UT (Tax & Chancery) UT-2022-000134 UT-2022-000135 UT-2022-000137 - [2025] UKUT 00214 (TCC)

The Authority has power under s123 FSMA 2000 to impose a penalty “of such amount as it considers appropriate” on a person if the Authority is satisfied that they have engaged in market abuse.

The Authority’s policy on imposing a financial penalty is set out in the Decision Procedure and Penalties Manual (“DEPP”).

DEPP 6.1.2 states that the principal purpose of imposing a financial penalty is to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches and helping to deter other persons from committing similar breaches, as well as demonstrating generally the benefits of compliant behaviour. Financial penalties (and public censures) are therefore tools that the Authority may employ to help it achieve its statutory objectives.

DEPP 6.2.1 identifies a non-exhaustive list of factors that the Authority will consider when determining whether or not to impose a financial penalty. They include: the nature, seriousness and impact of the suspected breach; the conduct of the person after the breach; and their previous disciplinary record and compliance history. Relevant factors in respect of any conduct after a breach include the degree of cooperation the person showed during the investigation, and the likelihood that the same type of breach will recur if no action is taken.

DEPP 6.2.2 provides that, when deciding whether to take action for market abuse, the Authority may consider additional factors including: the degree of sophistication of the users of the market in question, the size and liquidity of the market and the susceptibility of the market to market abuse; as well as the impact that any financial penalty may have on the financial markets or on the interests of consumers.

DEPP 6.4 contains guidance on when the Authority should consider issuing a public censure, instead of imposing a financial penalty. Relevant factors include whether the person has made a profit from the breach, whether the breach is serious, and whether the individual has a poor record of compliance where, in each case, those factors would favour the imposition of a financial penalty and their absence may be indicative that the issue of a public censure is more appropriate. The application of the Authority’s policy on serious financial hardship may also result in a financial penalty being reduced to zero (DEPP 6.4.2(8)).

DEPP 6.5.2 states that the Authority’s penalty-setting regime is based on the following principles:

The Authority applies a five-step framework to determine the appropriate level of financial penalty. The steps apply in all cases, but Steps 1 to 4 differ in market abuse cases against individuals. In summary:

This involves the disgorgement of any financial benefit derived as a direct result of the market abuse, where it is possible to quantify this (DEPP 6.5C.1).