By Chris Dorrell
The number of enforcement cases opened by the Financial Conduct Authority’s (FCA) dropped last year, but experts suggested the regulator was not resting on its laurels.
According to a Freedom of Information request submitted by law firm Reed Smith, in the year to March, the number of cases opened against firms dropped 67 per cent last year to 23 while cases opened against individuals fell 33 per cent to 74.
Despite the fall, the FCA has maintained its focus on insider dealing, with these cases representing the largest proportion of cases opened and closed against individuals in the last three financial years.
The fall comes despite the FCA’s determination to take a more active enforcement approach. But experts suggested the fall in cases opened could reflect more assertive interventions earlier in the process.
Laura-May Scott, counsel at Reed Smith, added: “What appears to be a lack of enforcement activity may also be a reflection of the FCA making greater use of its intervention powers – that could well be one of the reasons that explain why the FCA appears to have been less active in recent years.”
Enforcement cancelled the authorisation of 201 firms for failing to meet minimum standards in 2022.
The regulator has also blocked applications from a number of firms seeking authorisation. 80 per cent of crypto firms applying for registration were rejected, for example.
An FCA spokesperson said: “we have also increasingly used earlier assertive interventions – for example shutting down firms where they’re not meeting standards.”
“Our approach of enforcing against serious misconduct is unchanged and we’re taking action against those causing the most harm in financial services – our action led to over £200m in fines in 2022,” they continued.
Partner at Reed Smith, Romin Dabir suggested that the trend of fewer cases was unlikely to continue.
“It could well be that the last year is something of an aberration as there is good evidence to suggest that in the first few months of the new financial year the FCA has redoubled its efforts. Consequently, we could see an uptick in enforcement activity in the not-too-distant future,” he said.
Enforcement cases may also be set to increase as the Consumer Duty comes into force at the end of the month.
The new regulation, which has been described as the biggest shake-up to financial services regulation for a decade, will force firms to deliver “good outcomes” for customers. Experts have suggested that the regulator will take “swift and comprehensive” action against firms that fail to fall in line.
The Prudential Regulation Authority (PRA) is also consulting on new enforcement rules which would enable early cooperation in the regulator’s investigations.
Regulators have come under pressure from firms to resolve regulatory investigations more swiftly.
