The UK Financial Conduct Authority (FCA) is currently consulting on proposed changes to its Decisions Procedure and Penalties Manual (DEPP), which sets out the FCA’s policy for imposing financial penalties and public censures in enforcement cases. The consultation is open for comment until 10 August 2026.
The proposals are technical in form, but potentially significant in practice. Taken together, the changes suggest a more assertive approach to individual accountability and deterrence. They also signal the FCA is seeking to preserve the real-world impact of its penalty framework over time.
DEPP currently sets out a five-step process for calculating the appropriate financial penalty. In broad terms, that process considers:
- the disgorgement of any financial benefit resulting from the misconduct;
- the disciplinary element of the penalty;
- the proportionality to the misconduct;
- adjustments to ensure deterrence; and
- adjustments to take account of mitigating and aggravating factors and the willingness of the subject to settle the matter early.
This GT Alert summarises the FCA’s proposed changes to DEPP.
Increasing Minimum Initial Disciplinary Penalty Level for Serious Market Abuse Committed by Individuals
The existing minimum initial disciplinary penalty level for serious market abuse committed by individuals is £100,000 and has been at this level since 2010. Seriousness for these purposes is assessed by, for example, whether conduct is deliberate. But this is only an initial minimum level before the other stages are applied; the penalty actually imposed may be much higher or indeed potentially lower than this minimum. Nonetheless, this minimum amount is an important indicator of the FCA’s attitude towards serious market abuse. The FCA is proposing to increase this to £150,000 to account for inflation and to introduce an automatic inflation linked adjustment on 1 May every two years. This change reinforces that the FCA continues to take market abuse seriously and seeks to ensure that the minimum penalty would remain a suitable deterrent for individuals.
Clarifying Ability to Increase Penalties for Deterrence in Light of Individual’s Wealth
The second proposed change addresses a perceived ambiguity in the current DEPP wording. The existing policy on non-market abuse penalties might be interpreted to suggest that the FCA would only increase a penalty by reference to an individual’s wealth where their income is “small or zero.” The market abuse provisions, by contrast, permit increases where “the penalty may not act as a deterrent in light of the size of the individual’s income or net assets” – a broader formulation not dependent on the individual having low/no income. The FCA proposes to make the policy for non-market abuse cases the same as for market abuse cases. With this proposed change, the FCA aims to make clear that it may increase a penalty in cases where it may not act as a deterrent in light of the income or net assets of the individual.
Updating Treatment of Individuals’ Deferred Income in Light of Upper Tribunal Decisions
The disciplinary element of financial penalties imposed on individuals is calculated by reference to factors including their relevant income during the period of misconduct. However, in practice, this calculation is frequently complicated by the structure of modern remuneration packages, which may include deferred bonuses, unvested share awards, and other contingent benefits. The FCA proposes to update DEPP to reflect two 2025 Upper Tribunal decisions which addressed how deferred and contingent remuneration should be treated (Staley v FCA [2025] UKUT 00203 (TCC) and Gonzalez v FCA [2025] UKUT 00214 (TCC)). The FCA’s proposals codify the approach endorsed by the Tribunal.
In summary, the proposed amendments clarify that the FCA would treat as relevant income for the purposes of penalty calculation both: (i) benefits received after the misconduct period but earned during it; and (ii) income that is uncertain when calculating the penalty but that may be estimated or adjusted for likelihood of receipt. The FCA would not treat as relevant income: (i) benefits that the FCA knows at the time of calculating the penalty will never be received; or (ii) benefits received during the misconduct period but earned in a prior period. The FCA also proposes that it may increase a penalty calculated by reference to relevant income if the individual’s firm has reduced that income as a result of the relevant misconduct.
Updating Income and Capital Thresholds for Serious Financial Hardship Assessment
The FCA’s current policy permits a reduction in penalties where payment would cause an individual serious financial hardship (SFH). The existing starting point for considering SFH is that the FCA is only likely to be satisfied that a penalty will cause SFH where, if the individual paid the penalty over three years, their net annual income would fall below £14,000 and their capital below £16,000. Similarly to the proposed changes to the minimum penalty for serious market abuse, the FCA proposes to increase those thresholds by 50% to £21,000 for income and £24,000 for capital. As with the market abuse minimum, these thresholds would be automatically adjusted every two years.
Other SFH Changes
The FCA is also proposing two further refinements relating to SFH: (i) removing the words “exceptionally severe” from the guidance as to when an individual may make representations about the impact of a property sale on other occupants of their home; and (ii) expressly confirming that the disgorgement element of any penalty (representing the financial benefit of misconduct) would not be reduced for SFH.
The onus remains on the individual paying the penalty to establish SFH and (historically at least) the FCA has held individuals to a high standard of proof and required full financial disclosure before permitting a penalty reduction on this basis.
Procedural Change Regarding Enforcement Action in Settled Cases
The FCA is also proposing a change to allow more flexibility in respect of who makes settlement decisions in cases referred from the Market Oversight Directorate (dealing with, for example, market abuse or listings misconduct).
Consequential Amendments for Cryptoasset Market Abuse Regime
The FCA is proposing amendments to bring cryptoasset market abuse within the existing DEPP penalty framework and to identify the relevant decision-makers for the FCA’s powers under the savings and transitional provisions of the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026. Other proposed changes include updating the definitions of “inside information,” “market abuse,” and “public censure” in the FCA Handbook Glossary in light of the changes to the cryptoasset regulatory framework.
Takeaways
These proposals signal an update but also a tightening of the FCA’s enforcement posture, particularly with respect to individuals. This chimes with FCA Enforcement’s new credo of “impactful deterrence.”
The proposed increases to minimum penalties and SFH thresholds, together with automatic inflation-linked adjustments, are designed to preserve the deterrent effect of the penalty regime over time.
The proposed clarification on individual wealth and deferred remuneration is also significant. Whilst the principles exist in case law, the proposed codification signals the FCA’s stance aligns with the Upper Tribunal. It may mean the FCA intends to take a broad and practical approach when assessing whether a penalty is sufficiently deterrent and when calculating relevant income, including in cases involving deferred or contingent remuneration.
Should these changes come into force, firms and individuals subject to FCA supervision may want to consider at an early stage how remuneration structures, deferred awards, settlement strategy, and evidence of financial hardship may affect penalty exposure. This would in turn impact upon attitudes towards settlement.