There has been a 28% increase in the number of individuals being banned from working in the financial services industry by the FCA in 2017/2018.
The number of individuals banned by the Financial Conduct Authority (FCA) in the year to September 20, 2018, increased 28% from the preceding year, according to data from City-headquartered professional services firm RPC.
The number of such bans reached 23 in 2017/18, up from just 18 the previous year.
RPC attributes the rise in the number of prohibition orders to the FCA’s efforts to deter misconduct by individuals. The FCA also believes that punishments aimed at individuals may have a greater impact on improving the overall compliance culture at firms, rather than just issuing fines against the firms themselves.
Recently the FCA has disclosed that it spent a total of £300,000 in legal fees pursuing a case to ban one director. In addition, it spent a total of 4,777 man hours on that case between August 2015 and October 2018, RPC notes.
RPC forecasts that the number of prohibition orders could rise further in the coming years following the extension of the Senior Managers and Certification Regime (SMCR) to all financial services firms, which holds senior managers to higher standards of personal accountability than the current regime.
Introduced in 2016, the Regime currently applies mainly to the banking sector and makes senior managers personally accountable for wrongdoing in those institutions that occurs within the areas of the business for which they are responsible. By the end of 2019, senior managers at 47,000 financial services firms will be covered by the SMCR and they will be taking responsibility for the businesses that they run in an entirely new way. The expansion is set to cover all insurance firms and all financial services firms.
Let’s recall that, earlier this year, the FCA and FCA Practitioner Panel once again carried out a joint survey of regulated firms to monitor the industry’s perception of the regulator and to what extent it is meeting its objectives. The joint survey was conducted by Kantar Public on behalf of the FCA and the Panel. Fieldwork took place between January and March 2018. In total, 2,613 firms completed the survey.
Over the last year, there has been an improvement in the perception of the FCA’s performance against all three of its operational objectives (consumer protection; protecting the integrity of the financial system; promoting effective competition).
Just three in ten firms (31%) agreed that the FCA acts proportionately, so that the costs imposed on firms in their sector are proportionate to the benefits gained by the sector, with 38% of firms saying that they disagreed with this statement. This appears to be a particular concern in the Retail Investment sector. Half of the firms in this sector (51%) disagreed with this statement, a significantly higher level of disagreement than firms in other sectors.
In all sectors apart from Retail Investments, three quarters of firms agreed that FCA enforcement action in their sector(s) is effective at reinforcing the FCA’s expectations.