The UK's Financial Conduct Authority has published a decision notice in which it proposes to issue an order under s56 Financial Services and Markets Act to prohibit Andrew Tinney, the global chief operating officer of Barclays Wealth and Investment Management, from performing any senior management function again. It cannot do so, however, until it defeats Tinney's appeal against it.

Tinney held his post between May 2010 and December 2012. In that role, he oversaw Barclays Wealth’s global technology, operations and infrastructure activities, plus its compliance function, and had joint responsibility for its legal function. He held a CF29 (significant management) 'controlled function' licence. The FCA believes that he contravened its 'statement of principle' number 1 that obliged him to act with integrity in carrying out that function. Tinney denies this and has taken his case to the Upper Tribunal, which upholds FCA decisions 80% of the time. Until the tribunal reaches a decision, the decision notice will have no effect and its contents will not appear in a final notice.

The regulator's right to publish a decision notice before the apppearence of a final notice or before the Upper Tribunal makes a ruling in a disputed case is a relatively new thing and dates back to the days of the Financial Services Authority, which split into the Financial Conduct Authority and the Prudential Regulation Authority in 2013. The Government may have passed this rule to inject an element of 'trial by media' into the lives of people who faced regulatory punishment and had the temerity to appeal against it.

Transgressions against a fellow-regulator

The story begins at a time when Barclays Wealth was already in trouble with a regulator – in this case the Securities and Exchange Commission of the United States, where Barclays Wealth Americas, its US branch, was struggling to correct deficiencies that the examiners had found on a visit. Tinney chaired the committee that was overseeing the clean-up operation, which included a 'culture audit' which he set in motion personally and presented to the SEC as a way of identifying the root causes of the misconduct that the examiners had spotted. He hired an external consultancy to find out how the ‘tone at the top’ flowed through BWA. The consultancy set out its findings in a 29-page report that he received, in hard copy, in March 2012, with the words ‘Barclays Wealth America – Culture Audit’ at the top of every page. According to the FCA, he kept the report a secret from almost everybody at Barclays and let nobody else see it.

According to the FCA, the report was something of a sham because it failed to portray the way the ‘tone at the top’ flowed through BWA. Instead, it described interviews with BWA employees that criticised the senior managers. It said that BWA had pursued a policy of generating revenue at all costs and that its culture was 'high risk' and actively hostile to compliance. Its main recommendation was for the replacement of some senior managers.

The FCA accuses Tinney of making misleading statements to his colleagues at the firm about the report’s nature and/or existence in breach of Statement of Principle 1. It says that he should have been aware that his evasions would make it less likely that people would ask him or the consultancy for a copy of it.

'No wealth cultural audit here!'

Someone sent an anonymous email to the firm’s chairman in September 2012 alleging that a ‘wealth cultural audit report’ had been suppressed. Tinney allegedly took evasive action in drafts of a note regarding the allegation, to which he contributed and which he knew was likely to go to the firm’s chairman and new CEO, as well as to people who were conducting an independent review (known as the Salz Review) of BWA's business practices launched by the board of the firm in the immediate aftermath of the Libor settlements with the intention of examining the firm’s values, principles and standards of operation – the historical culture – and making recommendations for change. In the drafts, Tinney did not mention the report, described the consultancy’s work so as to imply that there was no written output and, at one stage of the drafting, added the words “There has never been a 'wealth cultural audit report' produced at any time.”

Then the firm received a request from the Federal Reserve Bank of New York for a copy of 'the' Barclays Wealth Americas ‘cultural audit’. In emails to colleagues regarding this request, Tinney initially did not mention the report and then made statements which suggested the report did not exist. Later, when discussing with colleagues what document(s) BWA should give to the Fed, he described the report as ‘interview notes,’ ‘rough notes' and ‘interview material.’ The FCA has found fault with this, even though it concerns Barclay's communications with a completely different regulator in a country 5,000 miles away.

In December 2012 the firm received a copy of the report from the consultancy and, shortly afterwards, suspended Tinney’s employment. Tinney subsequently resigned.

The FCA blames Tinney's for inhibiting the likelihood of the firm’s board understanding the reasons for Barclays Wealth America’s regulatory deficiencies. He also “exposed the firm to the risk that its efforts to address failings in its compliance with its legal and regulatory obligations could be delayed or frustrated.”

He did this in three ways, according to the regulator. He allegely inhibited the board of the firm from working out whether the concerns raised in the anonymous email were well-founded; from dealing with informants ('whistleblowers') properly; and from helping the Fed pursue its interest in the culture audit. The Salz Review added another dimension of blame.

Transgressions against another fellow-regulator

Andrew Tinney’s dealings with the Institute of Chartered Accountants of England and Wales, of which he is a member, also displeased the FCA. It accuses him of misleading misconduct in an account he gave to the ICAEW of certain events, through his solicitors, in correspondence and in compelled interviews.

During the compelled interviews, Tinney told the ICAEW that he had expressly instructed the consultancy not to produce anything in writing and had been surprised when he learnt that the report was going to be delivered to him. He told it that he expressed his surprise to his chief of staff who then told him that she had instructed the consultancy to prepare a written report. Other witnesses and documentary evidence, according to it, indicate that Tinnehad no such conversation with his chief of staff.

The ICAEW showed Tinney an email in which he appeared to instruct the consultancy not to bring a copy of the report to the first briefing. He told it in his first interview that the email related to a different document. He subsequently accepted in his second interview that he had indeed given this instruction to the consultancy.

Tinney told the authority that he instructed the consultancy in April and October 2012 to retain a copy of the report and to provide it to anyone from the firm who asked for a copy without reference to him. The consultancy told the authority that no such instruction was given until December 2012. Tinney told the authority that during a meeting on 10 December 2012, he recommended giving a copy of the report to the Fed. The authority, however, contends that other witness and documentary evidence indicates that he only referred to the existence of ‘interview notes’ or similar and offered in passing to obtain them. It thinks that he “was reckless as to the accuracy” of his starements, which he made out of a desire to avoid criticism of his conduct.

Mitigating factors

The FCA says that the reckless making of misleading statements and omissions by anyone who performs a “significant influence controlled function” amounts to serious misconduct. It says that a person of integrity in Andrew Tinney’s position would not have failed to mention the report’s existence in drafting the September note and in response to the New York Fed’s request, and would not have made misleading statements. That said, it does lay out some mitigating factors in its decision notice. He did not profit personally as a result of his misconduct. His misconduct did not cause loss to consumers, investors or other market users or increase the existing risk of loss to the firm’s clients that the SEC had identified. The period of misconduct was relatively brief. Moreover, some might say bewilderingly, the authority is at pains not to accuse him of making his statements and omissions with a deliberate intentaion to mislead.

There is more cheery – and, some might think, surprising – news for the former COO. The FCA thinks that Tinney genuinely did hope that the culture audit would, in due course, help to improve the firm’s culture and compliance with regulatory requirements and reduce the risk of loss to consumers, investors or other market users, “albeit his conduct during the relevant period was inconsistent with these goals.”

Moreover, the FCA finds it 'understandable' that Tinney tried to ensure that the report was not seen by or available to others because that would make it more likely that certain people would sue the bank.

Nevertheless, the regulator considers that Tinney is not a fit and proper person to perform any senior management function or any significant influence function in relation to any regulated activity carried on by an authorised person/firm and wants to impose a prohibition order on him.

The fit-and-proper test for approved persons

The FCA's criteria for this test – applicable to people and approved persons/firms alike – is found in the 'FIT' part of the rulebook. Its most important considerations ought to be the person’s honesty, integrity, reputation, competence, capability and financial soundness. In determining a person’s honesty, integrity and reputation, FIT 2.1.1G obliges the regulator to have regard to all relevant matters including (but not limited to) those set out in FIT 2.1.3G, which includes the question of whether the person has been dismissed, or asked to resign and resigned, from employment (FIT 2.1.3G(11)). This is what Andrew Tinney has done.

Tinney's responses

Paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper Tribunal) Rules 2008 gives Andrew Tinney the right to refer the matter to the tribunal. In accordance with s394 FSMA, he has the right to access the material upon which the FCA has relied against him and the secondary material which, in the opinion of the FCA, might undermine its decision.

It will be interesting to see how many of Tinney's points find favour with the tribunal. On the question of motive, his team is arguing that he had no inducement to conceal the report (which, after all, does not mention him personally) and therefore had no motive to make misleading statements or omissions. The argument here is that because the culture audit was his idea, it would have been “bizarre” for him to try to suppress the report.

The FCA, for its part, argues that his motivations are irrelevant; it is enough that he failed to take the course of action in late 2012 that was both obvious and correct, which would have been to make clear the existence of the report, to explain how it might expose the firm to litigation and to offer to provide a copy to the people with whom he prepared the September note, along with its ultimate recipients at the New York Fed, subject to appropriate restrictions for the sake of confidentiality.

Another contention of Tinney's is that he had reasonably believed that the anonymous email that referred to a ‘wealth cultural audit report’ was not referring to the report that he had commissioned because the description did not fit. The fact that each page of the report was headed ‘Barclays Wealth America – Culture Audit’ is neither here nor there, indicating only that the report was produced as an 'input' into the culture audit.

Another argument is that the anonymous email was the third in a sequence of anonymous emails that made allegations about Barclays Wealth America. The allegations in the previous two emails did not appear to be well-founded, so it was natural for Tinney (and the CEO of Barclays Wealth) to start with the assumption that this one also contained allegations that were wide of the mark.

Tinney's camp also argues that he could not possibly have sought to insert misleading drafting into the September note because his own manager, the CEO of Barclays Wealth, commissioned and oversaw the drafting of it and was aware of the existence and contents of the ‘tone at the top’ report, and also because a senior Barclays Wealth lawyer knew that the report existed and was 'broadly' familiar with its contents. They are also arguing that it would be unfair and 'improper' for the FCA to single Tinney out for lack of fitness and propriety because others were involved in the drafting and he did not have the final say over it. The FCA is unmoved by this assertion, saying that the involvement of others with differing levels of knowledge about the report has no bearing on Tinney's contributions. Judging from past performance, the Upper Tribunal is likely to agree with it on this point.