Financial Times: FSA fines grow in size but decline in numbers: “Royal Dutch Shell suffered the largest fine of 2004 - £17m - in the wake of scandal over its oil and gas reserves misstatement.”: “This year the regulator has faced questions, caused by the Royal Dutch Shell case, about its ability to pin the blame on high-profile individuals. The FSA said in November that it would not take any action against Sir Philip Watts, former chairman of the oil group, or any other executives, but that it stood by the fine imposed on the company itself.”: Friday 30 December 2005
By Barney Jopson, Financial Correspondent
Published: December 30 2005
The Financial Services Authority has handed out fewer fines this year than last, but the average size of penalties has grown as the City watchdog seeks to make an example of high-profile wrongdoers.
The average FSA fine worked out at about £860,000 this year, as the regulator collected £16.3m from 19 cases. The previous year's average was £774,000, with 32 cases producing a total of £24.8m in fines.
The figures cover a range of infractions by both companies and individuals, but they indicate that the regulator has stuck to a strategy of focusing on bigger fines for well-known targets in order to maximise the publicity value of its actions.
Dishing out low-level fines for minor rule-breaking was deemed an ineffective means of deterring wrongdoing such as market abuse, mis-selling and lax maintenance of internal controls.
A single penalty for Citigroup accounted for most of this year's fines. The financial services group was made to pay £13.9m for its "Dr Evil" bond trade, which shook the eurozone markets in the summer of 2004 when the group sold billions of euros of debt before quickly repurchasing it at a lower price.
Royal Dutch Shell suffered the largest fine of 2004 - £17m - in the wake of scandal over its oil and gas reserves misstatement.
The second biggest fine of 2005 was for Abbey National, now part of Santander, which was forced to pay £800,000 for mishandling mortgage endowment complaints and for providing the FSA with inaccurate information.
Pace Micro Technology, a maker of television set-top boxes, was fined £450,000 for failing to keep the market up to date on its weakening performance in 2002.
MyTravel, a tour operator, was penalised £240,000 for not disclosing promptly its discovery of an unreported £24.3m balance sheet debt.
There was a drop in the number of fines for maintaining poor money laundering controls, following complaints that the FSA's aggressive tactics were cowing companies into a narrow focus on complying only with the letter of the rules.
The number of FSA fines imposed on individuals, which tend to garner significant publicity only if prominent executives are involved, fell to four in 2005 from 10 the previous year.
This year the regulator has faced questions, caused by the Royal Dutch Shell case, about its ability to pin the blame on high-profile individuals. The FSA said in November that it would not take any action against Sir Philip Watts, former chairman of the oil group, or any other executives, but that it stood by the fine imposed on the company itself.
The FSA did, however, pass a landmark when two former company directors were convicted in the first contested criminal trial it had brought.
Two former directors of AIT Group, an AIM-listed software company, were jailed for misleading investors in a case used bythe FSA to highlight new powers.
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