Mark Steward, Director of Enforcement and Market Oversight at FCA, spoke at the Practising Law Institute’s annual seminar on securities regulation in Europe. His speech was headlined as looking at the practical implications of US law on EU practice, but instead he focussed on three topics: financial penalties, senior manager’s regime and the new ways in which FCA is proposing firms and individuals will be able to resolve cases without protracted litigation. He stressed that, although the aggregate level of fines has been reduced, FCA has not returned to its ‘light touch’. Many fines are lower because the firm has agreed settlement with FCA, and has done so by taking the full weight of culpability without any action being taken against any individual member of senior management. He moved on to outline how the SMR has introduced a new challenge for senior managers and FCA expects actions against senior managers will be harder to resolve by agreement, as the individuals are unlikely to agree as readily as their firms to paying large fines, and this will lead to more litigation. Firms may also become less willing to spend as much to resolve investigations if they cannot also resolve cases against senior managers. He also noted there are now tensions between firms’ desires to self-report misconduct and their fears if the report may lead to investigation of senior managers. Firms’ practice of providing FCA with reports they have commissions is of limited value, as the reports are often commissioned by the senior management who may be the ultimate problem. FCA has noted problems with the current enforcement process, that means that firms will lose the opportunity for early settlement unless they agree FCA’s entire case and proposed penalty before the RDC becomes involved. FCA is now proposing to extend the opportunity for a 30% settlement discount to cases where firms, for example, agree the facts but dispute the amount of the penalty. It is also planning further variants on this, and looking at how to make it easier for those who wish to do so to have their case heard at Tribunal level more easily and quickly than they currently can.
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