On July 6, the UK Financial Services Authority (FSA) published its consultation paper CP09/19 Enforcement Financial Penalties outlining its proposals for a more consistent and transparent framework for financial penalties. The proposals could mean some fines will triple in size.
The FSA stated that the proposals reflect its determination to change behavior and address concerns about firms’ repeated failure to improve standards. They will also ensure that fines better reflect the scale of the wrongdoing and that any profits made from behavior subject to penalty will be clawed back. The FSA emphasized the fact that its enforcement philosophy is “credible deterrence”. It aims to achieve this by focusing on cases that can make a real difference to consumers and markets, and using enforcement strategically as a tool to change industry behavior.
The main proposal in CP09/19 is for a change in the FSA’s policy on determining the level of financial penalties. The FSA intends to increase the level of penalties it imposes and also to be more transparent and consistent in the way that it sets penalties.
The proposed revised penalties framework will consist of the following steps: (i) removing any profits made from the breach; (ii) setting a figure to reflect the nature, impact and seriousness of the breach; (iii) considering any aggravating and mitigating factors; (iv) achieving the appropriate deterrent effect; and (v) applying any settlement discount.
The consultation will close on October 21, and any new policy is likely to apply to breaches committed after February 2010.