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Painful payouts: the biggest FCA fines of the year
by Michelle Abrego on Dec 10, 2013 at 15:52
The Financial Conduct Authority and its predecessor the Financial Service Authority have had a vintage 2013 levying a total of £444 million so far this year, and there’s still a few days to go. We run through the regulator’s 20 biggest scalps. Click through to see them all….
JP Morgan was hit with a whale of a fine in September 2013, when the regulator demanded £137.6 million over its losses sustained by the ‘London Whale’ trades.
This is the second highest fine ever imposed by the Financial Conduct Authority (FCA) or its predecessor, the Financial Services Authority (FSA).
Overall, the firm was fined a total of £573 million by US and UK regulators, including a $200 million (£125.3 million) fine from the US Securities and Exchange Commission, $300 million (£188 million) from the Office of the Comptroller of the Currency, and $200 million (£125.3 million) from the Federal Reserve.
The regulator said the losses were caused by a weak management of a high risk trading strategy and an inadequate response to important information which should have notified the firm of the huge risks presented.
The FCA imposed its second highest fine of 2013 on Rabobank for ‘serious, prolonged and widespread misconduct’ relating to Libor.
The regulator said the Dutch bank’s poor internal controls encouraged ‘collusion between traders’ and Libor submitters and allowed systematic attempts at benchmark manipulation.
The Royal Bank of Scotland
The Royal Bank of Scotland (RBS) was slapped with a £87.5 million fine from the FSA in February over its Libor failings.
Like other banks fined over Libor it did not escape scrutiny from international regulators, paying out £390 million in fines in total.
The US Commodity Futures Trading Commission took $325 million (£207 million) and the US Department of Justice fined it $150 million (£95 million).
An investigation between many international regulators and justice departments uncovered wrongdoing on the part of 21 RBS employees, predominantly in relation to the setting of the bank's Yen and Swiss Franc Libor submissions.
Prudential was fined £30 million in March this year over failings related to its aborted bid to buy Asian insurer AIA.
The fine related to failures to notify the regulator ahead of its ill-fated $35.5 billion (£23.4 billion) bid for Asian insurer AIA. The regulator only found out about the takeover plans when news of the bid leaked to the media in 2010.
The FCA allocated £16million of the fine to The Prudential Assurance Company and £14 million to Prudential.
To top off the fine, the FSA also censured Prudential chief executive Tidjane Thiam.
Broker Icap was handed a £14 million fine from the FCA in September over misconduct relating to Libor.
The broker was also fined $65 million (£40.5 million) by the US Commodity and Futures Trading Commission and it is still being investigated by the European Commission.
Icap was the first broking firm to be fined for failings relating to the benchmark and the subject of the fourth penalty issued by the FCA in relation to Libor.
The firm breached the regulator’s principles for business over five years, from October 2006 and November 2010, and its misconduct involved a significant number of brokers, including one who dubbed himself ‘Lord Libor’.
UBS was hit by a fine of £9.5 million for failures in the sale of the AIG Enhanced Variable Rate fund in February 2012.
UBS also holds the not-so-prestigious honour of receiving the largest ever fine from the UK regulator. In December 2012 the FSA fined UBS £160 million for its role in the Libor scandal.
In this case, the regulator said UBS's failures led to customers being exposed to an unacceptable risk of an unsuitable sale of the fund.
The FCA fined Clydesdale Bank £8.9 million in September for failing to inform its customers clearly of their rights after the bank miscalculated the repayments on more than 42,500 mortgages.
Clydesdale, which is owned by National Australia Bank, has agreed to compensate all those who underpaid on their mortgages as a result and write to other affected customers.
Incorrect repayments were made on over 42,500 customer accounts and of these, approximately 22,000 accounts were left with shortfalls because customers made repayments that were insufficient to repay their mortgages by the end of the agreed terms, the regulator said.
High street insurance retailer Swinton Group was fined by the regulator £7.3 million for ‘aggressive’ mis-selling.
In July, the FCA criticised Swinton’s ‘aggressive sales strategy’, which failed to treat customers fairly in its telephone sales of monthly add-on insurance policies.
Between April 2010 and April 2012, Swinton sold personal accident, home emergency and motor breakdown policies without providing enough information to customers about key terms of the policies. It also failed to properly monitor sales calls, said the FCA.
It generated £92.9 million of income during that period.
In September, the FCA hit Aberdeen Asset Managers and Aberdeen Fund Management with a £7.2 million fine for failing to properly protect client money.
According to the FCA, the firm failed to identify client money placed in money market deposits with third party banks between September 2008 and August 2011.
The average daily balance in money market deposits affected by the failure was £685 million.
Adviser network Sesame made the headlines in June for a £6 million fine over investment advice failings and failures over advice on Keydata products.
The penalty was made up of a £245,000 fine for advice failings in relation to Keydata life settlement products and £5.8 million for systems and controls weaknesses across its investment advice business.
All of the failings related to Sesame’s oversight of its appointed representatives on advice given between July 2005 and June 2009.
Royal Bank of Scotland
RBS makes its second appearance on the list after the FCA fined for reporting failures.
The FCA fined RBS £5.6 million for incorrectly reporting 45 million transactions in wholesale markets.
RBS failed to properly report 44.8 million transactions between November 2007 and February 2013, and failed altogether to report 804,000 transactions between November 2007 and February 2012.
Lloyds was hit by a £4.3 million fine from the City watchdog for delaying compensation pay-outs to consumers which it mis-sold payment protection insurance (PPI), including 25,000 payments that ‘inadvertently fell out’ of the system.
In February three of Lloyds’ businesses, TSB Bank, Lloyds TSB Scotland and Bank of Scotland, were penalised. The regulator found failings in the companies’ systems which resulted in 140,000 customers receiving delayed PPI redress.
JP Morgan International Bank was fined £3.1 million in May for systems and control failings in its wealth management business.
The failings, which related to its provision of retail investment advice and portfolio investment services, lasted over two years and were not corrected until the FCA brought them to the firm’s attention, following the regulator’s thematic review into wealth management firms.
Policy Administration Services
Mobile phone insurance complaints firm Policy Administration Services was fined £2.8 million for wide-ranging failures in dealing with gripes about mobile insurance policies.
The FCA fined the firm for poor complaints handling between June 2009 and September 2011.
Oil rig maker Lamprell was fined £2.4 million by the FCA over listing rules breaches in March.
United Arab Emirates-based Lamprell angered investors when senior managers sold shares weeks before a damaging profits warning
The FSA said systems and controls failings prevented the company from seeing the deterioration in its commercial performance in early 2012.
AXA Wealth Services
AXA Wealth Services makes the list for its £1.8 million fine handed out over advice failings.
The failings relate to advice given by AXA advisers working at Clydesdale Bank, Yorkshire Bank and the West Bromwich Building Society from 15 September 2010 to 30 April 2012 during which time they sold approximately 37,000 investment products to 26,000 retail customers.
Over this period customers invested £440 million with AXA.
Gurpreet Singh Chadda
The largest fine to a sole-trader went to Gurpreet Singh Chadda who was fined nearly £1 million and banned for failings when conducting sale and rent back transactions.
The FCA said that Chadda’s fine was ‘for deliberately misleading vulnerable customers for personal gain’, when it was issued in June.
Chadda’s widespread failings included: misleading the sellers of the properties by telling them he would be buying their homes when in fact the purchasers were other people, and failing to notify the sellers that these purchasers were not authorised or regulated by the FCA.
The FCA fined platform services provider SEI £900,200 for failings in relation to its protection of client money.
The FCA said between November 2007 and October 2012 SEI failed on several occasions to ensure that it maintained its records and accounts in a way that ensured their accuracy.
SEI provides platform services for a number of national advice firms, including Towry, Baker Tilly Financial Management, formerly Tenon, True Potential, and network Best Practice.
Stefan Chaligne and Patrick Sejean
£900,000 and £650,000 respectively
In January the FSA went through with its plans to fine and ban a Swiss fund manager and a trader over allegedly engaging in market abuse.
At the end of September last year, the Upper Tribunal directed the watchdog to fine Stefan Chaligne, a Swiss-based hedge fund manager, £900,000.
The FSA was also directed to fine Patrick Sejean, a former senior salesman at Cantor Fitzgerald Europe, £650,000.
Guaranty Trust Bank (UK)
The UK subsidiary of Nigera’s Guaranty Trust Bank was fined £525,000 pounds for failing to have adequate controls to prevent money laundering.
The FCA said that between May 2008 and July 2010, GT Bank UK had failed to assess potential money-laundering risks, screen customers against sanction lists, establish the purpose of the accounts being opened in their London branch or review the activity of ‘high risk’ accounts.