The Financial Conduct Authority has banned and fined Angela Burns, a former non-executive director, £154,800 for failing to disclose her conflicts of interest in working with two mutuals.
In a decision notice, published today (24 May), the FCA said that Ms Burns is banned from performing any role in regulated financial services for failing to act with integrity as a non-executive director at two mutual societies by failing to disclose her conflicts of interest.
In 2006 Ms Burns completed a consultancy project for a US based investment manager. Shortly after she completed this project Ms Burns asked the investment manager for the opportunity to turn her proposal into a UK business. The investment manager did not take her up on her proposal but she stayed in touch with them.
In September 2008, Ms Burns put forward a proposal outlining the consultancy work she could perform for the investment manager.
In January 2009 and May 2010, Ms Burns became a NED and chair of the investment committee for two UK mutual societies. Upon taking up her NED positions Ms Burns notified the investment manager of her new roles and renewed her request for consultancy work.
Ms Burns did not tell the mutual societies that she was at the same time trying to obtain work from the investment manager and, in the FCA’s opinion, attempted to use her NED positions to benefit herself when she emailed the investment manager on several occasions to remind them of her proposal.
During Ms Burns’ tenure as NED and chair of the investment committees at both mutual societies, one mutual society placed a £350m mandate, and the other was considering placing a £750m mandate with the investment manager.
In the FCA’s opinion, Ms Burns had a duty to disclose her interest in seeking consultancy work from the investment manager to her fellow mutual societies’ directors. Ms Burns made no such disclosure. In the FCA’s view, Ms Burns also attempted to use her NED positions to benefit herself.
Ms Burns has referred the matter to the Upper Tribunal where she and the FCA will each present their case.
The Upper Tribunal today published a decision rejecting her application not to be identified in the regulator’s decision notice.
In the FCA’s opinion, given the serious nature of these breaches, these failures demonstrate that Ms Burns lacked integrity.
Tracey McDermott, director of enforcement and financial crime, said: “The position of NEDs is critical to the effective functioning of a board and to maintaining the confidence of customers. Because of the nature of their role, NEDs are more likely to have a portfolio of appointments and are likely to find themselves having to manage conflicts of interest more frequently than their fellow directors. NEDs need to manage scrupulously their conflicts of interest and to observe basic corporate governance principles.”
The FCA makes no criticism of the mutual societies or the investment manager. Ms Burns applied to the Tribunal for an order preventing the FCA from publishing the decision notice which was unsuccessful.
Simon Morris of law firm CMS Cameron McKenna said: “This is a remarkable case. It is the first ever FCA or FSA case against a non-executive director for misconduct in office. It emphasises the obvious point that a non-executive director is required to act ethically and for the benefit of his or her firm and not with a view to lining their own pocket.
“Secondly, Burns sought to prevent the FCA from publishing its decision pending referral to the Tribunal. She failed, and rightly so, because the new regulatory system calls for transparency of FCA decisions at an early stage.”
