Fines against individuals hit record £12.9m as FSA gets tough

Financial Services Authority levies 54 fines to bring this year's total to whopping £63.4m

The City watchdog is set to finish the year with a flourish as it prepares to levy a thumping last fine which could be unveiled later this week.

The fine will be added to this year's running total of £63.4m, which is the second highest since the FSA's creation in 1999. Activity has hotted up since the end of November, with more than £14m of fines handed out, although that was chiefly down to a £10.5m penalty imposed on HSBC on 2 December.

Were it not for the mega-fines of £17.5m on Goldman Sachs and £33m on JP Morgan, 2011 would have been another record breaker. Those two combined accounted for more than half of the 2010 total of £89m.

The number of fines, at 54, is also ahead of last year's total of 50. As recently as 2007 the level of fines stood at just £5.34m. But stung by criticism of the so-called "light touch" regulation policy adopted during the boom times of the last decade in the run-up to the financial crisis, the regulator has taken a significantly harder line.

While this week's fine is thought to be substantial, it will still not be enough to bring the total up to last year's final figure. But the law firm Reynolds Porter Chamberlain (RPC) said fines against individual miscreants, as opposed to those against big companies, has hit a record. So far this year £12.9m has been levied against individuals, smashing the previous year's record of £8.8m. As well as the total value of fines increasing, the average fine paid has also more than doubled, from £149,358 last year to £313,655 this year.

The watchdog has warned that there will be no respite for miscreants next year. Tracey McDermott, acting director of enforcement and financial crime, said: "Firms can expect to see more of the same tough approach next year. We will continue to crack down on market misconduct and take robust action and secure redress where firms fail to deal properly with retail customers. There will be also be major criminal cases that we will be prosecuting in the courts."

Simon Morris, partner at the law firm CMS Cameron McKenna, said: "The increase in fines year-on-year is all of a piece with the FSA's determination to continue with an aggressive approach to enforcement. Fines provide good political capital, and the threat of a personal fine, reprimand or ban will always be more effective than action against corporations."

On the issue of individual fines, Richard Burger, partner at RPC, said: "The FSA is targeting high-profile individuals in hard-to-prosecute cases. The figures show that the focus of the FSA's enforcement strategy is to bring regulatory issues closer to home for company directors and others. The FSA's approach is based on making company directors feel that the buck stops firmly with them, which has a huge deterrent effect."

Mr Burger added: "Even if the FSA's enforcement team has got it wrong and a director or other FSA-approved person has not broken the rules, the reputational damage for the individual can be significant. This kind of regulatory crackdown makes directors feel like they are in personal jeopardy."

That stance is unlikely to carry much weight with the public, who have been outraged at the behaviour of bankers and other finance professionals in the run-up to the financial crisis.

Particular anger was generated by the fact that no one from Royal Bank of Scotland was fined or prosecuted for the bank's near collapse and multibillion-pound bailout by the taxpayer. Only Johnny Cameron, head of the company's investment bank, was penalised with a ban from the City. However, that was agreed voluntarily on Mr Cameron's part, with no admission of wrong-doing.