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The Guardian: Shell’s pounds 17m will be used to reduce fees levied by regulator

The Guardian: Shell’s pounds 17m will be used to reduce fees levied by regulator

“The reduction is almost entirely due to the penalty paid by Shell for “unprecedented misconduct” in misleading the markets over the reporting of its oil and gas reserves.”

JILL TREANOR

Sep 14, 2004

All companies regulated by the Financial Services Authority can expect a cut in their regulatory fees next year following the record pounds 17m fine levied on oil company Shell.

For the first time since it was formed, the City regulator plans to reduce by just under 10% the charge it levies on firms and individuals it regulates.

The reduction is almost entirely due to the penalty paid by Shell for “unprecedented misconduct” in misleading the markets over the reporting of its oil and gas reserves.

To avoid the FSA imposing excessive fines, it is not allowed to make money from the penalties it levies. This means any fines it makes must be channelled back to the firms its regulates. In its previous financial year, the FSA took in pounds 12m in fines but this had little impact on the overall level of fees, which amounted to just under pounds 240m.

Next year, however, the pounds 17m fine on Shell and other penalties will produce a significant reduction in fees.

An spokesman for the FSA said: “One of the key requirements is that there shouldn’t be an incentive for the FSA to fine firms. So any income that comes in from fines goes back to the regulated firms.

“In this particular circumstance, because the financial penalties have been significantly higher, we will be able to reduce fees by 7-8%”.

The Shell fine, a record for the FSA but considerably smaller than the pounds 70m levied by the securities and exchange commission in the United States, followed the Anglo-Dutch group’s admission in January that it had to downgrade its oil reserves by 20% to meet SEC guidelines.

Shell later reduced these figures by another 5% and ousted its chairman, Sir Philip Watts, and the exploration director, Walter van de Vijver, after revealing what appeared to be a cover-up of an overstatement of reserves.

While the FSA has faced questions about why its fine was lower than the one levied by the SEC, chief executive John Tiner said last week that fines should not be too onerous because shareholders are usually hit by a fall in an offending company’s share price.

http://www.guardian.co.uk/business/story/0,,1303925,00.html

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