Enforcement Insights: the latest FCA data

When the FCA proposed greater transparency in relation to its Enforcement activities earlier this year, many had high hopes of a more regular digest of enforcement priorities and actions which would provide better visibility and direction for firms and their advisors.  Much has been written already about how those hopes were dashed with CP24/2 which set out the controversial and regrettable change of approach now commonly referred to as the 'name and shame' proposal whereby the FCA would publicise the name of firms under investigation at the investigation stage.

So, as we wait for the FCA's response to the feedback received on CP24/2, what can we learn from the only regular meaningful insight the FCA currently provides on its activities - the annual enforcement data published as part of the FCA's Annual Report?

In short, the FCA enforcement data 2023/24 confirms a number of things we've seen developing over the last 18 months:

1. To enable FCA Enforcement to have a 'streamlined caseload of investigations' going forward (as previewed in CP24/2), a lot of the current cases need to be closed.  The 2023/24 data shows that 60 cases (referred to by the FCA in the data as 'operations') were closed last year, a significant jump from 38 the previous year.
2. Of course, to achieve a smaller caseload, there also need to be fewer cases opening than closing. Accordingly, in 2022/23, the FCA closed 38 cases but opened 35 new cases; whereas in 2023/24, they closed 60 and only opened 25. 
3. The number of financial penalties has halved (24 to 12) but within that, the average fine issued to an individual has increased significantly – in 2022/23, 9 individuals were fined a total of 1.5m; in 2023/34, 4 individuals were fined a total of £4.2m.
4. There has been an exponential leap in the number of criminal convictions – 11 in 2023/24, compared to 1 in 2022/23.  And with 16 of the 25 new cases opened as criminal or dual track, this trend seems set to continue.  
5. The FCA's focus on financial crime enforcement remains – with 13 of the 25 new cases opened relating to 'reducing and preventing financial crime' and 83 of the total 188 open cases at end March relating to the same. Added to the enforcement figures, is the marked increase in s.166 (Skilled Person) reviews related to financial crime, accounting for 23 of the 83 cases in 2023/24 – over a quarter of the total, and more than double the 10 commissioned in 2022/23.

And on the use of s.166 more generally, there is a noticeable increase in the use of this power – those 83 cases in 2023/24 compare with 47 in 2022/23, and 38 in 2021/22.  The number of Skilled Persons reports commissioned confirms our impression that, as the FCA opens fewer enforcement cases, it will be making greater use of its supervisory powers to drive change in the behaviour of regulated firms and individuals. And, for those cases which the regulator does pursue through enforcement, it will be interesting to see when (and whether) the speed dividend intended from this new approach kicks in. While there is a marked drop from the 591 open investigations into firms and individuals as at end March 2023, with 503 individuals and firms still under investigation at the same point in 2024, the FCA's caseload remains high.