The Financial Times has reported today that the Financial Conduct Authority (the FCA) had over 500 investigations open in April 2018. This represents roughly a fivefold increase in the number of open investigations compared to 2016.
However, this increase in investigations correlates with a significant drop in the value of financial penalties imposed by the FCA. The total value of penalties imposed in 2015/16 was £884.6m - this figure has tumbled to £69.9m for 2017/18.
This reflects what seems to be a strategic change from the FCA of consciously opening more investigations in order to effect changes in firms and encourage a heightened culture of regulatory compliance, rather than pursuing fewer targets in order to impose fines and penalties. It is significant that there has been a notable increase in the number of open investigations focused on governance and culture alongside the general increase in activity.
Firms should be aware of the FCA's growing tendency to open investigations, but also that the regulator will be willing to drop investigations where it right to do so. It is important to have updated policies and procedures, which are properly implemented and followed within the firm, to help combat this increased risk of being subject to an FCA investigation and avoid sanction. As we approach the implementation of the Senior Managers & Certification Regime to those authorised firms currently outside its scope (expected in 2019), senior managers will also become increasingly subject to parallel investigations where the FCA identifies non-compliance in those individuals' areas of responsibility.
The UK’s financial watchdog is opening more cases than ever before, with a particular focus on financial crime.