Thought For The Week: FCA publishes enforcement trends data: Key Takeaways

The FCA has published its Annual Report for the period 1 April 2022 to 31 March 2023– including data relating to its recent enforcement activities.

The data paints a mixed picture. The number of open enforcement cases has marginally decreased and the rate at which the FCA has commenced new investigations has slowed fairly significantly. However, enforcement activity remains very high and the number of actions published last year increased dramatically.

Key takeaways

• As of 1 April 2023, the FCA had 591 open enforcement cases relating to 224 investigations (compared to 603 open cases the previous year). Of these 591 cases, 236 were regulatory, 162 were criminal, 138 were 'dual track' and 55 were civil.
• The FCA investigated more individuals than firms (385 individuals and 206 firms).
• The FCA opened 100 new enforcement cases and closed 107. By comparison, it opened 194 enforcement cases and closed 160 cases during the preceding year.
• The main issues being investigated included unauthorised business, insider dealing, wholesale conduct, retail conduct and pensions advice.
• The number of open financial crime cases fell from 47 (during the 2021/22 period) to 30 cases. The FCA appears to be increasingly focussing on financial crime in the context of its unauthorised business cases - it reported that had 48 open financial crime investigations within its unauthorised business enforcement teams at the end of 2022/23.
• The FCA published 28 Final Notices (imposing 24 financial penalties), a significant increase from the 11 penalties imposed in 2021/22.
• As the FCA continues to grapple with a heavy caseload, the length of time it is taking to complete investigations has also increased. The average time taken to complete the regulatory 'investigation stage' (which ends at the point at which the investigation team make initial findings) was 40 months last year. This is up from 25 months in 2020/21 (and 38 months in the 2021/22). Regulatory cases that went beyond the investigation stage took a further 24 months to conclude (on average). Therefore, in cases where the FCA chose to pursue enforcement action, the average time to completion was a full five years and four months.
• So called 'early intervention' cases remain on the rise as the FCA seeks to establish itself as an assertive regulator. During the 2022/23 financial year, the FCA opened 51 cases where it considered the use of its 'own initiative' powers (up from 35 in 2021/22). The enforcement division also supported the securing of 70 VREQs (voluntary requirements) during the year (up from 64 the previous year).

Looking ahead, 2023/24 is shaping up to be an important year for enforcement. The newly appointed Co-Directors will be feeling under pressure to cut the existing caseload in order to speed up the time taken to complete investigations and make room for the Consumer Duty cases that it will want to bring.

Junior Associate Laura Bell assisted with the production of this article.