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Financial Times: Average size of FSA fine declines in 2006: ‘In 2004 Royal Dutch Shell paid £17m in the wake of its oil and gas reserves misstatement.’

By Barney Jopson
Published: December 29 2006 02:00 | Last updated: December 29 2006 02:00

The average size of fines doled out by the City watchdog dropped in 2006, but the total number of penalties edged up from the previous year.

The Financial Services Authority collected just over £13m in fines from 25 cases this year, with the average penalty working out at around £520,000.

The average fine in 2005 was about £860,000 as the regulator collected £16.3m from 19 cases.

The figures reflect the performance of the FSA’s en-forcement division in its first full year under the leadership of Margaret Cole, a litigator recruited from White & Case.

But they are likely to sow some confusion about the regulator’s tactics because they appear to reverse the trend of fines getting fewer but bigger, which emerged in 2005.

That was said to reflect a view that dishing out low-level fines for minor rule-breaking was an ineffective means of deterring wrong-doing.

One new theme – evident in the FSA’s two highest-profile cases this year – is its determination to crack down on market abuse by hedge funds and investment banks.

The largest fine this year was a £6.4m penalty slapped on Deutsche Bank for failing to observe proper standards of market conduct in two share sales.

Equal publicity was generated by a £750,000 fine for Philippe Jabre, a hedge fund manager and former partner at GLG, which was the largest ever penalty against an individual.

Mr Jabre was found guilty of market abuse after trading on inside information.

The regulator has now issued one multi-million-pound penalty in each of the past three years.

In 2004 Royal Dutch Shell paid £17m in the wake of its oil and gas reserves misstatement.

Last year Citigroup was fined £13.9m for a bond trade that destabilised the eurozone market.

Copyright The Financial Times Limited 2006

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