Posts Categorized: Investigations
Why justice matters
August 11 2019
At the start of a week described by the government as “Crime Week”, this article is a reminder of why the rule of law and a properly functioning criminal justice system matter.
June 28 2019
2016: Tracey McDermott, the then acting CEO of the FCA:-
“I’m not saying in 2001 I would have seen a failure. But one of the roles of a regulator is to have the confidence to ask what you think might be stupid questions. This is a big task for a 25-year-old faced with masters of the universe. The people who live and breathe this stuff, who speak in basis points, will say you don’t understand because you are in some ivory tower as a regulator. Making sure FCA people have that resilience is very important.”
26 June 2019: Andrew Bailey (CEO of the FCA) when questioned by the Treasury Select Committee admits that, despite having concerns about the Woodford funds since February 2018 and the various risk warnings it had given, the FCA had been taken by surprise by the wave of redemption requests and their effect on the fund. He admitted that the fund had been guilty of “regulatory arbitrage” and ‘sailing close to the wind”.
The FCA’s Chairman said that the European funds regime had created a “perfect storm” that allowed the Woodford situation to escalate, but that there should have been a more incisive cutting through to the key issues. You don’t say.
27 June 2019: Mark Carney (Governor of the Bank of England) talking to the Treasury Select Committee about the issues raised by Neil Woodford and his various funds:-
“These funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid.”
The FCA’s answers do not impress the Committee’s Chair. “Doesn’t anyone at the FCA actually read the newspapers and listen to what’s going on in the industry?”
Evidently, developing the confidence to ask any questions, let alone stupid ones, or even learning to cut through to the key issues are harder tasks than the FCA thought. Still, after three years you’d have thought some lessons would have been learnt. If only this one: curiosity is one of the most underrated but most necessary qualities for a regulator to have.
Better Late than Never
May 31 2019
The recent decisions by the FCA to fine UBS and Goldman Sachs £27.6 million and £34.3 million for transaction reporting failures going back to November 2007 and HBOS for its failure to inform the regulator of its suspicions that fraud was occurring in its Impaired Assets team – again in 2007 – is a reminder that the failings of long ago still have bite. All three firms will doubtless be relieved to put these investigations, finally, behind them. Systems changes will have been made, extensive remediation measures taken, training given and few, if any, of the people involved will still be in the organisations. Sighs of relief all round. After all, the past is another country. They did things differently then.
And yet, 12 years from the events in question to enforcement is a generation, probably two, in City terms. There will be people now starting their banking careers who were in short trousers when these events were happening. It will be all too easy for them to think that there is little for them to learn from what went on in these cases. After all, haven’t all the lessons already been learnt? They would be wrong.
For those training the next generation, the challenge is to make the lessons to be learnt from these past cases real for people working today – if the same dismal cycle is not to be repeated in future. Perhaps too the FCA might realise that the pursuit of perfection in their investigations risks making their ultimate outcomes little more than historical accounts of past misdeeds rather than a quick sharp reminder to those involved and their contemporaries of the perils of not taking their obligations seriously. Delaying justice for too long risks not just denying it but blunting its wider impact.