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Markets and Securities Services |
United Kingdom
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Angela Burns
8
The regulator’s case against Angela Burns
was that she had behaved improperly in her
activities as a non-executive director. The
Decision Notice proposed a financial penalty
of GBP154,800, along with a prohibition
order to prevent Burns from carrying on any
function in relation to any regulated activity
(an absolute prohibition). The Tribunal upheld
or partly upheld four allegations against
Burns but dismissed six of them. The Tribunal
found that Burns was in breach of Statement
of Principle 1 (integrity) and that she was not
a fit and proper person to carry out the non-
executive director (CF2) function.
Despite the findings of the Tribunal, the
regulator continued to argue for the financial
penalty of GBP154,800 and the absolute
prohibition order. The Tribunal said:
In our judgment the Authority did not make
a realistic reassessment of the position
in the light of the fact that six out of its
ten allegations failed and, out of the four
which succeeded, three were upheld to only
a limited extent. We find the Authority’s
submissions to be unsatisfactory and
unpersuasive in a number of respects . . . In
the circumstances, we find ourselves in
wholesale disagreement with the Authority’s
assessment of the level of seriousness of
the proven breaches, and accordingly with
the level of financial penalty arrived at by
the Authority. Furthermore, the Authority’s
contention that it would be appropriate
to prohibit Ms Burns from carrying out
any function in relation to any regulated
activity rests on a more negative view of her
conduct than that taken by the Tribunal.
The Tribunal considered that the appropriate
financial penalty was GBP20,000. A
prohibition order was imposed, but it only
prevented Burns from acting as a non-
executive director.
At the time of writing, Burns is in the process
of taking further legal action in her case.
John Pottage
9
Pottage was the CEO of two subsidiaries
of UBS. The FSA wanted to impose a
financial penalty on him of GBP100,000
because it was alleged he had “failed to
take reasonable steps to ensure that the
business of the firm complied with the
requirements of the regulatory system”.
The two UBS companies were separately
fined GBP8 million for failing to prevent
four employees posting unauthorised
trading losses to customer accounts.
The case against Pottage related to the
period when he first became the CEO and
what he had done on his appointment.
The FSA said he had failed to carry out an
effective “initial assessment” of the business
as would be expected of a new CEO. It also
said he had not questioned effectively
assurances that he was given by others, nor
had he carried out continuous monitoring
in particular to consider adequately the
wider implications for governance and risk
management of a series of warning signals.
It was alleged he had also not begun early
enough a systematic overhaul of the systems
and controls in place in the business.
The Tribunal, however, considered the
various activities that Pottage had done
on appointment and concluded that they
were the adequate actions of a new CEO,
concluding, “The FSA has not satisfied
us . . . from the evidence as a whole that Mr
Pottage’s standard of conduct was ‘below
that which would be reasonable in all the
circumstances’ (see APER 3.1.4G) . . . Put
positively, we think that the actions that
Mr Pottage in fact took prior to July 2007
to deal with the operational and compliance
issues as they arose were reasonable steps”.
Senior management liability and
a separate enforcer
The TSC and the PCBS were concerned about
the failure of the FSA enforcement regime to
discipline bankers in the wake of the financial
crisis and expect the system to generate
more such cases in future. Indeed, the new
senior manager regime is designed to make
it easier for such persons to be targeted. The
existence of statements of responsibility and
responsibilities maps will enable regulators
to work through the fog that frequently
surrounds organisation charts in large
corporate entities.
It is obviously important that the enforcement
regime should function effectively in
dealing with cases when they are brought