Lawyers assess perimeter effect of L&G Hearing
Alex Davidson
The tribunal hearing to assess the Financial Services Authority's £1.1m fine against Legal & General should set 'first-time perimeters' for future fines, according to City lawyers.
Most commentators would not hazard a guess as to the outcome of the tribunal hearing, which is set for 26 and 27 April. But Philip Rubens, partner at Finers Stephens Innocent, has stuck his neck out. Rubens said that the fine against L&G could be reduced to £100,000, with a knock-on effect for future cases.
"This is the first ever case where the level of fine will have been determined and tested by a tribunal. It will provide perimeters. Shell was fined £17m [for market abuse and breach of the listing rules]. Why was it £17m? Why was it not, for instance, £12m — or £27m? We just don't know the full factors," Rubens said.
Other lawyers agree that the tribunal hearing will be a landmark event for enforcement. "The Regulatory Decisions Committee will come under political scrutiny if its original fine turns out to be significantly different from that levied by the tribunal," one said.
Decision time
It is still 'early days' since the FSA's appointment last November of Tim Herrington, partner of Clifford Chance, as chairman of the RDC, but reforms are likely to follow, according to lawyers.
"People who sit as members of the RDC are likely to be required to devote a longer period of time to the task. At present, they are appointed part-time, but this may not be enough if they are to have a greater understanding of what the case is," Rubens said.
There may be a requirement for members of the RDC to be presented with more substantial documentation, according to Rubens. "At the moment, they are given selective documentation, decided by the FSA's enforcement division. There hasn't been a broad enough understanding of the cases."
If the RDC is to spend longer considering cases, on the basis of more substantial evidence, the industry will be footing the bill. This is likely to create conflicts of opinion, according to lawyers.
"The industry wants to see the right decisions made, but parts of it feel that it is already paying enough to finance the FSA. The RDC affects only a tiny minority because most firms do not face its enforcement action decisions," a lawyer said.