The enforcement data published with the FCA's Annual Report 2019/2020 makes grim reading for those subject to enforcement action; longer, more expensive cases and not even a hint at relaxing the approach to enforcement as a 'diagnostic tool'.
The key points from the Annual Report are:
- The average length of civil and regulatory cases has increased significantly from 17.5 months in 2018/2019 to 23.9 months in 2019/2020;
- The average cost of enforcement cases has also risen from £103,400 to £229,000;
- No criminal cases were closed during the reporting period so no figures were published for the average length and cost of criminal cases (itself indicative that the length of criminal cases tends to be far longer than civil and regulatory cases); and
- The FCA's focus in enforcement action was in the same five areas as the previous year; unauthorised business (142 cases), retail conduct (134 cases), insider dealing (88 cases), financial crime (71 cases) and pensions advice (61 cases).
The types of outcome resulting from enforcement action have largely remained the same; in 2019/2020, 81.1% of the total outcomes were variation/cancellation of permissions or withdrawal of approvals when compared to 82.6% in 2018/2019, 4.2% were criminal outcomes in both 2019/2020 and 2018/2019 and 6.9% were fines in 2019/2020 when compared with 5.6% in 2018/2019. The remainder of outcomes were civil, public censure and prohibitions which represented 1.8%, 0.5% and 5.5% of the total number of outcomes respectively.
Whilst the total amount of fines imposed has decreased slightly from from £227.3m in 2018/2019 to £224.4m in 2019/2020, this should not be taken as a sign that the regulator's appetite for enforcement is waning; the number of open cases has only decreased by 1 from 647 on 1 April 2019 to 646 on 31 March 2020. In addition, the single largest fine was £102.2m for anti-money laundering (AML) breaches, a significant increase on that of the previous year (£76m) and further evidence of the FCA's commitment to combatting financial crime.
A focus on the Threshold Conditions
A significant difference this year is that the number of Threshold Condition cases has increased considerably, from 232 cases open on 1 April 2019 to 369 open on 31 March 2020. By far the largest proportion of these relates to consumer credit firms (284), as it did in 2018/2019. This is unsurprising given the FCA's focus on consumer credit in recent years and the perceived risk of potential harm to consumers posed by those operating in the sector.
Predictions for 2020/2021
In terms of the enforcement data, there is little of surprise in this year's Annual Report. Although the FCA's Business Plan for 2020/2021 was somewhat shorter than usual due to COVID-19, it is clear from that, and FCA publications throughout the pandemic, that the regulator's appetite for enforcement remains as insatiable as ever. The FCA's focus this year is likely to be similar to the last; retail conduct, financial crime and fraud are set to be top of the regulator's enforcement agenda combined with firms', and their Senior Managers', actions during the pandemic. We are also likely to see a focus on smaller firms and those who consistently fail to meet the FCA’s standards; in those cases the FCA has stated that it will move more swiftly to enforcement action.
In conclusion, it is hard to imagine that the FCA's rhetoric won't be borne out in practice and the regulated would do well to heed the FCA's mantra; "we will remain vigilant to potential misconduct" and "where we find poor practice, we will clamp down with all relevant force".
Find out more about the FCA Business Plan 2020/21 including the key priorities over the next 1-3 years.