FSA makes up rising costs in higher penalties

A BUMPER year for enforcement fines means that financial firms will pay less for the FSA’s upkeep despite a ten per cent rise in its costs, the Authority’s business plan for 2011/2012 revealed yesterday.

Fees will drop two per cent because revenues from financial penalties doubled from £33.2m in 2009/2010 to £79.1m in the year to January 2011. The FSA’s annual funding requirement has risen to £500.5m.

It also gave a £90-£125m cost estimate for setting up the bodies that will replace it under plans outlined by the Treasury. Margaret Cole, currently the director of enforcement at the FSA, will temporarily become head of the Financial Conduct Authority – one of two new regulatory bodies to be formed in April.

Ahead of its disbandment, the FSA will cap its headcount at 4,000. However, City A.M. understands that the hiring freeze will not preclude the FSA from slowly adjusting the profile of its staff towards preferences specified by Bank of England governor Mervyn King. King has said that FSA staff are “too junior” to challenge banks. Staff who leave after 23 April will be replaced by hires more in line with King’s vision.


The FSA stepped up its financial penalties in the year to january 2011 in an effort to crack down on bad practices. here were the biggest:

1 JP Morgan was hit with a whopping £33.3m fine in June last year for “failing to protect client money by segregating it appropriately”. The FSA has taken a harsh line on this particular mis-demeanor.

2 Goldman Sachs was fined £17.5m in September last year for “weaknesses in controls resulting in failure to provide the FSA with appropriate information”. The information in question was that the bank was under investigation for fraud by US authorities.

3 In a high profile case, Barclays was fined £7.7m in January and forced to pay out £59m in compensation to retail customers who were not given adequate advice and lost savings as a result.

4 August 2010 saw RBS fined £5.6m as a penalty “for failing to have adequate systems and controls in place to prevent breaches of UK financial sanctions”, which involved not having sufficient checks to make sure its customers weren’t involved in terrorism.

5 Winterflood Securities was slapped with a £4m fine in April last year “for market abuse through a share ramping scheme relating to Fundamental-E Investments”.