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Regulatory analysis shows jail time is on the rise

‘Corlytics puts market conduct under the microscope’

• Regulators are getting personal; enforcement actions are focused on changing behaviours and non-financial sanctions are on the rise
• Global regulators have levied over USD 26.41bn in market conduct fines since 2012
• Almost 80% of those fines were issued by US regulators
• 2015 was the peak year for market conduct fines, but fines are rising again both for firms and individuals
• Market abuse was the most frequent violation
• 28 enforcement actions led to imprisonment between 2012 and Q3 2017
• Over 139 market bans in market conduct since 2012

New data from Corlytics, the global leaders in determining regulatory risk impact, shows that non-financial sanctions are on the rise. Be that market bans and injunctions or even jail time. But market conduct as a category of regulatory enforcement is still being hit with ongoing hefty fines. Since 2012, of the $26.4bn levied in market conduct fines worldwide, 80 percent of all fines have come from US regulators.

Interestingly, seven European banks were responsible for 45 percent of all US fines over the period. 2015 was the peak year for fines for firms and individuals. Market abuse practices uncovered because of foreign exchange rigging, led to heavy fines from US and European regulators. Enforcement actions globally settled down in 2016 but in the first three quarters of 2017 the data shows a steep increase as regulators remain vigilant on market conduct breaches.

This issue of the Corlytics Barometer, which examines global regulatory enforcement patterns globally, focuses on market conduct. Data reveals that there have been 139 market bans for senior executives since 2012, 46 specific activities suspensions, 11 cases of market suspension and 28 cases of imprisonment. Financial markets are learning from past mistakes but regulators are being increasingly firm on individuals.

What is included in market conduct?
In most markets, conduct regulation means consumer protection, market conduct rules and ethical codes of conduct. However, in more developed regulatory markets, such as the United States (US) and mature European and Asian regulators, conduct regulation also extends to corporate governance and incentives, organisational systems, competition and anti-trust.

Market bans and injunctions are favourites for regulators
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 continues, “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.”

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