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Is focus shifting from firms to individuals?

This article is part of
Guide to Regulation Post-FSA

There has been an increase in regulatory action taken against senior individuals in the financial services arena over the last few years

However, observes Sona Ganatra, senior associate at Fox Williams, “it has not always been clear how or why the FSA took action against certain individuals - such as [Pierre] Thiam of Prudential and [Peter] Cummings of HBOS - and not others, particularly when those individuals appeared to be operating with the consent of the board”.

The FCA has warned that it intends to pursue the FSA’s policy of “credible deterrence” vigorously against both firms and individuals and has stated that it will bring more cases against individuals in order to hold senior management accountable for their actions.

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“The recent decision against Kevin Wells, of Sipp provider Montpelier Pension Administration Services Ltd, highlights that the new regulator is not afraid to hold directors personally liable for misconduct,” says Ms Ganatra.

“The key issue for the FCA going forward will be whether it can bring increased clarity as to whether and when it will take action against individuals for being knowingly concerned in a firm’s breach.”

To negate their own risk, boards will be expected to demonstrate cultural change and top down influence, stresses Rebecca Prestage, head of policy at the Consulting Consortium.

“From the boardroom to the point of sale and beyond, firms’ behaviour, attitudes and motivations must be about good conduct, in terms of experiences and outcomes they offer their customers and clients.”

Simon Morris, financial services partner at CMS Cameron McKenna, argues, again, that the ‘new approach’ is more a modest shift than a sea change.

“Individuals have been the focus of the regulator from day one. At least from six years ago.

“The focus has shifted to senior management. There have been a dozen significant cases against individuals to highlight the fact that senior management are ultimate culpable.”