During 2014, the UK’s Financial Conduct Authority (FCA) opened around 20% more investigations than in 2013, according to today’s Financial Times (subscription required). This is in line with the stricter new regime supposedly being introduced by the FCA, compared to its supposedly less confrontational predecessor, the FSA.

It is tempting to draw conclusions about the supposed toughness, or otherwise, of the new agency from this data. Tempting but wrong. The 109 investigations initiated in 2014 are still fewer than the 134 started in 2012, the last year of the FSA’s existence.

More significantly, the number of investigations in any period is less important to regulated firms than the types of investigations opened, the nature of the targets and the way the investigations are resolved.

So, for example, the value of penalties imposed by the FCA in the last 12 months far surpasses the levels historically imposed by the FSA (see our recent comment on current FCA fining policy). Even this fact is context-specific, though, since it depends on the nature of the cases in question. There are unlikely to be major benchmark-rigging scandals every year, for example.

Our overall experience of the FCA leads us to identify three broad trends in regulatory enforcement which are most relevant to our clients in the regulated financial services industry:

  1. The tendency of the FCA to target compliance procedures more aggressively, even if there is no proven wrongdoing or harm, with the result that larger firms will see more of the FCA than before.
  2. The tendency of the FCA to seek increasingly higher penalties for breaches, in part as a deterrent.
  3. The tendency to expand its regulatory activity into non-traditional areas, such as anti-corruption, un-regulated trading and competition.

Of course, longer term, there is no guarantee that all or any of these trends will continue. Quantitative data will be very important in testing any theories about regulators or markets. But we should beware of simplistic ‘enforcement up / enforcement down’ narratives based on highly diverse data-sets and short time-periods. The picture is almost always much more complex.