FCA moves to increase fines on individuals in UK enforcement overhaul

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FCA to increase fines overhaul

Highlights

FCA proposes adjusting fines for individuals so penalties reflect true income during misconduct, excluding bonuses or benefits that will never be received.
Minimum fine for serious market abuse will rise from £100,000 to £150,000 and be inflation-adjusted biennially, aiming to preserve deterrence.
Regulator will be able to increase fines for wealthy offenders with low incomes but high net assets, broadening penalty scope beyond income.

Penalty calculation changes after court setbacks

Financial Times reports that the Financial Conduct Authority said on Monday it plans to give itself the ability to increase for deterrence a fine based on a person’s income when that income is later reduced by an employer as punishment for the same misconduct.

The proposal follows recent legal challenges, including the case involving former Barclays chief Jes Staley. A judge last year forced the FCA to reduce Staley’s fine from £1.8 million to £1.1 million, although the ban on him for recklessly misleading the watchdog over his ties to Jeffrey Epstein remains in place.

The court rules that the FCA should not have included deferred share payments later cancelled by Barclays when calculating the penalty as a share of Staley’s total income in the year of the wrongdoing. The regulator now says it will no longer count as income bonuses it knows will never be received, and it also says benefits received during the misconduct period but earned in a prior period will no longer be included.

Last year, a court also forces the regulator to reduce two fines against former bond traders at the UK subsidiary of Japan’s Mizuho Financial Group while upholding their bans for market manipulation in Italian sovereign bond futures. One trader’s fine is cut from £395,000 to £223,400 because bonuses linked to work from earlier years should not have been counted, while another trader’s penalty is reduced from £100,000 to £57,600 because they are a junior employee earning less than colleagues.

Higher minimum penalties and wider deterrence impact

The FCA also says it plans to raise its minimum fine for serious market abuse from £100,000 to £150,000, reflecting inflation since the rule was introduced in 2010. It adds that the minimum level will be adjusted automatically every two years in line with inflation to preserve its deterrent effect.

Another proposed rule change is designed to strengthen the watchdog’s ability to impose higher fines on wealthy individuals with low annual incomes but substantial net assets. The FCA says the revision makes clear that a penalty may be increased in any case where it may not act as a deterrent given an individual’s income or net assets.

The consultation underlines the regulator’s effort to crack down on market abuse and other financial breaches even as the government increases pressure on regulators to support economic growth by easing burdens on business. Simon Morris, a partner at CMS, says the proposal to take overall net worth into account is especially striking because fining a rich offender in the millions would send a powerful message.

The regulator also says fines for market abuse may still be reduced below the minimum level for proportionality, mitigating factors, settlement and serious financial hardship. It raises the thresholds for serious financial hardship in line with inflation to annual income of up to £21,000 and capital of up to £24,000.

In our earlier article on SThree’s leadership transition amid a tougher hiring backdrop, we covered the company’s decision to extend Chair James Bilefield’s tenure to April 2027 to oversee the search for a permanent CFO. We also noted the appointment of an interim finance chief and SThree’s expectation of a sharp drop in fiscal 2026 pretax profit as weaker recruitment demand and AI-related concerns weigh on the market.

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