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November 9, 2009    

FSA chief issues jail warning to financial firms

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by Kay Murchie

The Financial Services Authority’s (FSA) chief executive is calling for ethical behaviour within the financial world.

Hector Sants, chief executive of the City regulator, said he is “unconvinced” that top executives have accepted the need to change and operate in a different manner following the financial crisis that rocked the world.

In a speech to the City, Mr Sants said: “It is important to recognise that the FSA will not presume that the firms we supervise have learned the lessons of the past. There remains, I believe, an absence of the acceptance of collective responsibility for what has happened.

“We recognise that culture is driven by individuals and in particular senior executives who set the tone from the top. I thus strongly believe that our authorisation regime should seek to make a determination of an executive’s ability to set a strong ethical framework and to foster the right culture.”

Sants made it clear that those financial institutions which do not adjust their behaviour will face tough action from the FSA. “And yes, that does mean people go to jail,” he said.

The regulator has taken action against fraudulent mortgage brokers, firms mis-selling payment protection insurance, and companies mistreating customers in arrears on their home loans and this has resulted in a record number of fines in 2008-9.

More than 50 people were banned from the industry in the same period with an additional 29 being prohibited since.

In related news, the Conservative party have said they will abolish the FSA if they are elected next year, giving control back to the Bank of England.

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