Sexual misconduct allegations at asset management firm highlight regulatory focus on non-financial misconduct and firm culture in UK
Published on 16th Jun 2023
Treasury Committee letter to FCA emphasises its ongoing concern with financial services culture
In December last year, our Insight on the Financial Conduct Authority's (FCA) increasing focus on non-financial misconduct and firm culture in UK noted that a joint publication from the FCA and the Prudential Regulatory Authority (PRA) on this subject was expected this year. While it is still awaited, the numerous allegations of sexual misconduct levelled at the founder of Odey Asset Management highlight the increased public, governmental and regulatory scrutiny on non-financial misconduct both inside and outside the workplace.
Although we understand the FCA is currently investigating Odey Asset Management, on 14 June 2023, the Treasury Committee wrote to the FCA regarding its regulatory supervision of the firm, and asked a number of probing questions about its knowledge of Mr Odey's alleged conduct from as early as 3 November 2020 (when he ceased to perform the Chief Executive role at Odey Asset Management), and the steps that the FCA took at the time in relation to that conduct.
The letter makes clear that "Culture in financial services, and the experiences of women in the industry, have been ongoing concerns of the Treasury Committee". It goes on to ask the FCA about its wider work in relation to non-financial misconduct, including whether this remains a priority for the FCA. The Committee has asked for a response by 5 July. The FCA has promised to respond "shortly".
Osborne Clarke comment
The situation serves to highlight the increasing focus (by the FCA and others) on non-financial misconduct and firm culture in the UK.
In this case, the FCA itself is under scrutiny by the Treasury Committee, illustrating the growing importance of this area at both a regulatory and governmental level, and the understanding that misconduct of this nature can have significant repercussions for the culture within a firm and wider society.
This demonstrates how important it is that firms continue to consider how to assess individual misconduct and show that it is doing so fairly as part of any fitness and propriety assessment. As discussed in our previous article on this subject, there are a number of factors a firm may wish to pay particular attention to including:
- The precise circumstances of any misconduct and any factual and legal links between the misconduct and an individual's suitability for a particular role.
- Additional factors separate to the original misconduct which show, for example, dishonesty or lack of integrity.
- Conducting a thorough and well documented investigation into allegations of, or convictions for, misconduct.
- Engagement and accountability of senior managers who are expected to take responsibility for what happens in their areas of the business.
- Notifications from senior managers and certified staff of relevant misconduct which occurs outside the workplace.
- Appropriate notifications to the regulators.
Decisions in relation to misconduct of a non-financial nature are not straightforward, including the consideration of whether the behaviour (either that which occurs inside or outside the workplace) does in fact impact upon an individual's "fit and proper" standing.
We would encourage firms to contact us to discuss any decisions they may be taking in relation to these issues.