The decision to review the fines procedure was a response to industry criticism following the recent move to fine Nationwide £980,000. Many commentators have questioned where fine income was being spent.
Fines will continue to be used to reduce the regulatory fees of all firms within the same fee block as the fined firm, but this will now only go up to a certain level. The remainder of the fine will then be spread across all blocks to reduce every company’s regulatory fees in the year ahead.
This will prevent one large fine effectively giving companies a ‘fee holiday’, as happened following the £14 million fine of Citigroup Global Markets in June 2005.
The regulator has also proposed that fine payers will no longer be able to benefit from penalty discounts arising from their fines, where the value of the discount is £250 or more.
Robin Gordon-Walker, spokesman for the FSA, said: “In the future we don’t want to get this ‘fee holiday’ anomaly from one large fine. This will be fairer to all, as there are blocks where there haven’t been any large fines at all and mortgage intermediary fines are tiny.”
Colin Snowdon, chief executive of Freedom Lending, said it was a good move by the FSA. He commented: “This is pragmatic and sensible. The previous approach to fines seemed rather random, as why should some firms get a ‘fee holiday’ because one of their members transgressed seriously?
“It’s good that all income raised by penalties and fines goes back to give firms fee relief. It’s a very transparent approach.”
