UK: FCA consults on changes to its penalty and decision-making policies

Why should I read this?

The Financial Conduct Authority (FCA) is consulting on targeted changes to its penalty and decision-making policies (CP26/19). The proposed changes include: 

• increasing the minimum penalty for serious market abuse by individuals to £150,000;
• clarifying that the FCA may increase penalties for deterrent effect, having regard to an individual’s income and assets;
• clarifying how the FCA treats deferred remuneration when calculating relevant income;
• raising the serious financial hardship (SFH) thresholds for individuals;
• allowing more flexibility in who makes settlement decisions in some cases; and
• extending the FCA’s penalty framework to cover cryptoasset market abuse. 

The consultation closes on 10 August 2026.

Why does the FCA want to make these changes?

Higher minimum penalty for serious market abuse by individuals

Currently, the minimum initial penalty in cases of serious market abuse (market abuse assessed at seriousness level 4 or 5) by individuals is £100,000. This figure was introduced in 2010. The proposed increase to £150,000 is intended to reflect inflation since then, using the Consumer Price Index plus housing cost (CPIH) inflation index.

The FCA also proposes to automatically adjust the minimum penalty figure every two years, applying the percentage change in CPIH and rounding to the nearest £10,000.

The minimum penalty will be the figure or figures in place when the market abuse occurred.

Deterrence for wealthier individuals

The FCA may increase a penalty if it considers that the figure does not sufficiently deter the individual who committed the breach, or others, from committing further or similar breaches. DEPP contains two statements on increases relating to an individual’s wealth, one relating to market abuse cases (DEPP 6.5C.4) and one relating to non-market cases (DEPP 6.5B.4).

The FCA notes that the second statement has been interpreted to mean that in non-market abuse cases, it will only increase a penalty for deterrence where the individual’s relevant income was small or zero. The FCA proposes to replace this statement with the same wording as in market abuse cases. This change will clarify that the FCA may increase a penalty in any case where the penalty may not act as a deterrent given the individual’s income or net assets.

Relevant income and deferred remuneration

When calculating an individual’s relevant income for the purpose of calculating a financial penalty, the FCA looks at deferred remuneration such as shares and bonuses, as well as salary. Deferred remuneration may (i) relate to work undertaken during the misconduct period but be received after it, or (ii) be received during the misconduct period (and be treated for contractual purposes as earned during it) but relate to work undertaken before it.

To reflect the approach taken by the Upper Tribunal in Staley v FCA and Gonzalez v FCA, and to make its penalty policy more predictable, the FCA proposes to amend DEPP 6 to clarify that:

• the following  will be treated as relevant income:
• benefits received after the misconduct period but earned during it;
• income that is uncertain at the time of penalty calculation but may be estimated or adjusted for likelihood of receipt;
• the following  will not be treated as relevant income:
• benefits that that FCA knows, at the time of penalty calculation, will never be received;
• benefits received during the misconduct period but earned in a prior period;
• the FCA may increase for deterrence a penalty calculated by reference to relevant income if that income was reduced by the firm as a result of the misconduct in question.

Serious financial hardship thresholds

The FCA may reduce a proposed penalty where payment would cause SFH to the individual (DEPP 6.5D). To determine whether SFH will be caused, the FCA calculates whether the individual’s net annual income and capital will fall below certain thresholds if they were to pay the proposed penalty.

To reflect inflation (using the CPIH index), the FCA proposes to update the SFH thresholds as follows:

• net annual income: increase from £14,000 to £21,000;
• capital: increase from £16,000 to £24,000.

The FCA also proposes to automatically adjust the SFH thresholds every two years, applying the percentage change in CPIH and rounding to the nearest £1,000.

Settlement decision-makers

The FCA’s current policy is that when settling enforcement cases, decisions must be taken by two settlement decision-makers (SDMs), at least one of whom will not be from the FCA’s Enforcement and Market Oversight Division (EMO). The FCA’s standard practice is for one of the SDMs to be an Enforcement Director (given their expertise on the enforcement process), while the other SDM tends to be from the area which referred the case for investigation (given their technical expertise in the subject matter).

This approach creates difficulties when making settlement decisions in cases that have been referred to Enforcement from Market Oversight, as it means Enforcement may not have the benefit of an SDM with relevant technical expertise. To address this issue, the FCA proposes to disapply the restriction that one SDM must come from outside EMO where the investigation was referred from Market Oversight.

Cryptoasset market abuse

Currently, market abuse is largely defined in DEPP by reference to the Market Abuse Regulations. The FCA proposes to extend the penalty framework in DEPP 6 to cover market abuse involving cryptoassets.

What impact will the changes have?

If implemented, the changes will affect individuals subject to FCA enforcement action. This includes senior managers, directors and employees of authorised firms, as well as individuals involved in market abuse (including those outside regulated firms).

The proposals mean that individuals subject to enforcement action for serious market abuse face a significantly higher minimum penalty than is currently the case.

Wealthier individuals involved in non-market abuse cases may face higher than expected penalties in light of their assets and income. We may see more of these cases being referred to the Upper Tribunal, as individuals seek to challenge the FCA’s approach. Whether this change has a deterrent effect remains to be seen.

Clarification of the FCA’s approach to relevant income and deferred remuneration is welcome as it will provide greater certainty to individuals facing financial penalties.

The increase in SFH thresholds is a positive and overdue development. The new thresholds should better reflect the cost of living and protect individuals from disproportionate hardship.

How Eversheds Sutherland can help

Eversheds Sutherland’s Financial Services sector teams have specialist knowledge of FCA and PRA regulation. We can advise firms on:

• your regulatory obligations;
• compliance with regulatory requirements;
• how to manage your relationship with the regulators; and
• what to do when things go wrong.

Further reading on FCA investigations and enforcement

• FCA updates its Enforcement Guide
• FCA takes enforcement action against Crispin Odey