The Times: City watchdog promises to bite offenders harder: “FINES for market abuse are to rise after City firms complained to the Financial Services Authority that the current level of penalties was an insufficient deterrent.”: “Others felt that Shell, which was fined £17 million for misleading shareholders over its oil and gas reserves for many years, got off lightly. Shell made enough last year to pay its fine in eight hours.”
Thursday 19 January 2006
By Christine Seib
FINES for market abuse are to rise after City firms complained to the Financial Services Authority that the current level of penalties was an insufficient deterrent.
Margaret Cole, the enforcement chief at the Financial Services Authority, told serious offenders yesterday to expect bigger fines in future.
“In appropriate cases we will seek to impose higher financial penalties,” Ms Cole said, adding that abusers should not see fines as merely another cost of doing business. Ms Cole said that she had been “spurred on” to raise tariffs because of pressure from City firms.
Investors burnt by the “Dr Evil” bond market manipulation scandal in 1994 were furious when Citigroup was found guilty only of the relatively minor offence of failing to exercise proper controls and fined £14 million.
Others felt that Shell, which was fined £17 million for misleading shareholders over its oil and gas reserves for many years, got off lightly.
Shell made enough last year to pay its fine in eight hours. Citigroup’s penalty was the equivalent of 13 hours’ profit. Excluding these largest two FSA fines, average penalties have actually dropped in size recently. Other big fines were £4 million against CSFB for attempting to mislead Japanese regulators, £2.3 million against Abbey for breaching anti- money-laundering rules and £1.9 million against Lloyds TSB for mis-selling precipice bonds.
Robert Turner, a regulation expert with Simmons & Simmons, said that he expected fines to rise “by perhaps 25 to 50 per cent” and that this was not a move to American-style sanctions, where fines can run into hundreds of millions of dollars.
In her first big address since joining the FSA last July, Ms Cole adopted a tough tone and promised to be “bold and resolute” in pursuing cases against senior management guilty of misconduct.
She lambasted firms for failing to discipline staff guilty of market abuse. “It is not good enough for firms to give individuals the equivalent of a slap on the hand. We expect firms to foster a culture of zero tolerance of regulatory wrongdoing.” Those guilty of serious regulatory misconduct should be sacked, and those disciplined for regulatory wrongdoing should not receive bonuses.
She gave warning to City bosses against using juniors as scapegoats. “We will not be impressed by decisive action against unsupervised, poorly trained junior staff while more senior, or, dare I say it, more profitable, staff get away scot free.”
Fraudsters could be encouraged to enter the financial services industry if the City watchdog scraps its approved persons regime next month, the Liberal Democrats have cautioned. Lord Newby, the Lib Dems’ treasury spokesman, wrote to John Tiner, chief executive of the Financial Services Authority, yesterday urging him to reconsider the plan.
The FSA is expected to announce its decision early next month. Under its proposals, individuals would no longer have to be approved by the regulator to work in wholesale financial services. Individuals would also be exempt from the FSA’s rules on training and competence.
The proposals are designed to reduce red tape, but several City bodies said that the changes would lead to lower professional standards. There is no suggestion that the FSA’s requirements for individuals working in retail financial services should change.
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