On 31 March 2017, Mark Steward (Director of Enforcement and Market Oversight at the FCA) delivered a speech at New York University entitled "The expanding scope of individual accountability for corporate misconduct".
In some senses, details of the speech will no doubt be familiar to readers as Steward talked about the introduction of the Senior Managers Regime, its workings and its impact on individual accountability. No doubt tailoring his speech to the New York University Law School audience, he talked of public and private wrongs, highlighting Blackstone's discussion of the two, and considered how individual accountability and firm liability fitted into them.
Beyond these legal concepts, enforcement practitioners may be interested in some of Steward's specific comments about the interplay between individual and corporate liability for misconduct. Points of interest include:
- Steward recognised what he described as "the interconnectivity", as well as the tensions, between the interests of firms and individuals in respect of liability for misconduct.
- He illustrated the tensions by reference to the regulator's separate actions against JP Morgan and against Achilles Macris, resulting in conflicting findings between the two Notices (see elsewhere in this issue for a discussion of the Macris case
22 March 2017: Supreme Court rules on third party rights).
- In so doing, Steward appreciated how firms and individuals may well have different attitudes towards any enforcement action. Firms may well want early settlement in order to minimise publicity, whereas individuals are more likely to fight. He talked of how, "in the clinches", the different perspectives of the firm and an employee "are highly likely, if not inevitably, to be in conflict on crucial issues that affect one another's liability."
- Tellingly, Steward told his audience that prosecutors and investigators needed to take such tensions into account and assess the overall conduct as a whole and without exploiting them for the purposes of reaching settlement. Questions of firm or individual liability were not, he said, a simple binary either/or question of policy or attitude.
- He said there were many difficult questions that need to be asked. These included, for example, how the rules of attribution really operated and how firm culture affected conduct.
- According to Steward, some have viewed the Senior Managers Regime as shifting corporate liability onto individuals. He roundly rejected that (not least because the firm's liability is a jurisdictional fact in any action against an individual) and made it clear that there is what he called "no free pass" for firms.