Disciplinary action against employees of financial firms doubles in two years

16 Jan 2012 | 04:30 pm | 1 min. read

The number of employees working for FSA-authorised financial firms who have been disciplined over the past two years has more than doubled, according to data obtained by international law firm Pinsent Masons.*

  • 2,181 employees performing controlled functions disciplined
  • Firms responding to FSA ‘get tough’ approach 

2,181 employees performing ‘controlled functions’ in financial firms were disciplined in the most recent year, compared to 1,027 in 2008 - the year in which Lehman Brothers collapsed.

The disciplinary actions concern employees performing what the FSA terms ‘controlled functions’. A person performing a controlled function is an employee engaged in any activity which is subject to FSA regulations and includes, for example, those who provide financial advice to third parties or who report to the governing body or audit committee of a firm, often in relation to its financial affairs or its exposure to risk.

The 2,181 employees disciplined in the most recent year either had their employment terminated or were suspended from the posts. The figures do not cover employees resigning, moving internally, retiring or being made redundant.

Pinsent Masons says that the figures show the extent to which financial firms are operating in an environment of greater sensitivity and are enforcing the rules in relation to employees performing controlled functions much more rigorously.

Pinsent Masons points out that the FSA imposed a record numbers of fines on financial firms in the most recent financial year - £98.5 million, compared to £27.5 million in 2008/09.

The firm also adds that some of the employees will have been subject to disciplinary action as a result of poor performance insofar as they have failed to adapt to an environment of increased focus of regulatory compliance.

Nick Thomas, Partner at Pinsent Masons, comments: “FSA enforcement activity has clearly had an impact on firms’ willingness to tolerate wrongdoing. Presumably at least in part to avoid incurring the FSA’s wrath, financial firms now appear much more likely to discipline employees for offences which a few years ago may have been tolerated or even gone undetected.”

He adds: “Issues such as the unauthorised misuse of client money have come into sharper focus since the collapse of Lehmann Brothers and the subsequent banking crisis. Firms are taking a far more serious view of such activity in an attempt to protect their own reputations and to minimise the risk of serious financial penalties.”

* 2008-10, most recent audited figures available.


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