Regulation: UK's FSA gets heavy handed
The UK's FSA is setting out its store. The light-touch regime favoured by the US Fed and by extension the UK Treasury has had its day. New plans will hit companies where it hurts: in shareholders' pockets.
The Financial Services Authority has issued a consultancy document outlining its plans for improving the quality of financial services and market conduct.
Under the new proposals, an FSA statement says,
" fines will be linked more closely to income and be based on:
- Up to 20% of the company’s income from the product or business area linked to the breach over the relevant period;
- Up to 40% of an individual’s salary and benefits (including bonuses) from their job relating to the breach in non-market abuse cases;
- A minimum starting point of £100,000 for individuals in market abuse cases.
The total fine imposed will also take into account other factors, such as the desired deterrent effect and any settlement discount. "
The FSA uses buzzwords in the style of the Labour government which has manipulated it for the past twelve years. It is, the statement says "a credible deterrence strategy."
"The full framework will consist of the following steps:
- Removing any profits made;
- Setting a figure to reflect the nature, impact and seriousness of the breach;
- Considering any aggravating and mitigating factors;
- Achieving the appropriate deterrent effect;
- Applying any settlement discount."
But there's a last-gasp chance for market participants to do their worst: the statement says "The consultation will close on 21 October 2009 and any new policy is likely to apply to breaches committed after February 2010."
So the bad guys have best part of a year to make hay.
Sometimes, there is a case for totalitarianism by regulators and this would appear to be one such.
The bad aspects of this are
a) the move towards a US style bargaining system with all the opportunity for lack of transparency and institutionalised corruption that provides;
b) the fact that the bill will ultimately fall on shareholders.
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