UK FSA fines approach £100 million

How effective are the FSA’s efforts to deter market abuse?

LONDON – Fines administered by the UK Financial Services Authority (FSA) since its creation in 2001 are approaching the £100 million mark. The regulator is particularly focusing on market abuse and Treating Customers Fairly (TCF) failings, and both of these areas have seen high-profile fines in the past year.

Almost 40% of this year’s £20.5 million in fines were levied against Santander-owned UK bank Alliance & Leicester (A&L). A&L and HFC Bank, part of HSBC, were jointly fined £8.1 million for mis-selling payment protection insurance – a key focus of the FSA’s TCF regime.

A number of cases in 2008 have related to market abuse, but most of these fines concern events that occurred several years ago. High-profile market abuse allegations relating to share prices in UK bank HBOS prompted an FSA investigation, but no charges were brought.

Selwyn Blair-Ford, a senior domain expert for UK regulation at FRSGlobal, says: “For the UK financial market as a whole, we can applaud where the regulator successfully challenges and reprimands undesirable behaviour. However, the fines do not appear to really address the issues of insider trading or market manipulation. We need to have a plea bargaining arrangement, where the guilty can mitigate punishment by blowing the whistle on others, to further address these issues.”

September’s ban against short selling of shares in several UK banks – still in operation – is another FSA move to stymie suspected market abuse. Despite political talk of ‘spivs in suits’, this action is not aimed at individual abusers but rather at a long-established form of speculation within the financial system.

“Action should not have been taken unilaterally against short selling, but instead against those individuals spreading rumours to drive the price of stocks down. In short, don't penalise short sellers but instead arrest or fine the market manipulators,” says Blair-Ford.