14 September 2016
The FCA has issued a Decision Notice to Andrew Tinney, former Global Chief Operating Officer of Barclays Wealth and Investments Management (Wealth), a division of Barclays Bank Plc (the Firm).
The FCA found that Tinney failed to act in accordance with Statement of Principle 1 (Integrity)1. As a consequence, it proposes to publish a public censure and to make an order prohibiting him from performing any senior management function and any significant influence function. Tinney disputes the FCA's decision and has referred the matter to the Upper Tribunal.
In early 2012, Tinney was appointed Chairman of a steering committee that had been appointed to oversee a remediation programme to correct regulatory deficiencies identified by the SEC during an examination of Barclays Wealth Americas (BWA). Part of the remediation programme included a "Culture Audit" workstream, and a consultancy firm was instructed to consider how the "tone at the top" flowed through BWA.
The consultancy produced a 29 page document, which was referred to as a "Cultural Assessment" of BWA. The words "Culture Audit" appeared at the top of each page of the Report. The Report included statements and quotes taken from interviews with BWA employees which were critical of BWA's senior management. It also concluded that BWA had pursued a course of revenue at all cost and that its culture was actively hostile to compliance. The Report's main recommendation was that the Firm should replace, or consider replacing, some members of BWA's senior management.
Tinney received a hard copy of the Report on 30 March 2012. Although he discussed the Report with a small number of senior individuals within Wealth, he was the only individual who saw a copy of the Report. Tinney also discussed the Report with his manager, the Chief Executive of Wealth. They agreed that action should be taken to address the cultural failings in Wealth but also that the Report should not be seen or made available to any other person with the Firm (including not to the Chief Executive of Wealth with whom he was discussing it). Accordingly, Tinney took steps to ensure that the Report was not seen or made available to anyone at the Firm, including not entering it into the Firm's IT systems. He also instructed the consultancy not to circulate the Report.
In September 2012 an anonymous email was sent to the Chairman of the Firm, alleging that a "Wealth cultural audit report … prepared by an independent third party consultancy" had been supressed. In providing input to drafts of a note to the Chairman and CEO of the Firm responding to this allegation, Tinney did not mention the Report, and, at one stage, added words "There has never been a "Wealth Cultural Audit Report" produced at any time". Tinney also deleted references to the consultancy firm being "retained to conduct a "Compliance Culture Audit" of BWA and instead characterised the work as "data gathering interviews". Later in September, a senior Wealth lawyer made attempts to obtain a copy of the Report direct from the consultancy firm, but having discussed the matter with Tinney, the consultancy declined to provide a copy.
In November 2012, the Firm received a request from the Federal Reserve Bank of New York for a copy of the BWA "cultural audit". In response, the Firm's Global Head of Regulatory Relations sent an email to Tinney requesting a copy. In meetings with colleagues regarding the request, Tinney initially failed to mention the Report and then made statements which suggested that the Report did not exist.
The Firm commenced an investigation into the existence of the Report and received a copy of it direct from the consultancy firm on 6 December 2012. Tinney was suspended on 17 December 2012 and resigned shortly afterwards.
In September 2013, Tinney gave an account of these events (via his solicitors) to the Institute of Chartered Accountants of England and Wales (ICAEW) of which he is a member. Tinney submitted to compelled interviews with the FCA in July 2014 and January 2015.
The FCA's findings
The FCA noted that Tinney was not criticised by the Report and did not seek to supress its conclusions. It also noted that he had initiated actions that made others aware of some of the Report's findings, and it conceded that Tinney had legitimate concerns regarding litigation risk and employment law consequences arising out of the Report being circulated.
However, in the context of the steps he took following the anonymous email and the Fed's request, the FCA concluded that Tinney did not take the course of action that was "both obvious and correct", That course of action, it decided, would have been to make clear that the Report existed, to explain his concerns about the litigation risk and to make copies available to those dealing with the anonymous email and the request from the Fed, but subject to appropriate confidentiality restrictions. The FCA found both that Tinney had closed his mind to the obvious possibility that the anonymous email was referring to the Report and to the legitimate interest that the recipients of the note had in being made aware of the existence of the Report, and that the Report was relevant to the Fed's request. As a result of his actions, the FCA found that he had acted without integrity in recklessly making misleading statements and omissions in relation to matters relevant to regulatory compliance.
The FCA also found that aspects of Tinney's accounts to the ICAEW and the FCA were misleading. Amongst other matters, Tinney represented that his handling of the Report was consistent with legal advice he had received from the Firm's in-house counsel. The FCA found that Tinney had not sought or obtained such legal advice. Again, the FCA considered the misleading statements to have been reckless.
Whilst this Notice is clearly based on a rather unusual set of facts, it nevertheless has a number of points of interest of more general application.
One area of interest is the position in relation to penalty. It is fairly commonplace in FCA cases for a prohibition to go hand in hand with a fine. However, in this case, although the FCA regarded the reckless making of misleading statements and omissions by a SIF as serious misconduct, it ultimately decided that a public censure rather than a financial penalty was appropriate. In reaching that decision, the FCA took into account (i) that Mr Tinney did not personally profit as a result of the misconduct, and there had been no loss to consumers, investors or other market participants, (ii) there was no deliberate intention to mislead, and (ii) that the Relevant Period was relatively brief.3
Another area of interest lies in how the case may play out in front of the Upper Tribunal. Sometimes Enforcement fail to make good in front of the RDC on all aspects of their case, but then look to re-instate their arguments in front of the Upper Tribunal when the matter is referred, or even to add to them. In the Tinney Decision Notice, certain language suggests that the issue of whether the conduct was deliberate or reckless may have been a live issue before the RDC. We shall have to see whether the FCA argues in front of the Upper Tribunal for harsher findings and a harsher sanction than appears in the Decision Notice, and what the views of the Upper Tribunal are.