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FSA slaps Pru with £30m fine before its split

The Financial Services Authority (FSA) handed out its last penalty before being split up after fining companies in the Prudential Group (Prudential) a total of £30m.

According to the watchdog, the fine relates to Pru’s failure to inform the regulator that it was seeking to acquire AIA, the Asian subsidiary of AIG, in early 2010.

Stephenson Harwood and Freshfields Bruckhaus Deringer landed roles advising on the fine.

The Pru turned to Freshfields’ head of financial institutions David Scott for advice on the fine.

Tony Woodcock, commercial litigation partner at Stephenson Harwood landed a role acting for Tidjane Thiam, the insurer’s chief executive.

‘Prudential, led by Thiam as CEO, failed to give due consideration to its obligation to inform the FSA of this transaction, which would have had a huge impact on the ground had it gone through. That was a serious error of judgement for which the Prudential is paying the price,’ said Tracey McDermott, FSA director of enforcement, in a statement.

According to the FSA, the Pru failed to inform it at the earliest opportunity to allow them to approve or reject the deal on regulatory grounds.

The FSA issued record fines in 2012, totalling £313m after issuing 57 penalties. Compared to 2011, the FSA handed out £65.5m in fines although the Libor scandal was a major factor in the exponential rise in penalties last year. Already this year, the FSA has handed out over £135m in penalties, with the Royal Bank of Scotland getting hit with an £87.5m fine over the Libor issue in February this year.

This was the last fine to be handed out by the FSA, as it was split into two parts becoming the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) on 1 April.

Slaughter and May corporate heavyweight Charles Randell, is the only City lawyer to be appointed to either of the new regulation bodies. Randell will sit on the PRA’s board.

But if the change in name of the organisation may have caused some to think that the level of fines might drop, one partner at a Magic Circle firm is not convinced.

‘My expectation is that fines will continue to increase. The FSA was moving towards a tariff system, which increased fines in line with a company’s revenue. Although until Prudential no one was criticising the FSA for level of fines,’ they said.

Despite Martin Wheatley, chief executive of the FCA, publicly stating that level of fines will not change companies’ behaviour, many think it will be business as usual for the regulator. One City partner said: ‘The FSA is always trying to hold senior management to account, as seen with the targeting of Prudential’s Thiam.’

A new name perhaps but it looks like financial regulatory partners will be kept busy for the future.