The FCA budget for 2013 was £432.1m with adviser contributions being £41.9m for this financial year. For those investment intermediaries who hold client assets this will be £45.3m.
£432.1m is a tidy sum that I am sure the FCA will no doubt find ways to spend wisely. But in addition to the monies paid by firms in the form of regulatory fees, there is another regulatory ‘F’ word that involves money and that is ‘Fines’!
A Panacea FOI request has revealed that as of 30 October 2013 the totalamount levied in fines was £443,087,738. In ‘Arthur Daly’ speak, “a nice little earner Terry”
It had been my understanding that until recently all fines were to go toward reducing the regulatory cost burden on firms, in effect rewarding those that were not ‘bad boys’ for good behaviour.
By my reckoning that means that the fines P&L account has shown a profit of £11,087,738 on the FCA budgeted costs.
But all is not as it seems and the fines have not been retained by the regulator to see a reduced fee burden for firms, or even to the FSCS- an obvious home for this money.
The FCA has confirmed that “I can advise that certain enforcement costs are retained by the FCA from penalty receipts in line with Schedule 1ZA of the Financial Services and Markets Act (FSMA). In addition FSMA required the FCA pay over financial penalty receipts net of certain enforcement costs to the Treasury. These penalty receipts are paid over to the treasury in line with paragraph 20(6) of Schedule 1ZA of FSMA. There is further information about the payment to treasury of penalties on the legislature website. I have included a link to this for your reference”.
So, here’s a very simple thought about solving the funding conundrum that is the FSCS.
After all, the final 2013/14 levy by the FSCS was £285m according to its initial assumptions in its Plan and Budget 2013/14 in early February, that amount could have been comfortably funded by fines. And with £158,087,738 to spare.
“A nice little earner Terry” this time for the Treasury, that really seems a little immoral.
Shamefully the HM Government has suggested that the fines are going toward the care and recovery of our troops, Osborne & Cameron sound ‘oh so very caring’ but they only need this care because of the extreme and unecessary danger successive HM Governments place them in, not the financial services industry.
IFA Bill Crowley observed, “In the autumn statement that they announced they were going to give another £100m of financial services fine revenue to Forces charities. I am ex Forces and support the charities wholeheartedly but all he is doing is re-diverting fine money to charities who only exist because injured and disabled servicemen do not get the support they should from the Government, of whatever political persuasion. At the same time he is trying to get political mileage and votes from what is likely to be perceived as a good old bit of Bank bashing and helping our soldiers at the same time. I would just call it cynical and underhand”
As Arthur Daly said the “world’s your lobster” but in regulation, your fines are the Treasury’s. And their Christmas present has arrived early in the form of a nice stocking filler from Lloyds Banking Group, just fined over £28m and the largest ever fine imposed by the FCA or the FSA for retail conduct failings.
I’m off to the Winchester Club for a very large VAT!!