The Guardian: Damned in detail - but let off lightly: Shell faced far higher penalty in the US: The Financial Services Authority's judgment of the Shell reserves scandal is damning both in detail and conclusion, accusing the company of "unprecedented misconduct". (ShellNews.net)

Wednesday August 25, 2004

The Financial Services Authority's judgment of the Shell reserves scandal is damning both in detail and conclusion, accusing the company of "unprecedented misconduct".

To a degree, the "unprecedented misconduct" has been met with an unprecedented punishment. The £17m fine slapped on the company is more than four times the previous record for an FSA sanction.

Unprecedented it may be, but will it hurt? And, by meting out a £17m fine on Shell, has the FSA raised the bar when it comes to handing out punishment? Or has it set a ceiling?

The FSA makes it clear that Shell would have faced a much higher penalty but for the extent of its cooperation in the investigation. So the FSA could have imposed a stiffer sanction but decided against it.

Contrast that with United States regulator the SEC, with which the FSA worked closely and which, presumably, got the same cooperation. It deemed $120m (£66m) a more fitting fine for a company that makes £1bn in profits every six weeks. The FSA might argue Shell broke different rules in the different jurisdictions, but the plain facts of the case are common to both.

The FSA may have made a rod for its own back, too. In future any company facing a bigger than Shell-sized sanction, either in actual or relative terms, is going to dig out the FSA judgment on the oil company and seek to measure its misconduct, unprecedented or otherwise, against that benchmark.

There are risks in taking a "punishment fits the pocket" approach to justice, but in this case the FSA has erred on the side of caution.

http://www.guardian.co.uk/business/story/0,,1290046,00.html