We'll see you in court: New senior manager rules could mean fewer bumper fines for City watchdog and more days in court

 
Hayley Kirton
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SMR might leave the watchdog out in the cold over big ticket penalties (Source: Getty)

New rules to hold top bosses accountable for wrongdoings on their watch may have weakened the City watchdog's negotiating stance if it tries to swoop in for bumper settlements.

Speaking at the Practising Law Institute's annual seminar, Mark Steward, director of enforcement and market oversight at the Financial Conduct Authority (FCA), revealed the Senior Managers' Regime (SMR) has forced the authority to rethink how it approached firms suspected of troublemaking.

He added he felt actions against managers would be trickier to resolve through agreements, which is an approach the FCA has historically found useful for pinning down blockbuster fines, and the watchdog could find itself in court more often in the future.

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"We don't expect senior managers to agree so readily to pay high fines to resolve cases," said Steward. "We expect there will be more contest and more litigation."

Steward continued: "Firms may well be reluctant to spend such high sums to resolve investigations where those resolutions do not also resolve cases against senior managers who may also be in our cross-hairs."

Under the SMR, which came into force for certain financial services firms last March, managers can be held liable if they are found not to be taking reasonable steps to keep their business on the straight and narrow, in a bid to stop top dogs turning a blind eye to questionable activities going on under their noses.

Read more: Are regulators getting soft? FCA fines fall 97 per cent

However, although Steward confessed penalty levels over the last year were lower than the "halcyon years" before them, he added: "We have not gone soft nor will we. Light touch has not returned."

The FCA, and the Financial Services Authority before it, has handed out more than £3bn in penalties over the last five years, although this figure has started to trail off since last April.

"I don't believe the size of fines demonstrates anything significant about the FCA's enforcement effort, provided of course the fine is the result of a thorough investigation and a legally rational and fair process reflecting all relevant factors, including the gravity or seriousness of the misconduct in question, the need for general deterrence and all relevant mitigation," Steward said. "In other words, it fits the crime."

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