BLM launches free D&O fines tracker as SMEs hit by £100m in penalties

SMEs are increasingly finding themselves in the firing line for large fines from regulatory bodies, according to data from insurance risk and commercial law firm, BLM.

Smaller businesses in the UK have been handed over £100m in fines in the last four years, according to the law firm’s new D&O tracker, including large penalties of over £50,000 for cyber liabilities.

The new tool, which is free for insurers, brokers and corporates to access, captures fines from four major UK regulators, including the Serious Fraud Office, Financial Conduct Authority and the Information Commissioner’s Office. It also records compensation and legal costs orders, as well as the term of any custodial sentences against directors.

BLM professional indemnity partner Alex Traill comments: “Our D&O Tracker not only underlines the sheer scale of the fines, and an upwards trend, but exposes the dangers facing SMEs in particular that either have inadequate cover or none at all. Whilst D&O cover is popular with larger corporates there is a real coverage and perception gap in the SME market. Either directors and officers are genuinely unaware of the need for cover or they think they’ll never need it. But as our D&O Tracker shows, there is a growing need for it.

“There have been instances where SMEs have suffered a regulatory fine where they haven’t got sufficient funds or insurance to cover those fines. What’s more, we’ve seen examples of custodial sentences being handed down for various breaches committed by companies of different sizes, so the risk and potential impact on company owners and directors as individuals is very real.”

Commenting on the increasing trend of large, cyber-related fines, BLM partner Ross Baker said: “Many D&O policies extend cover to directors for claims arising out of cyber liabilities, including access to specialist crisis management consultants to minimise adverse publicity, which is often one of the biggest aftershocks of a cyber event, particularly in a post-GDPR climate.”

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

Iskander Fernandez, head of the white-collar crime team at BLM, adds: “Directors and officers face more than just financial sanctions. Two years ago, directors at SME Solar Energy Savings Limited were sentenced by the SFO to a total of 30 years and four months imprisonment after being found guilty of conspiracy to defraud by false representation. Liability for offences will fall on directors and officers regardless of the size of the company.”

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