‘A Lighter Regulatory Touch’? FCA’s Enforcement Cases Plummet in FY22/23

‘A Lighter Regulatory Touch’? FCA’s Enforcement Cases Plummet in FY22/23

Time Stamp: July 10, 2023 2:11 PM
‘A Lighter Regulatory Touch’? FCA’s Enforcement Cases Plummet in FY22/23 PlatoBlockchain Data Intelligence. Vertical Search. Ai.

Enforcement actions by
the UK financial watchdog slumped during the last
financial year ended March 31, 2023. The number of cases opened against firms
and individuals fell by 67% and 33% to 26 and 74, respectively. Similarly, the
number of cases closed dropped by 10% and 44%,
respectively.

Overall, the UK Financial Conduct Authority (FCA) handled a total of 100 new cases during
the period and closed 107 cases, compared to 190 and 159, respectively, in the
prior year. The figures are based on three-year data obtained by
global law firm Reed Smith through Freedom of Information (FOI) requests to the
FCA.

However, the data,
which the British watchdog confirmed to Finance
Magnates shows that despite the decline in enforcement activities,
cases on inside trading form the largest number of actions
against individuals, the regulator took in the past three financial years. The financial watchdog opened 61 such cases during the period and closed 52.

“Insider trading is
always a major focus for the FCA and, due to improvements in technology, it is
easier for the FCA to monitor for suspicious activity,” said Laura-May Scott,
Counsel at Reed Smith. “It is no great surprise to see that
opportunistic insider trading accounted for the majority of investigations
opened and closed against individuals.”

On the other hand, most of the investigations (13 in total) FCA initiated
against UK firms during the three-year period were about unauthorized collective investment schemes. Comparatively, the regulator closed 27 cases on money laundering controls,
which is the highest number of investigations closed against organizations.
This is followed by 15 closed cases on pensions advice.

“There was a notable
spike in enforcement activity in February 2022, with the number of cases opened
against firms 155% higher than the monthly average over the last three years,
and cases opened against individuals 121% more than the average,” Reed Smith explained.

Is the FCA Adopting ‘A Lighter Regulatory Touch’?

In a recent summary of its regulatory actions in 2022, FCA said it
increased the number of its enforcement actions and employed
1,000 new officers to better protect consumers from financial harm. It also revoked
the licenses of 201 firms that failed to meet regulatory standards during the
period.

However, what does the
sharp drop in enforcement actions or cases during the recent financial year
mean? Do they translate to a reduction in cases of misconduct or is the FCA
softening its approach?

Romin Dabir, a Partner
at Reed Smith, believes that the drop in enforcement actions could be related
to a backlog from the COVID-19 period. Dabir noted that the FCA could be
possibly busy with closing cases it previously opened.

“The relative decline
in enforcement activity may also reflect the government’s current objective to
increase the competitiveness of the City of London,” Dabir added.
“It is possible that the FCA may be adopting a lighter regulatory touch on
certain issues than in previous years.”

However, FCA told Finance
Magnates that its approach towards enforcing against serious misconduct remains ‘unchanged’.The regulator said it generated over £200 million in fines in 2022
through its actions against those that cause the most harm in the country’s financial services industry.

“The number of
enforcement cases we open naturally varies from year to year. Enforcement
investigations are one tool we use to protect consumers and market integrity,”
FCA explained. “We have also increasingly used earlier
assertive interventions – for example shutting down firms where they’re not
meeting standards.”

Meanwhile, the FCA
earlier this year launched its business plan for 2023-2024, noting that it would focus on four primary
areas: concentrating on consumers’
needs, preparing financial services for
the future, strengthening the position of the UK in the global wholesale
markets and reducing and preventing financial crime.

CNMV’s new warning; recurring payments by Praxis; read today’s news nuggets.

Enforcement actions by
the UK financial watchdog slumped during the last
financial year ended March 31, 2023. The number of cases opened against firms
and individuals fell by 67% and 33% to 26 and 74, respectively. Similarly, the
number of cases closed dropped by 10% and 44%,
respectively.

Overall, the UK Financial Conduct Authority (FCA) handled a total of 100 new cases during
the period and closed 107 cases, compared to 190 and 159, respectively, in the
prior year. The figures are based on three-year data obtained by
global law firm Reed Smith through Freedom of Information (FOI) requests to the
FCA.

However, the data,
which the British watchdog confirmed to Finance
Magnates shows that despite the decline in enforcement activities,
cases on inside trading form the largest number of actions
against individuals, the regulator took in the past three financial years. The financial watchdog opened 61 such cases during the period and closed 52.

“Insider trading is
always a major focus for the FCA and, due to improvements in technology, it is
easier for the FCA to monitor for suspicious activity,” said Laura-May Scott,
Counsel at Reed Smith. “It is no great surprise to see that
opportunistic insider trading accounted for the majority of investigations
opened and closed against individuals.”

On the other hand, most of the investigations (13 in total) FCA initiated
against UK firms during the three-year period were about unauthorized collective investment schemes. Comparatively, the regulator closed 27 cases on money laundering controls,
which is the highest number of investigations closed against organizations.
This is followed by 15 closed cases on pensions advice.

“There was a notable
spike in enforcement activity in February 2022, with the number of cases opened
against firms 155% higher than the monthly average over the last three years,
and cases opened against individuals 121% more than the average,” Reed Smith explained.

Is the FCA Adopting ‘A Lighter Regulatory Touch’?

In a recent summary of its regulatory actions in 2022, FCA said it
increased the number of its enforcement actions and employed
1,000 new officers to better protect consumers from financial harm. It also revoked
the licenses of 201 firms that failed to meet regulatory standards during the
period.

However, what does the
sharp drop in enforcement actions or cases during the recent financial year
mean? Do they translate to a reduction in cases of misconduct or is the FCA
softening its approach?

Romin Dabir, a Partner
at Reed Smith, believes that the drop in enforcement actions could be related
to a backlog from the COVID-19 period. Dabir noted that the FCA could be
possibly busy with closing cases it previously opened.

“The relative decline
in enforcement activity may also reflect the government’s current objective to
increase the competitiveness of the City of London,” Dabir added.
“It is possible that the FCA may be adopting a lighter regulatory touch on
certain issues than in previous years.”

However, FCA told Finance
Magnates that its approach towards enforcing against serious misconduct remains ‘unchanged’.The regulator said it generated over £200 million in fines in 2022
through its actions against those that cause the most harm in the country’s financial services industry.

“The number of
enforcement cases we open naturally varies from year to year. Enforcement
investigations are one tool we use to protect consumers and market integrity,”
FCA explained. “We have also increasingly used earlier
assertive interventions – for example shutting down firms where they’re not
meeting standards.”

Meanwhile, the FCA
earlier this year launched its business plan for 2023-2024, noting that it would focus on four primary
areas: concentrating on consumers’
needs, preparing financial services for
the future, strengthening the position of the UK in the global wholesale
markets and reducing and preventing financial crime.

CNMV’s new warning; recurring payments by Praxis; read today’s news nuggets.

Time Stamp:

More from Finance Magnates