinary £17 million fine against Shell last year, FSA fines are on a sharp downward trend. The average company fine, which rose to a high of more than £1 million in 2003, has slumped to less than £300,000 in recent months.
Simmons also pointed to the “startling” number of recent cases decided by negotiated settlement rather than formally by the FSA’s Regulatory Decisions Committee. Almost 80 per cent of important cases are now being settled by horse-trading between lawyers of the FSA and the accused company, Simmons estimates.
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Robert Turner, a Simmons partner, said that the FSA had been bruised by the Legal & General case. The smaller fines were because the FSA was targeting smaller firms and because of the much greater willingness to negotiate, he said.
However the low fining record may be about to be boosted by a mammoth penalty expected to be levied on Citigroup for its alleged manipulation of the bond market last August.
The FSA said that it took whatever enforcement action was needed and set fines according to what was necessary.
The FSA was forced to halve a mis-selling fine on L&G after a tribunal found flaws in its enforcement systems in January.