May 14 2018

Delighted to have contributed to – and be quoted in – this interesting feature article in this week’s Law Gazette on the various new ways in which law enforcement, regulators and government agencies are trying to crack down on the UK’s most common crime – fraud.

May 11 2018

Well, the first FCA/PRA enforcement decision against a senior manager – a CEO, no less (Barclays’ CEO, Jes Staley) – is out and can be read here.  Mr Staley is fined – a total of £642,430 – and Barclays has also announced that his bonus has been reduced by £500,000.  All very aggravating for Mr Staley, no doubt.  And Barclays faces continuing review of its whistleblowing framework and processes.

But there are some interesting features to the FCA’s reasoning which warrant a closer look:

(1) Much is made of the conflict of interest which Mr Staley had in relation to the first anonymous letter which was sent and why it was, therefore, wrong of him to get involved in decisions about whether the letter’s allegations should be classified as a whistleblowing and investigated.  All very true.  But a CEO – any senior manager, indeed, any manager at all – should not get involved at all in making such a decision (let alone be involved in the investigation) regardless of whether they have an actual or potential conflict of interest.  The decision about whether something is or is not a whistleblowing allegation should be made by the team in charge of whistleblowing.  No-one else.   The FCA’s focus on the conflict of interest point risks creating the impression that it may be OK for senior managers to be involved in deciding this when they face no actual or apparent conflict of interest.  Will this really give potential whistleblowers the reassurance they need?

(2) The level of the fine was not made any higher because Mr Staley was deemed to have acted negligently.  According to the facts set out in the Final Notice, Mr Staley appears to have taken a number of deliberate steps for reasons which made sense to him at the time.  To describe these as mere negligence might be viewed as generous.

(3) The seriousness of the breach is classified as a Level 2 (out of 5) breach, partly because of the negligence and partly because there was no profit made or loss avoided and there was little or no loss or risk of loss to consumers, investors and the market generally.  But these latter two tests are largely irrelevant in the case of something as important as whistleblowing.  The risk of his actions was that it sent out a message to anyone concerned about misconduct at the bank that, whatever the procedures said, senior management’s instinctive reaction was to try and shoot the messenger and/or dismiss the allegations.  It sent out a message that the bank – at the highest levels – did not appear to value the integrity or independence of the whistleblowing investigative process.  How could anyone wishing to raise concerns feel confident that their allegations would be taken seriously, investigated properly and treated confidentially?  And if this could happen at this bank, how could anyone be confident that it would not be the same at other financial institutions?

This was an opportunity to send out a very clear signal to the whole market about the importance of whistleblowing: not just the existence of procedures but the reality in practice of a function where the whistleblowing team is independent, in charge, trusted, not undermined or second-guessed by management and has the necessary skills, experience and resources to investigate allegations properly.  And, critically, that senior managers need to live by the rules applicable to others not simply espouse them.

The acid test for whether a culture has really changed for the better is whether those at the top are treated in the same way as those at the bottom when they misbehave.  Let’s hope that this is the lesson the sector learns from this decision.

And, finally, a plea: misbehaviour / breaches of rules are not “inappropriate” (a word best used for social or grammatical solecisms) but “wrong“.  It would be nice if the regulators were to say so.

April 20 2018

Today’s announcement by the FCA and PRA about the draft warning notice to Barclays boss, Jess Staley, seems to bring to an end (assuming the level of the fine is not contested, not necessarily a given) the lengthy investigation into his conduct when he twice sought to uncover the identity of an anonymous whistleblower, contrary to the rules, good practice and, one hopes, Barclays’ own internal procedures.

It’s noteworthy that the FCA and PRA are saying that Mr Staley had not acted with sufficient care when he set out to uncover the identity of the whistleblower.  Unfortunate wording since it implies that it was his ineptness in doing so that they are criticising rather than the fact that he did not realise that it was quite improper for him to try at all, let alone twice.  But the regulators have shied away from any suggestion of impropriety since calling into question Mr Staley’s fitness and propriety would have called into question whether he should or could continue in his role at all.

Always tricky to get the tone right when criticising those at the top.  So we must wait for the final public notice to see the basis on which the regulators have come to their decision.

Elsewhere Sir Alan Parker has resigned his position at Save The Children two weeks after the Charity Commission announced an inquiry into how the charity had handled sexual harassment claims dating back to 2012 and involving senior executives, including the former CEO and policy director.  As with other similar claims, it is not so much the initial allegations themselves (bad as they may be) which have led to grief but the way they were initially investigated and how those raising concerns were treated.  Better procedures and more training will undoubtedly be required but, even more importantly, what is really needed is an understanding that ignoring the messenger is always the wrong thing to do (no matter how mixed their motivation may be), a lesson others in public life might also usefully learn. As is hoping that the problems will go away if ignored.  They won’t.

Still, if banking has not yet got it right, it is at least better than the NHS, despite the recommendations of the Francis Report following the events at Stafford Hospital, as this programme describes.  Worth listening to just to hear a lawyer who had dealt with both NHS whistleblowers and ones working in a bank say, with more than a touch of incredulity in her voice, that a bank  – “a bank!” – had got it right about how to treat a whistleblower and investigate their claims.  Compliments must be taken where they can.

Photo by James McGill on Unsplash