Clean up or lawyer up: The FCA’s culture war gets real
With the City watchdog empowered to penalise non-financial misconduct and fresh off a win at the Upper Tribunal, lawyers now expect to be flooded with work from businesses that are grappling with the focus on culture, as bullying, harassment, and serious misconduct are no longer just HR matters, writes Maria Ward-Brennan.
The Financial Conduct Authority (FCA) enjoyed a great PR win yesterday after the Tribunal dismissed disgraced financier Crispin Odey’s appeal against the regulator’s ban on working in the industry. Although the Tribunal slightly reduced his fine from £1.8m to £1.5m, Odey is likely out just as much in legal fees from trying and failing to fight the regulator’s ban.
Amid the flurry of comments on this ruling, many of the lawyers pointed out that this case – which was over a series of historic sexual assault allegations from Odey’s female former staff – was taken up by the regulator long before it had its new powers.
But Odey wasn’t the first. Back in 2023, the watchdog barred former Barclays boss Jes Staley from holding senior management roles in the financial sector, along with issuing a £1.8m fine over his efforts to hide the extent of his friendship with the late sex offender Jeffrey Epstein. Staley took the decision to the Upper Tribunal, but failed to overturn it. His relationship with Epstein has also recently put him before the US House Committee on Oversight and Government Reform.
A lawyer noted that if the Odey case had unfolded before the FCA’s new powers came into play, the firm named after him would likely have faced a far tougher enforcement case, and accountability may have extended to other senior managers.
Chris Roberts, partner at Grosvenor Law, added: “Given that Mr Odey’s actions took place long before these rules came into force, there can be no doubt about how seriously the FCA takes allegations of this sort.”
Lawyers on call for City businesses
At the start of the month, around 37,000 non-bank financial firms automatically fell under the new FCA rules, as it now has the mandate and, clearly, the appetite.
Chloe-Jane Belton, legal director at Howard Kennedy, said Monday’s win “gives the FCA a stronger foundation for future cases involving culture, governance, and fitness and propriety, and is likely to be viewed as a significant judicial endorsement of that aspect of its enforcement agenda.”
Culture problems in the City have been a long-term issue, from toxic workplace behaviour to inappropriate conduct; the regulator was ultimately tasked with cleaning them up.
However, the journey from the initial proposals on non-financial misconduct to the final rules being published took nearly two years and involved significant industry pushback and major concessions by the City watchdog, but it also pushed many firms to change internal procedures in preparation for the rule changes.
Now, the regulator can review any unwanted behaviour that makes a colleague feel unsafe, uncomfortable, or disrespected, or involves violence.
Although the rules are not retrospective, Rachel Cook, counsel at Peters & Peters, said that she expects firms to use external lawyers more because of the new compliance issues, particularly in sensitive cases. She explained that external law firms may be instructed to conduct independent investigations and review whether existing governance and procedures are sufficiently robust.
Cook added, “But the value of external involvement goes beyond independence: serious misconduct allegations can engage regulatory, employment, civil and sometimes criminal issues simultaneously, requiring careful thought from the outset about how an investigation is structured and how decisions taken in one process may affect another.”
However, amid the flurry of new employment law under the Employment Rights Act, the most significant overhaul of workers’ rights in decades, the hotline between City businesses and specialised external law firms has been busier than ever, sending both phone and legal bills soaring.
‘Beyond The Billable’ is a weekly column focused on the professional services industry.