UK FCA Proposes Plan to Increase Fines

The UK Financial Conduct Authority (FCA) is overhauling its penalty framework to enable larger fines, following a series of court rulings that forced it to reduce penalties against individuals, as reported by the Financial Times.

The reforms, outlined in a consultation published last week, address two specific vulnerabilities exposed by recent legal challenges. First, the FCA will exclude canceled or unpaid bonuses from its baseline income calculations. Second, the regulator is expanding its ability to penalize high-net-worth individuals who report low annual earnings.

“This change will make clear that we may increase a penalty in all cases where it may not act as a deterrent given an individual’s income or net assets,” the FCA said.

The minimum fine for serious market abuse will also rise from £100,000 to £150,000, adjusted for inflation every two years. “Especially striking is the proposal to take overall net worth into account,” said Simon Morris, a Partner at law firm CMS. “Fining a rich crook in the millions will send out a very powerful message.”

In our 2022 Deeper Dive report, “The Costs of Misconduct,” we discussed the massive fines and societal impact stemming from misconduct in the financial sector, and whether they can be treated even tacitly as “costs of doing business.”