Sharp rise in disputes over UK financial watchdog's penalties
The number of referrals to an independent panel that hears disputes about UK financial watchdog penalties has jumped 65 per cent in a year.
There were 476 referrals to the regulatory decisions committee in 2017, compared with just 289 in 2016, research shows. The RDC hears challenges to investigatory findings by the Financial Conduct Authority before the FCA publishes the final notices that accompany fines and bans.
The RDC is technically part of the regulator but is operationally separate. It can amend or overturn FCA findings, as it did in the case of the trader in JPMorgan’s $6bn “London Whale” scandal.
There has been a steep rise in the number of cases that have been challenged over the past two years: in 2014 the number was 21.
The increase comes after the FCA changed the referral process to the RDC on the recommendation of the government, with the aim of making it fairer and more transparent. Now, the RDC determines the penalty in cases that are partly contested. Under the old system, the FCA set the penalty, which could then be challenged in front of the RDC.
The FCA has forecast more cases against individuals in the wake of tough new accountability rules introduced this year. Individuals are more likely to contest bans and fines before the RDC, whereas companies tend to settle.
The first big test of the “Senior Managers Regime”, is the case against Jes Staley, the chief executive of Barclays, who is accused of trying to unveil the identity of a whistleblower. The FCA’s decision in the case is expected this spring.
Mark Steward, the FCA’s head of enforcement, has also taken up more cases for investigation at an earlier stage. This could partly account for the rise in RDC referrals.
According to Cleveland & Co, the legal advice firm that gathered the data, it presages a wave of regulatory action, with fines increasing after a low point in 2016.
“With a growing number of firms being referred to the RDC, more sanctions could be on the horizon,” said Emma Cleveland, managing director. “After a couple of years of upheaval and distractions, the FCA spotlight has come back to shine intensely on firms’ misconduct again.”
The FCA declined to comment.