The UK regulator awakens from its COVID-19 slumber – A review of FCA enforcement in 2022 and a look ahead to 2023

Introduction

In September 2021, following the London Capital & Finance ‘mini-bonds’ scandal, the Treasury Select Committee of the UK House of Commons asked for a more “proactive” Financial Conduct Authority (FCA) that is “decisive” in its investigations.¹ The FCA appears to have taken this to heart.

Over the course of 2022, the FCA imposed 26 financial penalties on firms and individuals, up from 10 fines the year before.² The total quantum of fines decreased, but this was largely because the FCA achieved two very significant fines in 2021. In relation to individuals, the FCA imposed 10 financial penalties in 2022 (up from three the year before), totalling some £1.7 million³ (up from approximately £236,000 in the year before). The fines related to a fairly broad variety of different types of misconduct, including issues of market abuse, financial crime and money laundering issues, conflicts of interest, breaches of the Listing Rules and pensions mis-selling.

In line with one of its priorities, which became particularly acute during the height of the COVID-19 pandemic, the regulator also removed 14 times as many misleading adverts than in the previous year.⁴

To assist with this increased level of activity, the FCA opened a new office in Leeds and accelerated its expansion in Edinburgh. The regulator also hired over 1,000 new people, although questions remain as to how many of them have replaced employees who left during the year. This number is currently unknown but could be reasonably high given recently reported low staff morale. Nevertheless, it’s safe to say the Treasury is getting what it asked for.

In turn, 2023 promises to be an interesting year for the FCA’s enforcement strategy, not least with the recent announcement that the FCA’s Director of Enforcement and Market Oversight will soon be stepping down. Mr. Steward’s replacement is yet to be announced, but whoever is chosen will likely have their own agenda and objectives which will inform the direction of travel for the FCA’s enforcement decisions this year and beyond.

Helen Marshall, head of the Akin Gump London Financial Services Regulatory team, writes:

“Following the two years at the height of the pandemic when the FCA’s enforcement division secured comparatively few, but significant, financial penalties, 2022 saw a substantial uplift in the number of financial penalties imposed even if some were of comparatively lower value. Whether this was the result of a short-term effort during the pandemic to focus on a few large cases, and now we are seeing the backlog of smaller cases being cleared remains to be seen. It will be interesting to follow what the FCA does in 2023 and beyond, particularly with a new person at the helm of the Enforcement Division.”

In this alert, we take a closer look at a small number of the key cases of 2022 and signs of what may be on the horizon for 2023.

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¹ House of Commons LCF briefing.

² Including one criminal fine imposed by the Court.

³ Approximately £1.2 million consisted of fines to five individuals in relation to a pensions selling investigation – Andrew Page, Aiden Henderson, Thomas Ward, Robert Ward and Tristan Freer.

⁴ https://www.fca.org.uk/news/press-releases/highlights-fcas-approach-2022.