The Financial Conduct Authority ("FCA") has published its Annual Report and Accounts for the year 2019/20, including enforcement data for the same year. With the enforcement landscape largely remaining unchanged, is it a case of different year, same old story?
The 2019/20 enforcement landscape
The FCA's Enforcement Annual Report for 2019/20 makes for repetitive reading:
- The count of open cases, number of fines and the value of those financial penalties imposed have largely remained flat compared to 2018/191.
- The time it takes for a case to reach a decision remains long. While the average length of the most contested cases has reduced2, the average time it takes to resolve all cases, including those where the FCA has determined there is no case to answer, has increased to nearly two years3.
- The FCA's enforcement's focus remains largely unchanged. A large number of open cases relate to unauthorised business and retail conduct. Collectively, there is still a significant number of open financial crime, anti-money laundering, market abuse and insider dealing cases.
Has anything changed?
While the FCA's enforcement outcomes seem largely unchanged (or, arguably, worse) from its results in 2018/19, there has nevertheless been a significant increase in case costs over the year. The average cost of cases referred to the Regulatory Decisions Committee has increased from £253,500 in 2018/19 to £748,800 in 2019/20. Further, the average cost of cases referred to the Upper Tribunal increased from £447,300 in 2018/19 to £601,800 in 2019/20. With limited enforcement outcomes and little else changing or improving, it is hard to see how this significant cost increase is warranted.
What can we expect from the year ahead?
With little change from last year, it is hard to determine what the FCA is likely to achieve over the forthcoming 12 months. It is hoped that the FCA will issue more enforcement decisions, particularly if the costs associated with cases keep rising at such an exponential rate (with little if no explanation as to why). Without achieving improved enforcement outcomes, the FCA risks undermining its own principle of active regulation, and gaining a reputation for delivering fewer results alongside longer investigation times and ever increasing costs.
1 The number of fines imposed by the FCA decreased to 15, compared to 16 in the previous two years. The value of financial penalties increased by 1% over the last year, from £227,300,000 in 2018/19 to £224,400,000 in 2019/20 (https://www.fca.org.uk/data/enforcement-data-annual-report-2019-20
2 In 2018/19, it took an average of 74.1 months for a case to reach the Upper Tribunal compared to an average of 57 months in 2019/20 (https://www.fca.org.uk/data/enforcement-data-annual-report-2019-20
3 In 2018/19, the average length of all cases (including those where the FCA determined there was no case to answer) was 17.5 months. In 2019/20, the average length of such cases increased to 23.9 months.