FSA Given Extra Clout To Pnish City Crime

Errant financial companies are set to be prohibited from engaging in certain business lines under new enforcement powers to be given to the Financial Services Authority.
The new measures will be unveiled in this week’s Queen’s Speech as part of a broader financial services bill granting the City regulator more punch in tackling wrongdoing and excessive bonuses.
Alistair Darling, chancellor, will propose strengthening the FSA’s power to punish individuals and banks that break rules, including imposing suspensions on certain forms of business, a measure used to great effect in Japan. Currently the UK regulator can only pull authorisations for risk reasons.
To bolster efforts to contain City pay, Mr Darling will add a legal right for the FSA to “tear up” employment contracts for bankers if the terms encourage excessive risk-taking or include multi-year guarantees.
Other proposed enforcement powers include enhancing the FSA’s ability to hold executives personally responsible for misconduct, by giving the regulator four years rather than two to bring cases against individuals. The regulator would also be allowed to discipline individuals who perform key “control” functions without the necessary regulatory approval, rather than just fining the company involved.
The moves are part of a broad effort to strengthen FSA enforcement and make it a “credible deterrent” against financial crime by bringing more criminal cases and imposing tougher penalties on the regulatory side. Just last week, a new law giving the FSA the power to grant immunity to whistleblowers and other co-operating witnesses received royal assent.
Margaret Cole, FSA enforcement director, welcomed both the new immunity law and the government’s proposals to give the FSA additional powers, saying they helped to gave her division a “full tool kit”.
“We have really changed the landscape in this agency about the use of enforcement,” said Ms Cole. “Everyone is now keen to use it to send a message.”
The UK changes come against a global backdrop of stepped-up prosecution of white-collar crime, with a particular focus on insider trading. Ms Cole said the new immunity powers could be particularly helpful in the FSA’s efforts to go after more complex insider-trading rings.
“We have some people beginning to co-operate with us as part of a bigger story . . . We have a number of cases under investigation where you would expect to see charging in the near future,” she said.
The regulator is also toughening up its civil enforcement. The FSA is already proposing to triple many fines, and suspension power would add to its options.
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