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Nic Cicutti: Will compliance guarantees lead to more senior arrests?


Is the FCA’s mounting drive to seek personal undertakings – or attestations – from senior industry executives a dangerous or potentially improper escalation of regulatory intervention?

Some in the industry believe it has the potential to be: minutes of the FCA’s March board meeting, published a month or two ago, indicate that the regulator’s independent practitioner panel and smaller business panel have expressed concerns about their use.

According to Money Marketing reporter Tessa Norman, “experts have raised concerns the regulator is not being transparent in its strategy and individuals are signing attestations without realising the consequences for future enforcement action”.

Last week Tessa quoted Pinsent Masons senior associate Michael Ruck saying that the FCA might ask a firm’s chief executive to sign a form stating that everything is hunky-dory. “Six months down the line, if something goes wrong, they can put that back in front of them and ask why they told an untruth,” Ruck added.

I found myself wondering about the potential dangers of attestations during a visit to London a few days ago. My final meeting was near my mate Dave’s flat, so I popped round for a cuppa and a catch-up.

You may remember me writing about Dave a few years ago, when he was raided by vanloads of police in riot gear after an anonymous tip-off that they were fiddling benefits. Dave and his missus, who each weigh six stone dripping wet, were cuffed and ‘perp-walked’ out of the block in full view of appreciative neighbours.

It subsequently turned out that Dave, who only has a small part-time job so he can look after his wife, does not claim benefits. The only ‘fiddle’ was that his spouse, who has a long-term disability, was claiming housing benefit on the flat while he lived there too.

A serious transgression to be sure, evened out by the fact that he had never claimed Carer’s Allowance of about £60 a week, to which he was entitled, in all the time he had lived there.

No further action was taken and even though the amount of housing benefit has been cut, now that Dave is claiming this allowance the couple are financially better off. Not that this has erased the humiliation of both of them being marched out of the flat in handcuffs.

Back then, I wrote that I looked forward to a time when senior executives at UK banks guilty of ruining the financial lives of millions of their customers might be forced to undertake a similar US-style ‘walk of shame’ in front of their colleagues or neighbours.

In fact, I have been arguing for almost 20 years that the practice of directors earning large fees to attend board meetings but then walking away scot-free when regulators fine their firms – penalties paid for by long-suffering shareholders or policyholders, incidentally – is completely wrong.

Senior executives should be directly accountable for areas of their businesses they are in charge of: if you want the money and the kudos, do the job you are paid for. Oversight of a business means just that.

In fairness to the FCA, and the FSA before it, in the wake of the banking crisis a few years ago there is some evidence of a tougher policy towards individuals who break the rules.

Back in 2010, two Northern Rock directors, David Baker and Richard Barclay, were fined by the FSA and banned from working for a regulated financial firm again after admitting misreporting mortgage arrears data and failing to ensure accurate financial information. Baker was clobbered to the tune of £504,000 and Barclay was fined £140,000.

Several prominent people, including US hedge fund president David Einhorn and JC Flowers UK chief executive Ravi Shankar Sinha have also been fined. Einhorn was found to have used insider information for trades while Sinha fraudulently invoiced his company for fees he was not entitled to. 

But the striking thing about all these regulatory interventions is that they have all come after the offence was committed. It is almost as if the individual paid no thought to the role he or she was meant to be playing and only appeared to twig after the transgression, not before. 

Just as remarkable is that, as I have said, none of these fines apply to individuals who were simply ‘ignorant’–  or claimed to be ignorant – of what was happening, further down their chains of command.

Making senior people in institutions – and potentially IFA firms – sign ‘compliance guarantees’ changes this. It requires them to pay much more attention to what is being done on their watch.

To those who argue that some compliance issues in a particular area are so complex that a single individual, no matter how senior, cannot be expected to fully grasp what is truly happening there, my response is simple: if you do not fully understand what is going on, don’t take the money for it.

Ironically, the impact of the FCA’s move towards attestations may even help reduce the number of fines and after-the-event personal penalties now being imposed. 

Tougher regulation means fewer penalties? Perish the thought.

Failing that, we could see a few Dave-style perp walks on telly, with senior industry executives in handcuffs. 

Either is good for me.

Nic Cicutti can be contacted at
Follow him on twitter 



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. My understanding is that attestations are used where issues have been found and an acountable person is asked to take responsibility for putting thngs right. A year down the line, if things havenet progressed, regulatroy action can be taken against the individual rather than the firm as a whole. Attestations will need to be specific – you couldnt expect an exec to sign something saying ‘make sure the whole firm is compliant in everything they do’ – Its not realistic.

    Also ‘arrests’ are only made by the police following a crimial investigation, not the regulator.

  2. “Just as remarkable is that, as I have said, none of these fines apply to individuals who were simply ‘ignorant’– or claimed to be ignorant – of what was happening, further down their chains of command”

    Yes but this does not just apply to the financial services industry does it? Recent events have shown it appears to be a general principle. especially in the media where apparently some editors of national newspapers do not have the slightest idea what is happening on their newspapers.

    I could not agree more that those who are paid substantial sums of money to head up institutions should carry the responsibility when things go sour-it is after all often put forward as the reason for the substantial sum. Far too often it simply does not happen

  3. The development of limited liability facilitated commerce and the dominance of the UK in world affairs by removing the threat that an individual’s total wealth would be confiscated if invested in an unsuccessful company. Attestation is an example of the regulators attempt to redefine commercial law in their favour. Remember the FCA is an instrument of the state and is only accountable to the treasury. Its encroachment is akin to nationalization of financial services and we must safeguard and maintain the competitive edge of our financial services industry or risk its export to a more competitive regulatory regime. No quality business leader in his right mind will get involved in attestation.

  4. @ Blair Cann

    RE -: your last paragraph; I totally agree and would add, those people also who head up the institutions, in most instances are woefully under qualified to hold such a position, Rev Flowers as an instance but the vast majority would be left wanting in this area.

  5. Whilst I can see Simon Ms point. The reverse also applies in that when dealing with the F-pack itself their staff have no “skin in the game”.It seems the only people who do are the consuemr and the small advisory firm. Lareh firms and Networks, the shareholders are in the frame, NOT the directors, so something DOES need to change. For once I agree with Nic C as a result.

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