Anyone who believes the Financial Conduct Authority was treading water in terms of its approach to enforcement should think again. The regulator has issued some swingeing penalties and in the last six months to the end of June, some 10 fines had a combined value of £319.2 million – the figure is five times the annual total for 2018 of £60.5 million, while the combined total for the previous three years was still only £311 million.
This is indeed a steep rise, with more fines being imposed in the first half of this year than in the past three full years. Notable wrong doers included:
- Standard Chartered – the investment bank was hit with a fine of £102 million for failures in its anti-money laundering controls, which breached sanctions in place against Iran.
- Bank of Scotland – a fine of £45.5 million was issued because of the bank’s failing to disclose details of a serious fraud, which took place at its Reading branch. A number of small businesses were asset stripped and forced to cease trading, resulting in ruination for their owners. Six former staff were subsequently jailed.
- Carphone Warehouse – the retailer was fined £29 million for mis-selling phone insurance over six and a half years. After a whistleblower revealed their concerns, the FCA launched a probe and found that many customers were being sold insurance which they did not need – they were already covered by either home cover or via a packaged bank account.
It certainly appears this is far from being a blip. The regulator’s annual report showed that at 31 March 2019, the number of enforcement cases open – at 650 – was 31% higher than at the same time in 2018. These related to 101 connected to retail conduct, five to retail lending, 70 for culture and governance and 25 related to mis-selling. So, what has prompted the tougher stance? There is no doubt that the government’s influential Treasury Select Committee has been sharply critical of the regulator’s performance including claiming it had been “asleep at the wheel” when investors were prevented from withdrawing their money from the Woodford Equity Income fund. The once ‘superstar’ fund manager has now fallen from grace and a suspension is underway, with class action also threatened.
Meanwhile in May, a group of MPs said that FCA chief executive Andrew Bailey should resign following the collapse of Capital & Finance, resulting in investors losing around £236 million. It was said the regulator had been warned of problems three years ago but had failed to act. A probe is now underway of the mini-bond provider, which is also believed to have misled investors with marketing promotions that promised high rates of returns and too few warnings about risk.
Certainly, those who have lost out may feel that more action from the FCA will not help their situation. And Bailey has not only hung onto the top position but is also being tipped to take over the ultimate in plum City jobs, as Governor of the Bank of England, taking over from Mark Carney. Consumer groups will also be continuing to keep the pressure on the FCA and there will be no let-up even after the spectre of PPI mis-selling has gone post 29 August. Bailey himself has said that products such as mini-bonds, funeral plans and the global restricting group services offered by Royal Bank of Scotland were not subject to direct regulation. Equally, the fact cryptocurrencies are moving more into the consumer sphere is also a cause for alarm. As such, there may be a widening of regulation.
The announcement of bigger fines and naming and shaming some of the biggest players will never be enough to absolve the FCA from all criticism. But pragmatists will also argue that the regulator cannot always act quickly enough to prevent harm. Working on consumer education and the launch of a new register of regulated firms should have a positive impact on individuals making wiser choices. As for the providers who have been fined and castigated, at least the FCA is showing it has shaken off the FSA’s mantle, which was seen as a soft touch regulator. The pressure now is for it to act faster and to be seen as thinking ahead if it is to start winning more plaudits, rather than belated fines.