FCA: enforcement report 2019

The Financial Conduct Authority (FCA)’s Enforcement Annual Performance Report was published on 9 July 2019, and complements the FCA's wider Annual Report 2018/19.

The enforcement report follows the Business Plan issued earlier in the year, in which the FCA set out its priority areas for the coming year: EU withdrawal and international engagement, the firms’ culture and governance, operational resilience, financial crime (fraud & scams) and anti-money laundering, fair treatment of existing customers, innovation, data and data ethics, demographic change and the future of regulation.

Enforcement Annual Performance Report 2018/19

This report sets out developments and achievements of the past year in relation to enforcement, while also describing the ways in which the regulator has cooperated with other regulatory organisations, both internationally and domestically.

Some statistics and trends highlighted in the report:

  • The number of financial penalties imposed by the FCA in 2018/19 has remained the same as the previous year, although the total value of those penalties has increased substantially (rising from £69.9 Million to £227.3 Million).
  • More enforcement cases were opened during 2018/19 than the previous period.
  • The average length and cost of all regulatory and civil cases (including those closed with no further action) has fallen from the preceding period.
  • The average length and cost of criminal cases has increased from the preceding period.
  • The number of referrals to the FCA in respect of firms and individuals who do not meet the minimums standards increased significantly since the previous period (1,294 to 2,036).
  • Over the past year, the FCA cancelled 226 firms’ permissions to conduct regulated business, and prohibited 7 individuals (also fining one of those prohibited individuals).

The FCA also provide detail of the work they have carried out in a number of specific sectors:

Retail conduct

The FCA’s focus in the retail sphere continues to be on pension’s cases and money laundering investigations.

Furthermore, the FCA explain that in October 2018 they fined Tesco Bank £16.4 million for failing to exercise due skill, care and diligence in protecting its personal current account holders against a cyber-attack in November 2016. 

Wholesale conduct

The FCA have been investigating cases where companies are alleged to have misled the market in respect of their financial position (including examining the conduct of the company’s directors in some instance).

The regulator has also been pursuing insider dealing cases, investigating instances of manipulation across a range of asset classes, failures to manage conflicts of interest appropriately, and failures by firms to have effective systems and controls in place to mitigate the risk they may be used to enable financial crime.

Unauthorised business

The FCA also included specific commentary regarding unauthorised business.

The FCA received the highest number of reports about potential unauthorised activity in a single year in 2018/19 (a 25% increase on the last year). They have attributed this to the success of their “ScamSmart” public awareness campaign and the proliferation of fraudulent online trading platforms.

The FCA explain in the report that one of the most prevalent types of online trading fraud they had seen related to binary options, which are a high-risk, fixed odds method of investing on the financial markets (although the vast majority of entities engaged in this activity were outside of their jurisdiction).

The FCA also published the most number of consumer alerts in a single year where resolution with the unauthorised firm was not possible.

Summary

While undoubtedly much of the FCA’s efforts have been – and will continue to be - spent on preparing for Brexit, it is clear that their resources have been used to target a wide range of issues. We anticipate that tackling the challenges presented by technology, money laundering and financial crime will continue to be high on the FCA’s agenda for the coming months, if not years.

Read other items in Professions and Financial Lines Brief - September 2019