ABSTRACT
This chapter examines the role of what has been labelled 'credible deterrence' in financial regulation. The United Kingdom's principal conduct regulator, the Financial Conduct Authority (FCA), has committed itself to the policy of credible deterrence championed by its predecessor, the Financial Services Authority (FSA). In the words of the FCA's Director of Enforcement and Financial Crime, 'the FCA is just as committed to achieving credible deterrence as the FSA was'. Tracey McDermott, 'Enforcement and Credible Deterrence in the FCA', Thompson Reuters Compliance and Risk Summit, London, 18 June 2013 it focuses, in particular, on the use of financial penalties to protect consumers from misconduct by firms. The chapter explores the concept of deterrence in theory, before considering the FCA's approach to ensuring credible deterrence by the imposition of financial penalties. It identifies several concerns with credible deterrence, both in theory and in practice and it considers how these concerns might be addressed.
