Thus the FCA is flexing its biceps, keen to muscle in with more aggressive regulation to demonstrate it is up for the job.
Looking at the list of fines on the FCA website, with a glance back at the FSA archive, the actual number of fines has not gone up.
In 2013, the FCA (as the FSA until April) put out 45 fines, compared to 53 in 2012. On the other hand, despite a decrease in issued fines, the total monetary sum has rocketed by 52% year-on-year, from £311.6m in 2012 to £472.3m in 2013.
Intervention
The FCA has shown itself to be increasingly interventionist on products, design and pricing and more aggressive on penalty policy, according to Iain Coke, head of financial services faculty at the Institute of Chartered Accountants in England and Wales (ICAEW).
The FCA crackdown has two sides, to punish bad behaviour and to act as a deterrent. However, Coke notes that there is an inherent risk that escalating fines will lose their impact. The next fine needs to be bigger to have the desired impact, thus the initial impact diminishes.
While reckless people are not necessarily put off by fines, fines have made cautious investors super compliant. Similarly, institutions have also become more conscious over potential wrong behaviour. In some cases, this is likely lead to a carved-down range of product offerings where the cost of regulation and compliance, alongside the penalty regime, constrains businesses.
RDR
Since the Retail Distribution Review was rolled out earlier this year, financial advisers have been under sharper inspection from regulators. Not only have rules tightened in regards to how regulators are paid, they also need to be up to scratch with qualifications from accredited bodies such as the ICAEW.
“The FCA is monitoring, they talk to firms and accredited bodies about the status of adviser professionals. Not many have slipped under the net,” Coke said.
The FCA confirmed the checking process, but said when it comes to investment professionals the FCA looked at the type of market behavioural breaches occurred in, rather than at wealth managers specifically, when handling fines.
Divided views
The view on stringent FCA behaviour is divided, with some pointing out that the general pattern of fines has not changed because the FCA is acting primarily on previously established FSA methodology.
“It is doubtful that any FCA cases have actually been completed, having first started operating in April this year. Fine cases take at least a year,” Ian Cornwall, director of regulation at the Wealth Management Association, said. He added that in order to balance the picture, one needs to “strip out the big fines”, referring to recent Libor and bank fines.
