Whilst Covid may have stopped many things in 2020, it did not stop FCA Enforcement from issuing a number of substantial financial penalties. That is not to say that it did not have any impact at all, however. There were fewer enforcement actions resulting in fines than in the previous three years, and financial penalties were down from £391.8m in 2019 to £192.6m in 2020. And, notably, there was only one financial penalty imposed on an individual. This probably reflects at least in part the disruption experienced particularly at the start of the first UK lockdown, with most of the notable enforcement outcomes published from June onwards. The regulators were also focusing on work to prepare for the end of the Brexit transition period. So, we may well expect an uptick in published decisions in 2021 now we are more used to the “new normal”.
The key enforcement decisions in 2020 primarily focus on familiar themes.
In the retail sector, there were substantial penalties against firms for failing to treat customers in financial difficulty fairly in the context of mortgage and consumer credit repayments. And although the relevant conduct took place well before the coronavirus pandemic, the FCA was quick to highlight the importance of applying any lessons from these enforcement actions to the current circumstances. The training and experience of staff was highlighted as key in obtaining information from customers to ensure that repayment plans and other arrangements were affordable. Separately, a firm was penalised for unsuitable pension transfer advice – an area that the FCA is examining closely at the moment. Customer redress played an important role in a number of decisions, often exceeding any financial penalty imposed.
A firm’s systems and controls to prevent financial crime were flagged in a couple of enforcement decisions involving banks, both in the AML and ABC context. And the PRA imposed an equivalent penalty to the FCA in one case, showing that it views systems to prevent financial crime as a prudential issue, which it is willing to investigate.
And the FCA continues to investigate a large number of potential market abuse cases as part of its market integrity objective. The FCA announced penalties for failure to report short positions for the first time and against companies who failed to disclose accurate and timely information about their financial positions to the market. The FCA also used its enhanced market surveillance and data analytics capabilities to bring enforcement actions for spoofing against an individual trader, and other manipulative conduct against a broking firm where there was evidence of widespread misconduct.
We comment on these and other key enforcement decisions of 2020 in more detail in our article published by Thomson Reuters Accelus Regulatory Intelligence on 21 January 2021 (available here) and on our podcast.