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FCA: Financial services needs ‘drink driving’ cultural shift

The FCA wants to see a cultural shift among firms similar to the change in public attitudes towards drink driving, says director of enforcement and financial crime Tracey McDermott.

Speaking at the FCA’s enforcement conference in London today, McDermott said drink driving was in the past avoided only through fear of being fined, but is now seen as a “moral issue”.

She said: “The cultural change we are looking for is perhaps analogous to the shift in attitudes to drink driving between my parents’ generation and my own.

“For my parents and their peers, reluctance to have a drink and get behind the wheel was mainly because they were scared of being caught. This was not seen as an ethical dilemma.

“For my generation, however, drinking and driving was presented as a moral issue. We were forced to focus on the impact it could have on others’ lives.

“So the interesting challenge is how do we move from needing ‘a cop on every corner’ to a world where people more often make the right decision instinctively because they believe that is what is valued by their peers, their colleagues and their firms and because they will be ostracised if they don’t.”

McDermott said in light of the £2bn forex fines imposed on banks last month, the industry is “some way short of the corner that needs to be turned”.

She said repeated failures undermine the reputations of both the FCA and regulated firms.

McDermott argued misconduct is not the result of rogue individuals but evidence of “deeper and wider” issues.

She told delegates: “While some individuals went too far they did not do so in a vacuum. The traders involved in these incidents knew what they were doing was wrong.

“
They did it because they operated in a culture in which they believed, at best, that poor behaviour would be excused by the results for the firm, and for them individually and, at worst, would be rewarded by the firm and their peers – in terms of both financial reward and status.”

McDermott said lessons are being learnt, “albeit slowly and from the top down”.

She said: “The trickle down from boardroom to trading desks and sales staff takes time.

“Unless this becomes part of the DNA of firms, unless the front line owns this change and buys into it, it won’t happen, no matter how many fine words there are from those at the top and no matter how many thousands of compliance staff you employ.”

She added that the FCA does not have targets for enforcement action: “I have heard some in the industry say that regulatory enforcement is like the Soviet tractor factory – that we are fulfilling some expectation that year on year more must be produced.

“But there is no such expectation, there are no such targets. We do not see enforcement as an end in itself. It is simply one of the tools the FCA has at its disposal to encourage better behaviour.”

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Comments

There are 22 comments at the moment, we would love to hear your opinion too.

  1. As ever it is a shame that the banks continue to damage the reputation of the rest of us.

    Several years ago I learnt that PI insurers price owner operated businesses far lower than networks and big institutions because for us it is personal – so owner operators generally care more and have better controls. It would be good for the FCA to recognise that we are not all the same and for them to start trying to raise the profile and standing of professional firms.

    Hang on – I just saw a flying pig…

  2. E L Wisty (an only twin) 2nd December 2014 at 12:24 pm

    I agree with much of this – sadly, few of the bad apples will undergo Damascene conversions of their own accord.

    However, I do hope that Ms McDonut will take it on herself to broadcast the same message to her colleagues and superiors. Perhaps along the lines of:

    “Guys, I’ve recently been pontificating to those pesky IFAs on the need to adopt moral behaviours, so that our ‘stick and stick’ approach will eventually become redundant.

    The problem is that I’ve been looking at our own behaviours (for example, CF Arch cru, Keydata etc ……) and that, because we can do as we wish, without fear of enforcement, we can act entirely immorally and get away with it.

    Maybe we should reconsider our actions? OK, I’ll get my coat …….”

  3. What a stupid analogy.

    People still drink drive.

    There will always be people, accountants, solicitors, judges, journalists, celebrities, tradespeople etc. who will bend/break the rules for their own benefit no matter what.

  4. I kind of get where, she is coming from, albeit a clumsy analogy !

    The thing is; I drink and drive (I just make sure I am in the prescribed limit) I treat myself to a pint on the way home from an appointment for instance (depending on how it went).
    Morality has little to do with it, just stay with in the law, its very defined and precise, something the FCA should look at !!

    And I bet George Osborne has a thing or two to say to you not having enforcement targets !!! keep it up Tracey daddy needs new shoes !!!

  5. I wonder if Tracey McDermott is having a dig at one of her former bosses at the FSA who if I remember rightly, was not only the one who within the FSA Board minutes for 18 September 2003 said “We did not consult on having a 15 year limitation period when Disp was consulted on. The predecessor complaint schemes before the FOS each had different approaches to time limits for making complaints. “, but was also the person who I am reliably informed was banned from driving for drunk driving so had to have a chauffeur……!!!!
    Pot kettle black…..
    In this article – “McDermott argued misconduct is not the result of rogue individuals but evidence of “deeper and wider” issues.”
    Yes changing the rules without discussion and then making discussion of time bars and longstops “out of scope” on a paper entitled “Consumer Rights and responsibilities”, then threatening advisers who try to achieve a balance in their contracts between rights and responsibilities and even now refusing to discuss the longstop in any meaningful way with APFA!
    Martin Wheatley committed in front of an audience at Chatham CCL seminars to the Longstop review, his staff agreed to a meeting with APFA nearly 2 months ago, Sam Condry (Senior Associate) at FCA met members of the Longstop working party and NOTHING is happening in open chamber, ity is all taking place behind the doors of the executive. This has now been going on longer than we have been fighting in Afghanistan so war with the F-pack would probably be quicker!

  6. The premise is somewhat spoiled by the fact that the greatest increase in drink driving is amongst the young, but don’t let fact get in the way of sensationalism hey?

  7. If we use this analogy there are some interesting conclusions to be made.

    Firstly it was the stick that changed habits, then came the change in public opinion. We advisers have had not just the stick but the gun to the head for years., whilst the banks carried on regardless.

    So, using this analogy an adviser by means for fraud takes £250K of clients money. Regulator fines, strikes them off, courts sentences them to 2 years in prison.

    The banks nearly bankrupt the world economy, fraudulently rig markets and rates, get a fine but no one has been to court or has be sent to jail? They did say sorry mind you!

    This is like saying its OK to be just over the limit, but if you are off your face, 4 times over the limit,, crash and KILL hundreds of people, well that’s OK.

    After 9-11 the hunt for those responsible was intense. The main issue being they did not know where to find them, We all know and have documented proof about the market rigging, yet they seem to have a get out of jail card free.

    The downfall of the world economy would have seen millions killed, the end of civilization. What will it actually take for Governments and regulators to not just breathalyze these organisations but to actually place those responsible on public trail and sentence them to life.

  8. The problem is that I’ve been looking at our own behaviours (for example, CF Arch cru, Keydata etc ……) and that, because we can do as we wish, without fear of enforcement, we can act entirely immorally and get away with it.

    Absolutely bang on Mr Wisty, add Connaught to that list and it’s long overdue that the FCA, FSA, Lautro, PIA etc………………whatever their latest manifestation, took a hard look at themselves and became accountable for their actions!!!

  9. Maybe it would be good if the FCA took a ‘moral stand’ and did not waste our money on golf weekends etc

  10. @DH agree!
    The social stigma of drink driving did not just develop out of a few fines. It was the jailing/ loss of job/ family embarrassment caused within the local and professional community that took the best part of 40 years to develop to the point Tracey is attempting to make.

    I have yet to see any of the “big bankers” personally jailed or named and shamed. If they have lost/ moved on from their jobs it has been with significant compensation and a very nice pension/ share option packages or other rewards.

    In extreme instances they may be black balled from their clubs/ House of Lords but I do not see a great comparison with drink driving other than the FCA’s treatment of IFA’s…and yet we are meant to be “professional”

    Clumsy is being kind.!

  11. Paul Standerwick 2nd December 2014 at 2:45 pm

    what a ridiculous analogy!

  12. Can we take this as an indication that the FCA will NOT be having a staff Christmas Binge this month?

  13. Michael.White.BoutiqueCapital - Bridging Loans 2nd December 2014 at 3:20 pm

    The analogy of Drink-Driving is a complete load of Tosh. But I am never surprised by the absolute lack of tact displayed by senior management at the FCA… neither polite and certainly not politic.

    But on a more positive note, at least the Bank fines have been put to very good use…being ‘re-cycled’ by the government as a boost for the NHS.

  14. If she is serious about real change, the FCA needs to stop being drunk out of their minds behind the wheel. No regulator has credibility when there own behaviour is worse than most of those they regulate.

  15. I read this article fairly carefully and, to be fair to Ms McDermot, its main focus seems to be on the cultural failings of the larger financial institutions rather than small financial intermediaries, whom even Rory Percival has grudgingly conceded are on our way to becoming a profession.

    Simon Webster ~ I remain of the view that it’s wrong to classify networks as large institutions. Rather, networks are collectives, albeit some of them fairly large collectives, of small firms who choose to subscribe to their centralised support, research, compliance, training and guidance services. Given that part of what the better networks do is steer us and our clients away from dodgy funds and/or products, I really don’t know why PI Insurers should impose on higher premium rates than on our DA counterparts.

    Phil Castle ~ “war with the F-pack would probably be quicker”. ANYTHING must be quicker than absolutely no progress or movement whatsoever. The FSA/FCA has perniciously decided, without consultation or negotiation or even approval from Parliament, that intermediaries shall have no longstop protection. It has no intention of modifying that stance and has even abandoned the flimsy pretence of being prepared to discuss it. The only way forward is now a Judicial Review, though sadly the one body that should be mounting such a challenge has neither the bottle, the balls or the backbone to do it. It may claim it doesn’t have the money but it could almost certainly raise it with little difficulty were it so minded. Enquiries as to why it’s doing nothing are studiously ignored. Try it and see.

  16. at the end of the day banking and financial services are dirty words

    every month a new fraud or mis selling scandal

  17. I read this article fairly carefully and, to be fair to Ms McDermott, the main focus of her comments seem to be on the cultural failings of large financial institutions rather than small financial intermediaries, whom even Rory Percival has grudgingly conceded are on our way to becoming a profession.

    That said, the main fear amongst smaller intermediaries is not so much of being found out for doing something contrary to our clients’ best interests but of the FCA determining that even though both we and our clients are quite satisfied, we haven’t dotted every i and crossed every t, ad infinitum, to the satisfaction of the regulatory busybodies, for whom virtually nothing we ever do is good enough..

    Simon Webster ~ I remain of the view that it’s wrong to classify networks as large institutions. Rather, networks are collectives, albeit some of them fairly large collectives, of small firms who choose to subscribe to their centralised support, research, compliance, training and guidance services. Given that part of what the better networks do is steer us and our clients away from dodgy funds and/or products, I really don’t know why PI Insurers should impose on us higher premium rates than on our DA counterparts.

    Phil Castle ~ “war with the F-pack would probably be quicker”. ANYTHING must be quicker than absolutely no progress or movement whatsoever. The FSA/FCA has perniciously decided, without consultation or negotiation or even approval from Parliament, that intermediaries shall have no longstop protection. It has no intention of modifying that stance and has even abandoned the flimsy pretence of being prepared to discuss it. The only way forward is now a Judicial Review, though sadly the one body that should be mounting such a challenge has neither the bottle, the balls or the backbone to do it. It may claim it doesn’t have the money but it could almost certainly raise it with little difficulty were it so minded. Enquiries as to why it’s doing nothing are studiously ignored. Try it and see.

  18. She’s dead right when it comes to generational differences and car driving.

    Someone’s antecedents I seem to recall were accused of being repeatedly asleep at the wheel for years, causing numerous pile-ups along the way.

    Millions of innocent bystanders suffered as a result of their actions, though amazingly the perpetrators escaped from the wreckage each time unscathed. I wonder where they’re driving today?

  19. @Julian
    Network PI tends to be more expensive because they generally have long historic “tails” of business – some of it written by those no longer with the network or no longer in the industry. I am told that on the odds this is more likely to produce claims….

  20. I am reminded of the old adage “if you are drunk and you are driving, you must have a car”
    In other words, the predisposition to drink exists before the car becomes the means of perpetrating an illegal act.

    The same principle applies in our industry. A predisposition to cheating/dishonesty already exists; financial products simply offer a vehicle and means of so doing.

    Greater care is needed in the recruitment of individuals entering the industry or simply moving from another company . Equally, over and above the normal routine of competency checks, CPD etc, much greater personal supervision is needed on an on-going basis. In short, eliminate the potential fraudulent activity before it becomes a reality

  21. When I started driving in the seventies drinking and driving was sadly regarded as “normal” behaviour by many. There was a song in the charts with lyrics “in the summertime…have a drink have a drive, know you’re alive.” There was a joke dong the rounds: I had to drive I was too drunk to walk… and people used to laugh – but as Bob Monkhouse once said they are not laughing now.

    My children were brought up that if they touched a drink they were not to drive and if I ever caught them doing it I would remove their cars and all privileges permanently. Their friends parents took the same view. So for whatever reason there has been a huge and welcome social change in my lifetime.

    I am not sure whether whistle blowing on drunk friends and colleagues at at the wheel is yet regarded as socially acceptable – it ought to be; but there is something almost innate around no one likes a sneak. But in financial services THAT is the culture change really required…

  22. Simon Webster ~ the lyric was:-

    In the summertime when the weather is high
    You can stretch right up and touch the sky
    When the weather’s fine
    You got women, you got women on your mind
    Have a drink, have a drive
    Go out and see what you can find.

    Your point about the effects on premium rates of long established networks having historic potential liabilities is well made, though ex-members can still be pursued for upheld claims indefinitely and, if they have no run-off cover, they’re in trouble. This is exactly what happened to an unknown but quite possibly large number of former network members as a result of the first of the big hindsight reviews (pension transfers). Many lost their homes.

    For its part, the regulator still seems to consider this to be quite okay.

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