Regulatory enforcement saw a sharp decline in the first quarter of 2025, with both the volume and monetary value of fines significantly lower than in previous quarters.
However, this quieter period did not mark a retreat from scrutiny, particularly around how financial firms treat their customers and manage governance.
According to a recent enforcement report for Q1 by Corlytics, customer treatment was a recurring theme in enforcement actions across major financial markets. In the US, the Consumer Financial Protection Bureau (CFPB) took action against Sutherland Global for misleading borrowers by sending letters suggesting their loans were in default. The bureau also penalised Chime Financial for delays in refunding customers, reinforcing its stance on fair treatment.
In the UK, the Financial Conduct Authority (FCA) issued a fine to HSBC, citing systemic failings in its handling of customers experiencing financial hardship. These actions highlight a transatlantic alignment in regulators’ focus on customer outcomes.
Governance issues also remained high on the agenda. Citigroup Global Markets came under fire from multiple regulators, including the FCA, the Prudential Regulation Authority (PRA), and Germany’s BaFin. The fines related to deficiencies in the firm’s trading systems and internal controls, reflecting the continued emphasis on robust oversight and operational resilience.
A key development this quarter was the FCA’s decision following its long-running investigation into Link Fund Solutions, the authorised corporate director of the Woodford Equity Income Fund (WEIF).
The FCA concluded that WEIF had an unsuitable liquidity profile and that Link had failed to oversee the investment manager appropriately. While a £50m fine was deemed appropriate for breaches of Principles 2 and 6, the FCA chose not to enforce the penalty in favour of directing funds towards a separate investor compensation scheme. Due to the importance of the case, the fine was still included in the enforcement figures.
Despite the reduced enforcement activity, Q1 2025 underscored regulators’ ongoing vigilance, particularly around customer protection and firm governance.
Corlytics previously released its regulatory enforcement data for Q3 last year, showcasing a surge in regulatory actions, record fines, and a stronger emphasis on senior staff conduct.
Regulators across multiple jurisdictions have made headlines by imposing historic penalties, breaking new ground in enforcement practices, and intensifying focus on compliance failures.
In a landmark case, the Commodity Futures Trading Commission (CFTC) in the US secured a $12.7bn judgment against FTX and Alameda. This case, stemming from the dramatic collapse of FTX two years ago, exposed fundamental shortcomings in governance, customer protections, and surveillance. The CFTC emphasised that the absence of these regulatory tools contributed directly to the catastrophic downfall.
Susie Mackenzie, Head of Regulatory Analysis at Corlytics, said, “The FCA link decision is a bit of an odd one, because the fine amount didn’t come directly from the FCA, but from an arrangement with the investors. However, we have included it in the figures, so may be worth adding the commentary.
“The second quarter of 2024 has been a quiet one, both in terms of amounts and number of fines imposed. However, we have seen regulators on both sides of the Atlantic focus on unfair customer treatment, with three of the top ten fines relating to this issue. The CFPB fined Sutherland Group for sending borrowers “due and payable” letters that often falsely conveyed that loans were in default and other customer communication failures.
“It also took action against Chime Financial for failing to refund consumers in a timely manner. In the UK, the FCA fined HSBC for its failures in its treatment of customers who were in arrears or experiencing financial difficulty. Governance issues in sales and trading activities have also been the subject of regulatory action, with Citigroup Global Markets facing three fines from each of the FCA, PRA and BaFin for failings in its trading systems and controls.
“Of particular interest in the UK over the past quarter has been the FCA’s decision following an investigation into Link Fund Solutions, the authorized corporate director of the Woodford Equity Income Fund (WEIF), which was suspended in June 2019 after experiencing severe liquidity issues. The fund’s value plummeted, causing significant losses for its investors. The FCA found that WEIF’s liquidity profile had been unreasonable and inappropriate and that Link had failed to supervise the investment manager of the WEIF. The FCA concluded that Link had breached Principles 2 and 6 and that a £50m fine would be appropriate. However, this was not imposed as it would have reduced the amounts payable back to customers under the separate scheme of arrangement.”
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