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Nic Cicutti: When ex-regulators go private

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In the past few days one or two IFAs I have spoken to have expressed disquiet at the recruitment by HSBC of the recently-departed Financial Ombudsman Service chief executive Natalie Ceeney.

Ceeney, according to Money Marketing, will become head of the bank’s customer standards, responsible for “improving customer service and complaint handling”, as well as “developing the bank’s approach to conduct risk.

The concern seems to be over Ceeney’s transformation from gamekeeper to poacher. Actually, she follows in a long and proud tradition of former regulators opting for megabucks by moving to the private sector.

Financial services companies have been recruiting senior public sector figures for many years, including former PIA chief executive Colette Bowe who stepped smoothly into the executive chairman’s position at Fleming Fund Management after the FSA took over the role of her own regulatory organisation.

More recently, there is former FSA chief executive Hector Sants, who was snapped up by Barclays Bank in December 2012 to become its head of compliance and government and regulatory relations.

Barely one year later, Sir Hector – as he has now become after being ennobled in the 2013 New Year’s Honour’s list – resigned because of “stress and exhaustion” after being on sick leave for over a month.

Then there is Christina Sinclair, who also changed sides after 18 years at the FSA and the FCA, where she had been acting director of retail. Sinclair is now the Barclays’ global head of compliance for wealth and investment management.

Let’s not forget Margaret Cole, who swapped her job as FSA managing director for a nice little earner as legal counsel and board member at PricewaterhouseCoopers.  

Others using their regulatory inside knowledge include Jon Pain, former FSA head of supervision, who left to become a partner at KPMG after being snubbed for the FSA’s top job when Hector – sorry, Sir Hector – Sants decided he would not be resigning after all in 2010. Pain is now head of conduct and regulatory affairs at RBS.

More minor figures to jump ship have included Katharine Leaman, manager of the FSA’s professional standards team, who has now been at RBS since 2011. There are plenty more like her.

Some advisers, like my old pal and fellow Money Marketing columnist Robert Reid, feel this transfer of expertise between regulators and the financial services sector shouldn’t be allowed.

Robert has commented: “We clearly need rules that state no regulator can work for a regulated firm for two years, at that point she would be hired on ability not recent locus.”

I must respectfully disagree with Rob on this one. If there were a genuine possibility that these people could use their experience and knowledge gained at the FSA or similar bodies to promote more rigorous standards of compliance and customer service, I would be all in favour of these moves.

My worry is that what can sometimes happen is these former regulators unwittingly become, at best, an inadequate sticking plaster used to cover some fairly unsavoury practices by the industry.

At worst, they are fig leaves, there to show the rest of the world that the institution recruiting them is keen on reforming itself. In fact, everything continues as before.

Take, for example, the case of Christine Farnish, a director of the FSA’s consumer division prior before decamping to the National Association of Pension Funds in 2002.

In July 2006, Farnish was recruited to become Barclays’ public policy director. At the time, Farnish was quoted as saying that she was “very excited” about joining at a time when the bank faced “the challenges of continuing to delight customers against a backdrop of increasing regulation and stakeholder pressure around the globe.”

A year later, Amanda Egbujo, an undercover reporter at the BBC, went to work at one of Barclays’ call centres in Sunderland. While there, Egbujo witnessed an extensive series of misselling malpractices from call centre staff.

This behaviour was encouraged by managers there, who told Egbujo that Barclays “was a business and we are here to make money”.

Barclays trainers – the very people who should have been teaching Egbujo and her colleagues about ethical standards of customer service – told her they “loved it” when customers complained about the extortionate cost of bank charges.

When the BBC broadcast Egbujo’s revelations on TV, Barclays wheeled out Farnish to tell viewers that, contrary to what they had just seen, “we are not in the business of encouraging or condoning inappropriate sales in any way whatsoever.”

What had happened was “not in any way representative of the way in which Barclays does business”. 

Clearly, Farnish had no idea of Barclays’ long-running involvement in PPI sales at the time, where the cost of redress has now reached £4bn; nor the interest rate derivatives scandal where thousands of small firms – including pub owners, haulage firms, care-home operators and vets – were missold “hedging” insurance.  

Then here is the continuing Libor fixing scandal, where interest rates were manipulated by Barclays traders, among others.

Farnish left Barclays after five years of “delighting” her customers there. One can only hope Ceeney does not cause similar raptures of joy from consumers in her time at HSBC.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Doesn’t this ‘long tradition’ show that the argument regarding high wages at our regulators being justified to compete with the private sector is hogwash – so maybe rather than recruiting people at the top who are driven by salary they should recruit those who actually know what they are doing, are suitably qualified and have a commitment to the role.

  2. I think its a disgrace that a private organisation can employ someone from another organisation within the same industry – *tongue firmly in cheek* – Can we please discuss more important issues?

  3. @ Matthew: – This is a serious issue as it is barely concealed “graft”. IFAs regularly ask how Banks are allowed to get away with their sales practices and how the concepts of TCF rarely visit them. The FOS is the size it is because of the banks and still little action apart from “bon mots” and given the size of the profits involved pathetically small fines.

    Welcome to Animal Farm – all pigs are equal but those pigs that can offer jobs to regulatory pigs are more equal than others.

    Regulatory Rule #1 Don’t upset a future employer

    GJH

  4. Garry, banks have received far more regulatory sanctions than IFAs; they have been fined millions over the years (probably justifiably) and are now all but extinct when it comes to providing advice.

  5. It is curious is it not. Read the FOS annual report and it is like a gigantic growth business looking forward to the next colossal series of attacks against those ‘regulated’ for which it has all those highly paid staff on salary-related pension benefits…. and no right of the accused to challenge any judgments or their basis either (just limply to challenge the protocol of the process…).

    Then the cynic might imagine that a tougher line taken by the FOS and more support for claimants’ causes (as caveat emptor doesn’t apply of course) and a justification for its own ongoing existence (and the staff’s monthly salaries) could suggest it becomes grander than God and starts to write its own rules (‘starts’ acknowledging this happened years ago in fact, despite it in theory being ‘regulated;’ by the FCA from its very establishment) and suddenly it grows into an even more influential body for all regulated advisers and companies to fear.

    Then, a Chief Executive who presides over this growling presence to attack the big companies and small advisers alike, advertising left right and centre to entice more and more people to complain (not far removed from the Claims Chasing companies themselves) – with staff incentivised to encourage even more complaints (their own self-existence at stake – God forbid that it could be hoping to almost not exist in several years as the industry has professionalised to such an extent)…..

    Then, imagine the scene… a feared FOS, headed by a Chief Executive successfully who bolsters her own importance and ‘fear’ whilst there, leading from the top and then lo attracting a colossal income from one of the same entities subjected to her wrath previously and which believes that by engaging her it will have a special insight into the very policies over which she presided from which it hopes to escape attention as a consequence…. hmmmm.

    At the very least, there is a taint – or the possibility of a taint and calls for a garden leave period may indeed by appropriate for ex-regulators (and the FOS/FSCS!) after all – and maybe after two years these individuals wouldn’t be so ‘valuable’ and indeed, they may be more inclined to continue in their regulated role for the goodness of the industry…? Who could say that any such marriage could not be planned months before it happens and for a marginally more lenient approach to policy cases being adopted to the favoured institution…. of curse that wouldn’t happen – this is the consumers’ champion!

  6. The other point here Nic is that these “regulators” are still in position and being paid by us whilst actively engaged in the job moving process. These are not jobs that were advertised and the individual just thought they would apply for. The organisations involved will have actively sought out that individual and no doubt lavished gifts and hospitality on them followed by long discussions about packages. All the while this person is still employed as a regulator of that organisation. That is why I believe that there should be a 5 year gap between regulatory roles and private sector if that private sector organisation is a regulated one.

    Whilst this type of behaviour goes on in the private sector, regulators are paid for by the FS community and should always be seen to uphold the highest standards and not leave themselves open to accusations of conflicts of interest. Corruption does not always need a brown paper envelope!

  7. In addition, the musical chairs that goes on with these regulators also shows us that they are only in it for the money. Just like politicians none of these people have any long term interest for the welfare of FS only appearing to make their mark before moving on to the next cushy number. Here they’ll stay for another few years then move on again. Short termism.

    How do these ex University professional job hoppers understand what it’s like for the real people who face the public. As we all know they have no idea at all, but the course they did in History at Cambridge qualifies them to tell us, the plebs, how it should be. They’re all a set of Bankers! (apologies for the auto correct)

  8. Carol Sergeant? Banking supervision, then Lloyds and then picked by the Treasury to lecture us on simple products

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