FSA gets tough as it threatens to triple abuse fines

The City watchdog has upped the ante in tackling market abuse by threatening to triple fines and even bankrupt some offenders.

The Financial Services Authority (FSA) yesterday unveiled plans to bolster its regulatory firepower, threatening fines of up to £50m, following concern over repeat offenders.

Margaret Cole, the director of enforcement at the FSA, said the proposals were an "important step," adding: "By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules."

Individuals who abuse the market will be fined at least £100,000. They also face losing 40 per cent of their salary and bonus from the entire year and twice the profit made, or the loss avoided, from the abuse. Companies will also lose up to 20 per cent of income from the business where the breach took place during the period of abuse.

"The rules will ensure that fines better reflect the scale of the wrongdoing and that profits made from the breaches are clawed back," the FSA said.

Brian Dilley, a partner at KPMG, said many would welcome the move. "The FSA has upped the ante in its enforcement operations."

Last year, Alliance & Leicester was fined £7m relating to payment protection insurance. A spokeswoman for the FSA said under new rules the punishment could have increased to £35m.

This is the latest stage of the "new-look tougher FSA," she added.

The regulator said penalties "need to be increased. We have repeatedly seen breaches in particular areas – for example the sale of payment protection insurance and market misconduct – where insufficient account has been taken of previous enforcement action."

The new "get tough" attitude has already had an effect as the regulator has upped its fines sixfold to £27.4m in the year to the end of March over the previous year.

The FSA said its new penalties could drive firms or individuals into bankruptcy. It is considering not reducing financial penalties over serious financial hardship as before. "As the primary purpose of a financial penalty is to deter, we consider that this approach would be justified, even if it forces individuals into bankruptcy," it said.