Daily Telegraph: Watchdog promises 'zero tolerance' on market abuse: “The largest market abuse penalty levied by the City's chief watchodog so far is the £17m on oil giant Shell over its mis-stated oil reserves.”

Thursday 19 Jan 2006

By Robert Miller (Filed: 19/01/2006)

Financial services companies were warned yesterday by a senior City watchdog to expect tougher enforcement action and fines for market abuse and misconduct.

In her first speech since joining the Financial Services Authority as enforcement director Margaret Cole said: "In appropriate cases we will seek to impose higher financial penalties. This will reflect the gravity with which we view market misconduct."

She added that supervised firms could expect "zero tolerance of regulatory wrong doing".

The largest market abuse penalty levied by the City's chief watchodog so far is the £17m on oil giant Shell over its mis-stated oil reserves. Only last June Citigroup was fined nearly £14m for serious rule breaches while household names such as Bank of Scotland, Lloyds TSB and Credit Suisse First Boston have also been fined.

The FSA director told delegates at the SII conference that co-operation with the regulator "is very important" in helping the FSA to establish the facts and negotiating "a speedy outcome".

But, she continued, companies should not expect an "automatic 'get out of jail' chit" just because they reported rule breaches themselves. Ms Cole argued that authorised individuals in firms should be in no doubt how seriously rule breaches were viewed by their own employers, let alone the regulator.

"It is not good enough for firms to give individuals the equivalent of a slap on the hand," she said. "We expect firms to foster a culture of zero tolerance of regulatory wrong doing. Serious regulatory misconduct should be a ground for summary dismissal. Bonuses should not be awarded to individuals who have been disciplined."

And in a clear warning to the top management of regulated firms she concluded: "We will not be impressed by decisive action against undersupervised, poorly trained junior staff while more senior, or more profitable, staff get away scot-free."

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