"It could well be that the last year is something of an aberration as there is good evidence to suggest that in the first few months of the new financial year the FCA has redoubled its efforts."
A freedom of information request has revealed that FCA enforcement activity fell across the board in 2022-23, with enforcement cases opened against firms down 67% and cases opened against individuals down 33%.
The findings of a freedom of information request published by global law firm Reed Smith show that in the last financial year the number of enforcement cases opened against firms fell from 79 to 26 while cases opened against individuals dropped from 111 to 74. The downwards trend was also reflected in the number of cases closed against both firms and individuals, which fell by 10% and 44% respectively in the last financial year.
Despite the fall in cases opened and closed, the FCA has maintained its focus on opportunistic insider dealing, with such cases representing the largest proportion of cases opened and closed against individuals across the last three financial years.
Meanwhile, for firms, unauthorised collective investment schemes accounted for the largest number of cases opened, while money laundering controls topped the list for most cases closed against firms, closely followed by pensions advice.
Romin Dabir, partner at Reed Smith, commented: “It is difficult to determine exactly why enforcement activity is falling, though it is possible that it is related to a backlog of issues created by the Covid-19 pandemic. It could also be that the drop in cases opened has occurred because the FCA has devoted resources to closing cases it has already opened.
“The relative decline in enforcement activity may also reflect the government’s current objective to increase the competitiveness of the City of London. It is possible that the FCA may be adopting a lighter regulatory touch on certain issues than in previous years.
“Having said that, it’s important to note that on a number of issues, be it insider trading or operating a collective investment scheme without being authorised, the FCA has continued to take action with activity levels remaining high. It could well be that the last year is something of an aberration as there is good evidence to suggest that in the first few months of the new financial year the FCA has redoubled its efforts. Consequently, we could see an uptick in enforcement activity in the not-too-distant future.”
Laura-May Scott, counsel at Reed Smith, added: “What appears to be a lack of enforcement activity may also be a reflection of the FCA making greater use of its intervention powers – that could well be one of the reasons that explain why the FCA appears to have been less active in recent years.
“Insider trading is always a major focus for the FCA and, due to improvements in technology, it is easier for the FCA to monitor for suspicious activity. It is no great surprise to see that opportunistic insider trading accounted for the majority of investigations opened and closed against individuals.
“There is invariably a proportionality issue that comes into play with ‘dawn’ raids. Given the resources that raids require of the FCA, raids are typically only conducted where there is an urgent need to move quickly due to serious concerns in relation to financial crime activity and potentially in order to stop companies destroying relevant evidence.”
