One of the least publicised changes brought about by N2 provision of the Financial Services and Markets Act 2000 (FSMA) is the idea that each party throughout the enforcement process is responsible for its own costs. This marks a radical change from the previous rules-based enforcement regime of the self-regulating organisations (SRO) where authorised firms and registered persons were often required to pay significant contributions towards the costs incurred in disciplining them.
Under the old regime, costs awards in excess of £100,000 were not unknown and the ability of the SROs to recoup at least part of their enforcement costs helped to keep membership fees down and acted as a deterrent against transgression. In the months after N2 it will be interesting to see how the policy of the Financial Services Authority (FSA) in investigating and bringing disciplinary actions and the tactics of those being investigated and disciplined adapt to this new reality.
