Those who break City rules face a threefold increase in fines for cheating and misleading their customers and for other serious failings, the Financial Services Authority said yesterday. Individuals could be fined up to 40 per cent of their total pay and bonus package, the regulator said in a report that spells out the penalty tariff in much greater detail than before. Except in cases of financial hardship, the minimum penalty for an individual in serious market abuse cases, including insider dealing, will be set at £100,000.
Banks and other groups also face a more hawkish regime, with the FSA threatening to confiscate up to 20 per cent of the revenue from the offending product category. The regulator said it was a consistent and more transparent framework that “could see enforcement penalties treble in size”. The biggest FSA fine so far was imposed in 2004 on Shell, which had to pay £17 million for repeatedly misleading its shareholders over the size of its oil and gas reserves.
The biggest individual penalty was the £967,005 fine meted out last month to Mehmet Sepil, chief executive of Genel Enerji, a Turkish oil explorer, for insider dealing in the shares of Heritage Oil, the FTSE 250 explorer.
As well as setting penalties according to income, the FSA believes that those found to have broken the rules should be fined at least enough to ensure they do not profit from their misdeeds.
Simon Orton, a partner at Freshfields Bruckhaus Deringer, the legal group, said that the new regime could lead to some very big fines at large corporates and suggested that it might persuade more accused firms and individuals to take cases to appeal rather than settle early.
Margaret Cole, head of enforcement at the FSA, said, however, that the new tariff would be a better deterrent.
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