FCA to refocus and clamp down on individual misconduct

Here’s why

There has been a sharp fall in the number of individuals working in financial services being referred to the FCA’s Regulatory Decision Committee (RDC), dropping 64 per cent to 13 in 2017 – down from 36 in 2016, says RPC, the City-headquartered professional services firm.

RPC says that the RDC is an independent panel that hears disputes relating to the FCA’s findings against firms and individuals. There were 476 businesses referred to the RDC in 2017, up from 289 in the previous year.

One of the FCA’s key objectives is to hold individuals to account for their regulatory failings in order to pursue its credible deterrence objective and reduce misconduct in the financial services sector.

RPC explains that the RDC makes decisions on behalf of the FCA relating to enforcement actions against regulated firms and individuals, as well as authorisations.

However, RPC adds that there were only 8 fines issued by the FCA against individuals in 2017, down from 15 in 2016. The value of those fines dropped from £16m to £435,000 over the same period.

Despite the fall in referrals of individuals to the RDC, Parham Kouchikali, Partner at RPC, comments: “Anyone who thinks that the FCA has gone soft on individual misconduct may be in for a rude awakening.”

“In practice, we are seeing ever increasing numbers of FCA investigations into individuals, particularly the senior management of financial services firms.”

“The FCA has recently publicly reaffirmed its commitment to pursuing individual responsibility vigorously and it won’t want to leave itself open for criticism for not pursuing cases against individuals.”

“We expect significant increases in referrals to the RDC in the coming years - not only due to the projected increase in the number of investigations into individuals, but also due to recent changes to the FCA enforcement process that mean discounts on penalties will no longer be forfeited by individuals and firms if they dispute the FCA’s findings and refer their cases to the RDC.”

Any temporary fall in FCA action against individuals could partly be due to the lingering impact of organisational disruption at the FCA which saw it headed by three different CEOs in just over a year. With a new Chief Executive in place for over a year and a half, the FCA enforcement activity should now be running at more normal levels.

Parham Kouchikali continues: “The FCA remains open for business and we anticipate greater enforcement action in the coming months against individuals.”

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