03 January 2018 at 13:37 BST

Global regulators set sights on individuals

As regulators up their games globally, individuals are finding themselves in the line of fire.

Den Rise

Regulators are getting personal with enforcement actions focused on changing behaviours and non-financial sanctions on the rise, according to new research. US regulators are by far the most active but Asian regulators are starting to make an impact, the research revealed. Furthermore, whilst 2015 was the peak year for market conduct fines, fines are starting to increase again -  both for firms and individuals - with market abuse the most frequent violation. The research also found that 28 enforcement actions led to imprisonment between 2012 and Q3 2017. The data from Corlytics, which specialises in regulatory risk impact, reveals greater numbers of non-financial sanctions - from market bans and injunctions to imprisonment. However, it also found that market conduct as a category of regulatory enforcement was still being hit with ongoing hefty fines. Since 2012, of the $26.4bn levied in market conduct fines worldwide, 80 per cent of all fines have come from US regulators. 

European banks felt US regulatory pressure

Seven European banks were responsible for 45 per cent of all US fines ($20bn) from 2012 in relation to market conduct. Many of these fines have originated from rigging the foreign exchange markets. Two US institutions were fined over $2bn by US regulators whilst three European institutions were fined over $2bn by US regulators. This illustrates that the US regulators are treating foreign and domestic banks in similar ways for similar issues, the report said.

US and UK regulators getting tough on market conduct issues

Conduct issues are high on the agenda in the US and the UK. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commissions (CFTC) are responsible for 20 per cent of all enforcement actions globally. The Department of Justice (DoJ) was responsible for over $6bn in fines against organisations and individuals. This was followed closely by the CFTC, with $5bn in fines. The New York State Department of Financial Services (NYDFS) and the SEC both handed out fines of over $1bn for market conduct issues during the period. The Financial Conduct Authority (FCA) in the United Kingdom also handed out fines for conduct issues of over $3.1bn during the period. 

Asian regulators are becoming more active

The data illustrates just how strongly the Asian regulators are concentrating on market conduct issues. For instance, the Asian jurisdictions with the most active regulators (Australia, Hong Kong, and Singapore) are bringing large numbers of cases for market conduct issues. Even though the fines tend to be greater in Europe and the US, Asian regulators are more active across the period. 

Australian enforcement actions

Australian regulators have brought almost twice the number of market conduct enforcements actions (131) across the period as the UK (74), with the Hong Kong regulators (89 cases) regulator (HKSFC) also out stripping its UK counterparts. Singapore comes in at just under the UK count at 55 but is far ahead of all other European regulators.

Non-financial firms at mercy of regulators

Conduct issues that have been in play within financial institutions are now coming to the foreground in other organisations. For instance, this year there has been an increased focus on non-financial firms in relation to issues on disclosure to the market. Of the 34 enforcements across global regulators for issues related to disclosure, 33 of them have been against non-financial institutions, including technology firms, pharmaceutical companies, ratings agencies and individuals.

Individual responsiblity

John Byrne, CEO at Corlytics said: 'Making individuals responsible for their own actions through threat of penalties is becoming a favourite mechanism for regulators to improve compliance with market conduct regulation. From the Corlytics Barometer, we can clearly see that both market bans and injunctions are favourites for regulators.' He added: 'It is apparent that conduct and culture are high on the agenda of many financial services businesses. Although many financial institutions have put programmes in place to address the culture that often leads to bad behaviour and market conduct issues. Many financial institutions are lacking the data that can provide insight as to where the greatest risks lie. Thus, violations are repeated. The regulators are looking for us to learn from one another and not make the same mistakes. These are more heavily fined each time.'


The financial data was taken from ‘The Corlytics Barometer – The market conduct landscape’ which is a summary of market conduct-related regulatory fines between January 2012 – September 2017. 


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