Fines tally up as FSA goes down fighting

The City watchdog dished out fines totalling more than £66 million in 2011, the second highest on record as its aggressive enforcement approach continued despite its impending break-up.

There were 58 fines over the year, the last being the £2.8m sanction handed to Combined Insurance Company of America on 19 December.

The annual total would have been a clear record but for the £33m and £17.5m fines slapped on JP Morgan and Goldman Sachs respectively in 2010.

However, the figure compared with £5.3m in 2007, reflecting the hardline approach adopted by the regulator since the start of the economic crisis.

While the overall total was down, the £12.9m of penalties dished out to individuals was a record high, easily surpassing last year’s total of £8.8m and accounting for more than all fines in 2011. The average individual penalised by the Financial Services Authority (FSA) had to pay out £313,655 in fines this year, more than double the 2010 average of £149,358.

Richard Burger, a partner at law firm Reynolds Porter Chamberlain (RPC), said the regulator was increasingly targeting high-profile individuals.

“The figures show that the focus of the FSA’s enforcement strategy is to bring regulatory issues closer to home for company directors and other approved persons,” he said.

“The FSA’s approach is based on making company directors feel that the buck stops firmly with them, which has a huge deterrent effect.”

The amount that companies are ordered to pay to customers in compensation often dwarves the official fine. HSBC, fined £10.5m in early December for failings in subsidiary NHFA, estimates that the cost of compensation will reach nearly £30m.

The second-biggest fine was imposed on Barclays in January, for misselling investment funds to elderly customers.

Bank of Scotland, Coutts and Royal Bank of Scotland – all taxpayer-supported – were among the other firms hit with hefty penalties over the last 12 months.

Burger predicted that there would be no let-up in the FSA’s aggressive approach to enforcement, even with the regulation of the financial services industry being handed to the Bank of England in 2012, under government reforms.

“With the regulator keeping up the aggressive tactics that led to them handing down record-breaking fines year on year, financial services firms and their directors cannot afford to be complacent as the FSA move on to targeting individuals and company directors.”