Record fines for firms let down by D&Os

Fines totalling nearly half a billion pounds were handed out to UK companies during 2021, highlighting the importance of appropriate Directors & Officers (D&O) insurance. 

The findings come from Specialist insurance risk and commercial law firm BLM. These include fines from four major UK regulators, including the Serious Fraud Office, Financial Conduct Authority, and the Information Commissioner’s Office.

The findings were recorded by BLM’s ‘D&O Tracker’, which is free to access for insurers, brokers, and corporates. It also records compensation and legal costs orders, as well as the term of any custodial sentences against directors.

BLM’s D&O Tracker identifies the reasons for fines being handed down, breaking them into jurisdiction, sector and by company turnover. The data also shows a number of additional areas affecting D&Os, such as bribery, corruption, and facilitation payments.

The largest fine, worth more than £264m, was handed to a banking group, which was convicted of failing to comply with money laundering obligations.  The case was the first occasion on which such criminal charges had been brought by the Financial Conduct Authority.

Regulators flex their muscles

BLM Professional & Financial risk partner Alex Traill comments: “Cases like this indicate how the regulators are increasingly looking to get tough against firms when their directors and officers are failing in their legal obligations. 

“Even when businesses are not complicit in the illegal activity taking place, they can be functionally vital to facilitating the illegal activity. It demonstrates the importance of having appropriate D&O insurance coverage to protect businesses and their senior personnel.”

The D&O tracker has also identified multiple violations of privacy rules.  The data shows how the Information Commissioner’s Office brought charges against firms that were calling, texting, or emailing former customers without consent.  Some of the breaches were committed by smaller firms, resulting in fines of more than £50,000 each. 

Traill continues: “It’s not just the large corporations that can fall foul of the law. SMEs racked up over £60m in D&O fines in 2021, compared to £120m over five years between 2016-2020.

“The safeguarding of customer data is the responsibility of company directors and officers, and when that data is misused, directors can face fines or even custodial sentences. Being properly insured is now more important than ever.”

D&O policies provide liability cover for company managers of all levels, which protects them from claims, reputational damage and legal costs following decisions and actions taken within the scope of their duties.