Financial penalty setting

In keeping with the FSA’s ‘credible deterrence’ approach, it has published PS10/4 – ‘Enforcement financial penalties’ – with a view to establishing a consistent and more transparent framework for the calculation of financial penalties. The associated press release states that as a result enforcement fines could treble in size.

A link to PS10/4 is below and includes the changes to the Decision Procedure and Penalties manual (DEPP).

Fines will be linked more closely to income and could be up to 20% of a firm’s relevant revenue and, for non-market abuse cases, 40% of an individual’s salary/benefits/bonuses. Serious market abuse cases will start with a minimum of £100K.

DEPP 6.5D defines ‘serious financial hardship’ (income falling below £14K and capital below £16K) below which the FSA may consider reducing a penalty. It also introduces the concept of paying fines by easy instalments (although there is no option to pay now breach later).

The new penalty regime came into force on Saturday 6 March and applies to any breaches which occur on or after that date.