On 19 July 2018, the FCA published its annual performance report in respect of its enforcement activities. As ever, this gives an interesting (if high-level) insight into the performance of the Enforcement Division. In this article, we focus on some of the published data that is likely to be of greatest interest to practitioners.
The FCA has been and continues to be vocal about the need for a greater number of investigations to be commenced and at an earlier stage in the chronology of the FCA's involvement in a matter than ever before (see for example Jamie Symington's comments on 15 July 2017 in Enforcement Watch 23 'Symington Outlines the FCA's Approach to Investigations'). However, many practitioners are concerned that those investigations the FCA does commence can take a disproportionate amount of time to come to a conclusion.
The most recent FCA annual performance report reveals that the FCA opened 302 cases in 17/18, with 208 being concluded in the same period. Looking back at the report for 16/17 this compares with 282 cases opened in 16/17 and 115 being closed. It is not possible to determine how many of those opened in these periods were closed in the same year and the FCA always starts each year with a significant legacy caseload from the previous years (it carries some 504 into year 18/19). However, what can be said is that the number of cases being opened has (slightly) increased and the number being closed has also increased. The uptick in the number of investigations is certainly consistent with the FCA's stated desire to increase the early use of its investigative tools. The quid pro quo for investigations starting at an earlier stage should be that more conclude promptly (often without any action). Whilst there is a risk in reading too much into data over such a comparatively short period of time, this broadly seems to be borne out by the data, although the FCA may feel that the increase in the number of investigations could be more marked.
As a related point, the average length of regulatory cases has increased from last year, from 17.6 to 19.1 months. For criminal cases (which the FCA notes tend to take longer) the average is down from 75.6 months in 16/17 to 58.2 months in 17/18. Of particular note, the average duration of cases referred to the RDC has increased from 33.6 to 59.4 months. Plainly those cases that go to the RDC are contested in some respect and may also be complex. However, these are very significant timescales even when held up against High Court litigation. It is not possible to directly attribute the increase in average case duration to the step up in the number of investigations over the last year or so. However, it is difficult to resist the conclusion that resource taken to commence new matters must at some level impact the speed with which existing matters can be pursued. It may well be that whilst there is a larger number of cases being opened and closed comparatively quickly, those cases that are being disputed or otherwise progressed beyond the initial stages of the investigative process, are still taking far too long.
The level of fines is also taken by many as a barometer of the FCA's activity. In truth, it can be a misleading measure, with many complex and important cases nonetheless resulting in comparatively small fines in terms of the overall FCA figures. Similarly, large penalties (such as those imposed as a result of benchmark rigging) can distort the figures in the other direction. Against that backdrop, the drop in fines from £181m in 16/17 to £69m in 17/18 (including a very large fine of £27m imposed on Rio Tinto plc), whilst on the face of it significant, is not that revealing. The number of penalties imposed by the FCA in 17/18 was in fact very slightly higher than those imposed in 16/17 (16 penalties as opposed to 15). The number of cases concluded with any sanction (financial or otherwise) is surely a better benchmark of regulatory activity and efficiency.