The regulator also tripled the number of senior managers under
investigation during the year, fining four of them a total of over
£200,000. This follows the FSA's promise last December to hold more
senior managers personally accountable for the poor conduct of
their firms.
The FSA's enforcement philosophy is to achieve "credible
deterrence" in its regulation of the UK's financial services
industry.
During 2008/9, its Enforcement Division made use of its full
range of civil, criminal and administrative sanctions against
financial firms in the UK. These included instigating three
prosecutions for insider dealing and successfully concluding the
FSA's first insider dealing trial with two convictions and one
custodial sentence.
Over 30 firms were ordered to review their past business,
contact consumers and pay redress as appropriate. And a record 58
individuals were prohibited from carrying out regulated activities
because of unacceptable conduct, which ranged from market abuse to
mortgage fraud or failing to adhere to the FSA's guidelines for
treating customers fairly.
Commenting on the results in his Chief Executive's report,
Hector Sants pointed to a broader change in the FSA's general
approach to regulation.
"When I took on the CEO role, I made clear my intentions to
change radically the supervisory approach of the FSA," said Sants.
"I set out to ensure that the FSA is seen as a regulator which
delivers 'intensive supervision' and 'credible deterrence'. That
programme began 18 months ago and we are well on track to achieve
that goal by the end of 2009."
The focus has now shifted from 'principles-based' to
'outcomes-focused' regulation. Historically, the FSA has
concentrated on firms' systems and controls and relied on
management to make the right decisions. Principles are still
important, but the regulator increasingly sees a need to judge
individuals on the consequences of their actions.
"We are now focusing on questioning the overall business
strategy of the institution and more generally on the possibility
of risk crystallising in the future," said Sants. "This is a
fundamentally different way of supervising firms.
"We are now making judgements on the judgements of senior
management and taking action if, in our view, those decisions will
lead to risks to our statutory objectives," he said. "We believe
this move from regulation based only on observable facts to
regulation based on judgements about the future is vital to help us
deliver our statutory objectives."
While much of the annual report deals with the FSA's response to
the global banking crisis, it also describes progress made on a
number of other regulatory initiatives over the last year,
including measures to address mis-selling of payment protection
insurance and the Retail Distribution Review.
Overall, of the 59 'milestones' put forward in its 2008/9
business plan, the FSA achieved 39 on schedule. A further 10 were
rescheduled but were still delivered in the 2008/9 financial
year.
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