FSA Annual Report 2006/07 - Better Regulation Ltd

Section six – Appendices
Appendix 2
123
In some (limited) circumstances where we have concerns about the behaviour
of a firm or approved person we may decide that it is not appropriate to
bring formal disciplinary action. Instead, we may consider it helpful to make
a firm or person aware that they came close to being subject to formal
disciplinary action. We use private warnings to deliver this message, and in
2006/07 we issued 25 of them.
We have achieved successful enforcement outcomes in the wholesale and
retail markets for breaches of our high-level principles without reference to
detailed rules. We expect this trend to continue. We took action against 20
individuals last year across a range of issues, with consequences including
financial penalties, public censures and prohibition from the industry. Some
of the actions against individuals were on the basis of Principles only. We are
serious in our aim to engage senior management in respect of the regulatory
conduct of their firms: we expect senior management to take responsibility
for ensuring that risks are identified; that there are appropriate systems and
controls in place to mitigate these risks; and that steps have been taken to
ensure that they are effective. We will consider taking action against
individuals if we consider that they have failed in their responsibilities.
In our recent consultation on the review of the Enforcement and Decision
Making Manuals, we have proposed that when determining the amount of a
penalty to be imposed on an individual we will take into account that
individuals will not always have comparable resources to a firm, that
enforcement action may have a greater impact on an individual, and also,
that it may be possible to achieve effective deterrence by imposing a smaller
penalty on an individual than on a firm. We have also proposed that when
setting the level of penalty in cases involving individuals with significant
financial resources, it will be appropriate to consider whether the level of
financial penalty should be higher than might otherwise be imposed on an
individual, to ensure that the penalty has a deterrent effect. We propose to
also consider whether the status, position or responsibilities of the individual
are such as to make a breach more serious and whether the penalty should
therefore be set at a higher level.
We have had considerable success over recent months in tackling those firms
and individuals in the UK that facilitate the actions of overseas boiler rooms.
We believe that these cases have an overall deterrent effect on boiler room
activity. For example we obtained a winding up order against Inertia
Partnership and an interim injunction against Chesteroak; both firms were
UK links to boiler room activity and the orders were obtained to protect UK
consumers. Our enforcement options in respect of overseas boiler rooms
without any UK link are far more limited because of jurisdictional
difficulties. One of the most effective methods we have to deal with the
dangers posed by overseas boiler rooms is to raise awareness through
consumer education and to issue warnings and alerts in relation to specific
boiler room threats. We have also taken action against a firm of solicitors
based in the UK for assisting overseas boiler room based activity. The firm
has referred our decision to impose a penalty on it to the Financial Services
and Markets Tribunal and the case is being heard in June.
Response to the Annual Report for 2006/07
of the Smaller Businesses Practitioner Panel
(to follow)