For Critics, FCA Fails Test by Giving Barclays CEO Staley a Pass
(Bloomberg) -- The U.K. banking regulator’s decision to allow Barclays Plc Chief Executive Officer Jes Staley to hold onto his job at the flagship lender gives an early indication that the Financial Conduct Authority may tread cautiously when enforcing new rules for top executives.
The FCA decided to fine Staley after investigating his two attempts to identify a whistle-blower within Barclays, the bank said Friday, removing fears that the regulator could impose more serious measures. Staley is likely to face penalties between 1 million pounds ($1.4 million) and 2 million pounds, a combination of regulator fines and a bonus clawback from the bank, according to a person familiar with the matter.
The U.K. finance industry’s reputation has suffered from a string of scandals -- from Libor-rigging to mis-selling of financial products -- prompting the FCA to introduce the Senior Managers Regime two years ago. The message was that it will hold top executives directly accountable for any wrongdoing on their watch.
“I’m gravely disappointed with the FCA’s response here,” said Mary Inman, an attorney at Constantine Cannon, a U.S. firm that started a whistle-blower practice in Europe last year. “It failed the test by being so weak in its response to Staley’s willful flouting of the requirements.”
The whistle-blowing controversy dates back to June 2016, when Barclays’s board received an anonymous letter raising concerns about the recruitment of one of Staley’s former colleagues at JPMorgan Chase & Co., Tim Main. The contact flagged issues of a personal nature regarding Main and Staley’s role in dealing with those concerns at JPMorgan.
‘Honestly, but Mistakenly’
After learning about the matter, Staley attempted to identify the whistle-blower, despite being informed that it was inappropriate for him to do so after his first try. Barclays’s own investigation had found Staley "honestly, but mistakenly, believed" his actions were permitted. His lawyer, Kathleen Harris, declined to comment Friday.
“This was an opportunity for U.K. regulators to say they will protect whistle-blowers, and they blew it,” said Erika Kelton, an attorney at Phillips & Cohen LLP in Washington D.C., who has represents whistle-blowers in the U.K.
“This decision is disturbing and conflicts with U.K. regulators’ stated desire to better protect whistle-blowers,” Kelton said. “Simply put, it’s a victory for executives who brook no challenges to corporate behavior and a loss for employees who do nothing more than express concern over company conduct.”
The amount of Staley’s financial penalty pales in comparison to some previous regulatory fines. The top end of the levy would only be 3 percent of the biggest monetary penalty the FCA has levied against an individual.
The FCA handed down a record 75 million-pound penalty in 2015 against the CEO of Keydata Investment Services Ltd. The fine -- bigger than the ones against some banks in the Libor-rigging scandal -- was tied to the amount the CEO made from the improper sales of investment products.
Other big hits by U.K. regulators to financial professionals’ wallets include a $9.6 million penalty against Dubai-based investor Rameshkumar Goenka in a market-abuse case. The FCA has also proposed a 10 million-pound fine against a trader caught up in interest-rate rigging.
Still, some lawyers caution that the FCA’s options were limited in its first big case against the head of a major bank. A sanction that banned or suspended Staley would have put the onus on the regulator to prove that he acted without integrity in a likely legal challenge.
“The magnitude of banning the sitting CEO of such a systemically important institution made outcomes other than a fine unlikely,” Nicholas Querée, a lawyer at Peters & Peters in London, said in emailed comments. “But the case does set an interesting precedent -- you can use your power to unmask a whistle-blower and remain in a regulated post.”
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