Professionals beware: your conduct outside of the office could be under regulatory scrutiny

7 August 2014

If asked to answer truthfully, I am sure many professionals would, at some point, and to varying degrees, have acted in a way which was less than entirely honest. For most, this would have been an isolated event, which has long been put out of their minds. Few would have thought through the range of consequences of such an act; however, as a professional, acting dishonestly, or with a lack of integrity, could have wide-reaching consequences. 

This message was reinforced once again in last weekend’s press. Some weeks ago, the Sunday Times ran a story about a “City Executive”, who had avoided prosecution by repaying £43,000 of unpaid train fares, accumulated by his travel from East Sussex to London over a five year period.  Instead of buying a valid ticket for the train, the individual used his pre-paid Oyster card, and merely paid the penalty fare each day he travelled. Until now, he had not been named, as he had repaid the £43,000 he owed to Southeastern Railway, which, it is reported, led to his name been kept anonymous. 

However, his anonymity has not been permanently secured; he has now been named by the Sunday Times as former BlackRock employee Jonathon Burrows, after British Transport Police launched an investigation into his actions. It is reported that he was initially suspended from BlackRock and subsequently resigned from his high profile job. It is reported that the Financial Conduct Authority (FCA) has also expressed an interest in Mr Burrows’ wrongdoing.

This story provides a salutary reminder of the potential impact of misconduct carried out by professionals whether in their business or personal lives. The requirement to act with honesty and integrity underpins the code of conduct of most professions, spanning finance, the legal sector, healthcare and elsewhere. Regulators will commonly evaluate issues of impropriety when determining whether a professional is fit to operate in a particular role. The tests applied by regulators vary, but the principles of honesty, integrity and reputation of the profession are key themes which run throughout professional regulation.

For example, part of the FCA’s remit is to determine whether individuals working in a “controlled function” in regulated financial institutions are ‘fit and proper’ to work in such a capacity, i.e. to become an ‘Approved Person’ under the FCA’s regime.

The FCA, when considering whether an individual working in a controlled function is ‘fit and proper’ to do so, will determine the individual’s honesty, integrity and reputation. In making this consideration, the FCA will look at whether the person is honest, whether the person’s reputation might have an adverse impact upon the firm for which the controlled function is to be performed, and the person’s responsibilities. As with most regulators, the FCA’s considerations are not just limited to a person’s professional life:  it can have regard to a person’s criminal history, whether they have been subject to any adverse civil findings and whether they have been subject to any disciplinary proceedings or investigations, amongst several other factors. An incident in an individual’s personal life could therefore potentially obstruct them from gaining the authorisation they require to carry out their professional role, and in turn have a seriously limiting effect on their career. If there is an incident in one’s past which could come back to haunt them when dealing with their regulator, what then should they do?

Seeking advice from the outset should always be encouraged; transparency is vital in demonstrating honesty and integrity, and providing a balanced explanation of events may assist the regulator in establishing the seriousness of a past transgression, and whether the previous conduct should prevent a person from practising in their chosen profession. Each case will be considered on its own merits;  regulators will, however, take a dim view of a failure to disclose relevant information when sought, as this may compound any suggestion of an individual demonstrating a lack of integrity.

Some professionals will of course have skeletons in their closets; it is important to address those appropriately when dealing with their regulator.  Doing so will assist with demonstrating that past indiscretions do not necessarily demonstrate an inherent lack of integrity or honesty.

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