FSA seeks to ban insurance cover for regulatory fines
24/07/2003
Regulated firms and individuals will not be able to use insurance to pay FSA fines under new rules proposed by the FSA today. The changes are intended to ensure that anyone who is fined must pay the fine himself rather than claim it under insurance. The proposed changes reflect concerns that firms are increasingly taking out insurance policies designed to pay for FSA fines.
Carol Sergeant, Managing Director responsible for Enforcement at the FSA said:
"Our proposals are designed to plug a potential hole. Insurance to pay FSA fines not only reduces the impact of those fines but also lessens the incentive for firms and individuals to meet appropriate standards. We cannot allow such developments to go ahead unchecked."
"The new rules would apply from 1 January 2004. The consultation ends on 24 September 2003. Consultation paper 191 Miscellaneous Amendments to the Handbook can be accessed at www.fsa.gov.uk/pubs/cp ."
Notes for editors
The proposed amendments are also relevant to Lloyds and so indirectly to every member of Lloyds
Regulated firms will still be able to make compensation payments to consumers either from their own funds or from professional indemnity insurance.
Firms will have until 31 December 2003 to review any insurance for FSA fines.
. Firms and individuals can make representations to the FSA during the course of Enforcement proceedings and to the Independent Financial Services and Markets Tribunal. These can also include representations on the amount of any proposed fine.
The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the appropriate degree of protection for consumers; and fighting financial crime.
The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.