Ghosts of enforcement past and future

The FSA has commenced its 2012 enforcement programme with gusto, dealing out high-profile sanctions and hefty fines. Ian Mason reviews last year’s trends and predicts the path ahead.

Ian Mason (Ian.Mason@BakerMcKenzie.com) is a partner in the financial services group at law firm Baker & McKenzie and a former head of department in the enforcement division at the FSA.

2011 was another busy year for the FSA’s enforcement and financial crime division. There were 60 enforcement press releases. Total FSA fines for 2011 were £66m, less than the £79m total in 2010, however a large part of the previous year’s total consisted of two large fines against JP Morgan (£33m – client money) and Goldman Sachs (£17.5m – systems and controls). In addition to the fines, the FSA also required firms to make significant redress costs of £160m in 2011 (a significant increase on the £62.7m imposed in 2010). In any retail enforcement case, where significant mis-selling to consumers has or may have taken place, the FSA will require firms to carry out a redress exercise, often involving the appointment of a skilled person under section 166 FSMA to assess and calculate possible redress (which in itself involves significant costs), as well as paying the compensation to consumers.