FCA to update penalty policy concerning individuals

The FCA has published a consultation paper (CP26/19) on targeted updates to its Decision Procedure and Penalties Manual (DEPP). The proposed changes are relatively minor and largely reflect an evolution of the penalty rules in response to recent Tribunal case law, an evolving regulatory framework and the impact of inflation on various thresholds since the FCA's current penalty policy was introduced 16 years ago.

The proposals include:

Market abuse: for the most serious cases (assessed at Levels 4 or 5), raising the minimum penalty for individuals from £100,000 to £150,000 to account for inflation.

Deterrence for wealthier individuals: The FCA wants to clarify that it may increase penalties for deterrent effect having regard to an individual's income and assets. It is concerned that the current wording in DEPP may be interpreted as limiting its ability to increase penalties based on a person's wealth (in non-market abuse cases) to situations where the relevant income is 'small or zero'. The FCA plans to remove this reference to 'small or zero income', thereby aligning its approach across market abuse and non-market abuse cases.

In FCA v Rangecourt SA & Ors, the Tribunal was critical of what it regarded as an attempt by one of the individuals to structure their affairs to minimise declared income, resulting in an artificially low starting point for penalty calculations. The Tribunal was prepared to look through the form to the substance and calibrate penalties to that individual's true financial position. The FCA appears keen to confirm that it has an equivalent power.

Penalties for individuals – relevant income: In response to recent Tribunal decisions, the FCA plans to clarify that 'relevant income' for the purposes of penalty calculations for individuals will:

include:

• benefits received after the misconduct period but earned during it; and
• income that is uncertain at the time of calculation but that may be estimated or adjusted for the likelihood of receipt;

but exclude:

• benefits which the FCA knows, by the time it calculates the penalty, will never be received; and
• benefits received during the misconduct period but earned in a prior period.

These changes largely reflect the Upper Tribunal's reasoning in Gonzalez v FCA.

The FCA also plans to clarify that it may increase, for deterrence purposes, a penalty calculated by reference to relevant income where that income was reduced by the firm because of the misconduct in question. This is likely a direct response to the Tribunal's decision in the Jess Staley case, in which the Tribunal reduced the penalty initially imposed by the FCA on the grounds that Mr Staley’s relevant income was materially lower than it had been when he appeared before the RDC. This reduction reflected the withdrawal of certain deferred compensation by his former employer following publication of the Decision Notice.

Serious financial hardship thresholds: The FCA proposes to raise the income and capital thresholds used to assess serious financial hardship, in order to reflect current living costs and to provide for those thresholds to be updated over time. The proposed thresholds would increase to £21,000 for income and £24,000 for capital.

The FCA also proposes to remove the current requirement that the impact of the sale of a property on other occupants must be 'exceptionally severe' before the FCA will consider representations on that point. In practice, the FCA already considers such representations regardless of severity, and the proposed amendment seeks to reflect that position. 

Finally, the FCA plans to clarify that the disgorgement element of any penalty will not be reduced, even where payment would cause the person serious financial hardship.

Settlement decision-makers: The FCA proposes to allow greater flexibility in the appointment of settlement decision-makers (SDMs) in certain cases. The rules currently require one SDM to come from outside of the Enforcement and Market Oversight Division (“EMO”). Current practice is for one SDM to be an Enforcement Director, with the other drawn from the area that referred the investigation to provide relevant technical expertise. However, because the Market Oversight team sits within EMO, it is not possible in market abuse cases to source a second SDM with relevant expertise from outside EMO. The FCA therefore proposes to modify DEPP 5 so that the restriction requiring one SDM to come from outside EMO does not apply where the investigation was referred by Market Oversight. This would enable a Director or Head of Department from Market Oversight — with the relevant expertise — to be involved in settlement decision-making.

Cryptoasset market abuse regime – consequential amendments: The FCA proposes to extend its penalty framework to cover cryptoasset market abuse and to reflect new powers under the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026.

The thresholds for market abuse fines and serious financial hardship have been recalculated by reference to the change in CPI plus housing inflation ("CPIH") since 2010. They will automatically update based on any increase or decrease in this metric every two years, with the applicable figures being those in place when the relevant misconduct occurred.

One aspect of the CP that is not entirely clear is how the FCA will take into account a decision by a firm to reduce an individual's remuneration in response to a finding of misconduct, before a decision on this has been made. In practice, it may be easier for the FCA to give less weight to variable compensation in future, relying instead on salary together with a Step 4 adjustment for deterrence in appropriate cases.

The consultation closes on 10 August 2026.

The consultation paper is here.