A Division that's sluggish or ready to spring? The latest stats from FCA Enforcement

The FCA Enforcement data released with the FCA's 2020-21 Annual Report paint a striking picture of the FCA's responses during an extraordinary year affected by Covid-19 and associated lockdowns. 

Aggressive case pipeline rationalisation

The numbers bear out mid-pandemic statements from the FCA that it was focusing initially on prevention rather than deterrence. During 2020-21 FCA Enforcement aggressively rationalised its case pipeline.  From April 2020 to March 2021 its caseload dropped 8 per cent - the first substantial drop since 2014-15.  It achieved this not by closing more cases (its case closure rate was steady year-on-year); instead, it opened substantially (27%) fewer cases.

By primary issue, the biggest contributors to this drop in cases were retail conduct, financial crime and market conduct. In relative terms, there were substantial drops in wholesale conduct and listings cases.  The smallest declines in relative terms were in the unauthorised business, mis-selling, retail lending and investment scams spaces.  This is consistent with FCA messaging that fraud and scams are a key focus area and with a likely increase in distressed borrowers during lockdowns.

Fewer enforcement outcomes and less total financial penalties

The FCA continued its work on cases that were close to their conclusion, but issued 34% fewer final notices, 33% fewer number of fines and 15% less total fines, and secured 32% fewer outcomes using its enforcement powers.  Also of note: the number of FCA fines against individuals began to decline from 2018-19 and, like 2019-20, 2020-21 has seen a continuation of this trend.  Going forward, we may well see the FCA pursue its individual accountability agenda predominantly through culture and governance action against firms rather than individuals within firms.

So, what's next - more of the same?

Not according to FCA Chief Executive Nikhil Rathi.  In launching the FCA's 2021-22 Business Plan he said that the FCA's instinct now will be to "test our powers to the limit" accepting the risk of "legal challenges", and to "run towards the fires of complex, difficult issues - and to try to put them out".

This is more than plausible.  The data probably doesn't reveal a stagnating FCA Enforcement division.  Instead it demonstrates just how challenging it has been to continue business as usual during the pandemic, and how preventative measures took priority over punitive steps.

And it's likely that significant conduct issues have arisen during lockdown - issues that will invite the FCA to take regulatory action as soon as the time is right.

So the statistics don't really show an FCA in the doldrums. They're more suggestive of a coiled spring or a pent-up dam.  2021-22 could be a busy year!