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July 6, 2009

FSA to treble some fines

by Gill Montia

Story link: FSA to treble some fines

As part of the credit crisis inspired regulatory shake-up, the Financial Services Authority (FSA) has announced plans to create a “consistent and more transparent” system of penalties for wrongdoers, which could mean some fines treble in size.

The move is aimed at ensuring penalties better reflect the scale of misdemeanours and that profits made in the process are clawed back.

Under the new proposals, fines will be linked more closely to income and be based on:

Up to 20% of the company’s income from the product or business area linked to the breach over the relevant period;

Up to 40% of an individual’s salary and benefits (including bonuses) from their job relating to the breach in non-market abuse cases.

For individuals in market abuse cases, a minimum starting point of £100,000 is proposed.

The total fine imposed will also take into account other factors, such as the desired deterrent effect and any settlement discount.

Margaret Cole, director of enforcement at the FSA, says: “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.”

The FSA promised a more proactive approach to enforcement in its recently published 2008/09 annual report, which also revealed that a record £27.3 million in fines had been levied during the year, compared to £4.4 million during the previous twelve months.

A consultation period on the latest proposals will close on 21st October and any new policy is likely to apply to breaches committed after February 2010.

 

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