The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have together fined James Staley, Barclays group chief executive £642,430, for failing to act with due skill, care and diligence in the way he acted in response to an anonymous letter received by Barclays in June 2016.
The bank is also now subject to special requirements by which it must report annually to the regulators detailing how it handles whistleblowing, with personal attestations required from those senior managers responsible for the relevant systems and controls.
Staley attempted to identify the author of an anonymous letter received by Barclays in June 2016 that claimed to be from a Barclays shareholder. The letter contained various allegations, some of which concerned Staley. Given his conflict, Staley should have maintained an appropriate distance; he should not have taken steps to identify the author. Staley should have explicitly consulted fully with those with expertise and responsibility for whistleblowing in Barclays and sought express confirmation from them that what he wanted to do was permissible. He failed to do this.
The investigation found this to be a breach of the requirement to act with due skill, care and diligence, but not a breach of the requirement to act with integrity.
As CEO, Mr Staley should have identified that:
- He had a conflict of interest in relation to the letter, and needed to take particular care to maintain an appropriate distance from Group Compliance’s investigation.
- There was a risk he would not be able to exercise impartial judgement in relation to how Barclays should respond.
- Once the complaint was in the hands of the Group Compliance team, it was important that Group Compliance retained control over its investigation process.
Mark Steward, FCA executive director of enforcement and market oversight, said: “Given the crucial role of the chief executive, the standard of due skill, care and diligence is more demanding than for other employees.
“Mr Staley breached the standard of care required and expected of a chief executive in a way that risked undermining confidence in Barclays’ whistleblowing procedures. chief executives must act with a high degree of care and prudence at all times.
“Whistleblowers play a vital role in exposing poor practice and misconduct in the financial services sector. It is critical that individuals are able to speak up anonymously and without fear of retaliation if they want to raise concerns.”
Sam Woods, deputy governor for prudential regulation and CEO of the PRA, said: “Protection for whistleblowers is an essential part of keeping the financial system safe and sound. Mr Staley’s behaviour fell below the standard we require, resulting in today’s fine and public censure. In addition, Barclays is now subject to special requirements to report to the PRA and FCA how it handles its whistleblowing cases in the coming years.”
This is the first case brought by the FCA and PRA under the Senior Managers Regime. The investigation found that Staley made serious errors of judgement. While he made no personal gain in this instance, both regulators viewed his misconduct as sufficiently serious for each to impose a penalty of 10% of Staley’s relevant annual income. Taking into account that he has settled at an early stage, Staley has been fined a combined sum of £642,430.
The FCA and PRA consider this to be appropriate and proportionate given the seniority of Mr Staley and the potential impact of the breach. In addition, Staley is censured by the publication of the regulators’ Final Notices.
John McFarlane, chairman of Barclays, said: “The board takes Barclays’ culture and the integrity of its controls extremely seriously. The group’s whistleblowing processes are fundamental to ensuring that individuals feel comfortable raising concerns and are encouraged to do so.
“Having considered the findings of the FCA and PRA, the Board remains satisfied with its conclusions as set out in the group’s announcement of 10 April 2017. Accordingly, the board has now confirmed its decision of April 2017 and has made a very significant adjustment to Jes’s variable compensation on the recommendation of the Board Remuneration Committee.
“The board is pleased that the FCA and PRA’s investigations have concluded and are now behind us. The board has reiterated its support for Jes, as have shareholders at last week’s Annual General Meeting. As a business, we remain focused on executing our strategy and delivering greater returns for shareholders.”
Staley added: “I have consistently acknowledged that my personal involvement in this matter was inappropriate, and I have apologised for mistakes which I made. I accept the conclusions of the board, the FCA, and the PRA, following their respective investigations, and the sanctions which they have each applied.”