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The FCA’s recent decision notice against Barclays Bank raises some interesting, and potentially far reaching, questions around the concept of corporate integrity. In particular, what does a regulator need to establish in order to determine that a regulated firm (or a listed company) has not acted with integrity?
Both regulated firms, and firms subject to the listing rules are required to meet certain principles set out by the FCA. In both cases, acting with integrity is one of those principles. Holding regulated firms to account for breaches of these principles is a long-standing enforcement approach but the Barclays decision may be about to muddy the waters.
Under the FCA’s recent decision notice, currently being appealed to the Upper Tribunal, the FCA has determined that Barclays not only breached the Listing Rules by failing to disclose certain matters in relevant announcements and prospectuses, but also failed to act with integrity. The actions in question surround the non-disclosure to shareholders and the market of certain contracts entered by Barclays as part of the financial support provided to the bank by the State of Qatar during the financial crisis in 2008.
The FCA’s action is, in effect, a regulatory re-run of the criminal prosecution that was brought against Barclays by the SFO in 2018. This corporate prosecution failed on the basis that the individuals responsible for negotiating and securing the necessary fundraising from the State of Qatar could not be said to constitute the directing mind and will of the bank. Accordingly, any failure on their part couldn’t rightfully be attributed to the bank. This decision was subsequently upheld on appeal.
In its recent decision notice, the FCA specifically attributes the activities of the senior manager responsible for the Qatar deal to the bank, stating: “The Authority considers that Barclays plc, including a senior manager (whose state of mind the Authority attributes to Barclays plc in the circumstances), acted recklessly.”
Barclays has argued, largely based on the SFO case, that attributing the actions of a senior manager to the bank is inappropriate, on the basis that the senior manager concerned did not constitute the bank’s “directing mind and will”. In response, the FCA argues that it’s not necessary to determine whether the senior manager was the firm’s “directing mind and will”. Instead, the FCA maintains that it’s appropriate to create a “special rule of attribution” in regulatory matters on the basis that the dealings of a firm must be conducted by individuals acting on behalf of the firm, such that a firm would act with integrity only if those to whom it delegates authority act with integrity.
If, on appeal, the Upper Tribunal adopts the same approach as in the SFO case, then holding firms to account for breaches on integrity, and potentially other breaches of the principles, is about to get a lot harder.
‘View from the Chair’ is Bovill’s regular column from our Executive Chair Ben Blackett-Ord who founded the firm in 1999 and led it as CEO until 2022. Ben continues to support Bovill’s executive team and clients, as well as being a prominent figure in the industry.