Regulators fine Barclays CEO for breach of SMR requirements

PRA and FCA have published the first final notice for breach of an Individual Conduct Rule. They have jointly fined James (Jes) Staley £642,430 for breach of Individual Conduct Rule 2 (failure to act with due skill, care and diligence), after he tried to find out who had sent an anonymous letter. The letter claimed to be from a Barclays shareholder and made various allegations about an employee, the process for hiring him and how Mr Staley had dealt with concerns about that employee at a previous organisation. Mr Staley did not treat the letter as falling within the firm’s Whistleblowing policy (which, at the time, applied only in relation to employees) and discussed it with two individuals outside the group who he thought could help if the letter became public.

A second letter arrived, this time purporting to come from an employee, so Mr Staley did not attempt to identify its author, but instructed Barclays Group Security to try to identify the author of the first letter.  Some days later he was advised the first letter also might be a whistleblow and that he should stop trying to seek its author. He did so, until he was informed the investigation was nearly complete and, believing this to mean the letter was not a whistleblow, re-started attempts to find its author without confirming with the Compliance department that he could do so.

The regulators found that Mr Staley did not fail to act with integrity, but did fail to act with due skill, care and diligence.  He should have identified that he had a conflict of interest and kept his distance; he should have seen that there was a real risk he would not be able to form an objective view on responding to the letter; and he should have recognised the importance of Group Compliance retaining control over the investigation.

The regulators thought it appropriate to impose a fine of 10% of Mr Staley’s annual income, and he qualified for a 30% reduction. They also placed requirements on the bank so that it must now report annually to them until the end of 2020 on various elements of the whistleblowing policies and procedures, including specifically any allegations made against senior managers or where Barclays has sought to identify whistleblowers. Its Whistleblowing Champions must also attest to the soundness of the systems and controls.

Nicky Morgan said the Treasury Committee would be asking FCA why it thought the level of fine was appropriate.