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FCA Collects £425 Million In Fines; Posts £29.3 Million Annual Loss

Stephen Little

14 July 2014

In its first annual report since it replaced the Financial Services Authority last year, the UK Financial Conduct Authority has revealed that it levied a total of £425 million ($727.6 million) in fines for the 2013-2014 financial year, up from £423.2 million a year ago. The regulator also posted a loss of £29.3 million, up £8.2 million from the previous financial year.

In the past year, the has significantly clamped down on financial services firms that break regulations and offer poor advice and has imposed 46 penalties, five public censures and 26 prohibitions.

On 12 September 2013 the FCA fined AXA Wealth Services £1.8 million for failing to ensure it gave suitable investment advice to its customers, while in February the UK arm of US financial services giant State Street was hit with a penalty of £22.9 million ($37.7 million) for deliberately charging clients substantial mark-ups. Other firms that have been fined include Barclays, Santander, Aberdeen Asset Managers and Standard Bank.

“We have also taken action against firms and individuals operating a variety of unlawful schemes, such as boiler room frauds, land banking scams, and other ‘get rich quick’ investment schemes. This has included freezing assets, closing down unlawful schemes and pursuing civil and criminal action in appropriate cases,” the report said.

Loss

The FCA posted a pre-tax loss of £29.3 million for the year ended 31 March. This was driven by a deficit after tax of £2.9 million and a loss of £26.4 million in its defined benefit pension scheme, down from £43.9 million last year.

The watchdog said that it spent £3.3 million on the Retail Distribution Review, up £2.4 million from the previous financial year.

Since March 2013, the FCA has carried out three phases of a review looking at how firms are meeting the requirements of the RDR. The regulator has focused on how firms are disclosing their service and charging structure to clients and whether firms that describe themselves as independent are actually offering an independent service in practice.

The regulator collected £434.5 million in regulatory fees - down from £449 million in 2013.

Net costs increased by 2.3 per cent from £428 million to £438.3 million, principally driven by an increase in employment costs of 3.1 per cent.

The FCA also said that the total scheme redress for Arch Cru funds is estimated to be £31.8 million, with £11.8 million paid to consumers so far.