FCA investigations into individuals double in 2018

FCA investigations into individuals have doubled in the last year, with the number of cases involving individuals being referred to the FCA’s Regulatory Decisions Committee (RDC) rising to 27 in 2018 (year end Dec 31) from 13 the year before*, says RPC, the City-headquartered law firm.

The RDC makes decisions on behalf of the FCA relating to enforcement actions against regulated firms and individuals, as well as authorisation applications. The RDC is the final stage of decision making within the FCA and decides on the appropriateness of sanctions including financial penalties and suspensions.

RPC says that the rise in regulatory actions against individuals is likely to be driven by the FCA’s desire to hold individuals responsible for failings at their firms, rather than just the firms themselves.

In particular, the FCA has focused on clamping down on directors of companies that target low income or vulnerable individuals, a focus it recently reiterated in its business plan. Categories of businesses include those that sell high-risk products, such as mini-bonds that offer high interest rates, payday lending firms and debt management advice companies.

Earlier this month, the FCA announced a tightening of credit rules on ‘buy now, pay later’ products in order to prevent consumers having to overpay backdated interest.

RPC had previously warned that the FCA was likely to step up regulatory action after investigations dropped by 64% from 2016 to 2017.

Jonathan Cary, Commercial Disputes partner at RPC, says: “Political pressure on the FCA to take a tough stance against misconduct remains intense.”

“As a result, the FCA is going to maintain a no-nonsense approach to wrongdoing by directors. It believes penalising an individual is a far better deterrent than just fining a corporate entity.”

Cases against businesses rise 14%

The number of referrals of businesses to the RDC has also increased, rising 14% to 543 in 2018 from 476 in 2017 and 289 the previous year.

RPC adds that the level of regulatory action could rise even further as the Senior Managers and Certification Regime (SMCR) is extended to all financial services firms by the end of this year.

Jonathan Cary adds: “The Senior Managers Regime has increased the scope for FCA action across the whole financial services sector. As the SMCR continues to expand, so too does the possibility of the FCA taking increasing enforcement action against firms and individuals.”

* FCA data

** FCA business plan