From 6 March, fines will be linked more closely to income and will be based on up to 20% of a firm’s revenue from the product or business area linked to the breach over the relevant period.
It will also be based on up to 40% of an individual’s salary and benefits from their job relating to the breach in non-market abuse cases and be based on a minimum starting point of £100,000 for individuals in serious market abuse cases.
The FSA’s Policy Statement, ‘Enforcement Financial Penalties’, which creates the new framework, has been established following a period of consultation with the industry subsequent to the publication of a Consultation Paper in July 2009.
The new framework is based on removing any profits made from the misconduct, setting a figure to reflect the seriousness of the breach, considering any aggravating and mitigating factors, achieving the appropriate deterrent effect and applying any settlement discount.
“Enforcement Financial Penalties” also sets out a new policy in relation to the circumstances when the FSA may reduce a fine because of its financial impact and clarifies the situations where FSA may publicise enforcement action in criminal cases.
Margaret Cole, director of enforcement and financial crime at the FSA, said: “Despite industry opposition we have decided to implement these proposals as we believe enforcement penalties are a powerful tool to help change behaviour in the industry.
“As well as delivering increased levels of fines, we believe that our new framework offers substantially more clarity and transparency around the penalty-setting process and will reap rewards in terms of an increase in compliant behaviour,” she added.
