Barclays, the scandal-struck banking giant, has opened a School of Compliance at Cambridge University which, it says, will hire philosophers to lecture students about trust. It is making the bold claim that its initiative will "transform and professionalise compliance."

In early July, Barclays, the scandal-struck banking giant, opened a School of Compliance at Cambridge University which, it has said, will hire philosophers to lecture students about trust. It is making the bold claim that its initiative will “transform and professionalise compliance.” In truth, other colleges and universities have long been running compliance courses and many more bodies provide higher education and qualifications for compliance-oriented folk.

Some of the terminology that Barclays uses in its promotional literature is slightly confusing and begs a few questions. Barclays and the Cambridge Judge Business School – a long-established unit – jointly run the Compliance Career Academy, which they describe as a ‘programme’ and, furthermore, as ‘externally recognised.’ The websites of all concerned do not say how an academy can be a programme or what form the recognition takes and who is bestowing it. According to the business school’s website, the academy has been established under a brand new Centre for Compliance and Trust which also belongs to the business school. The business school’s website itself proclaims that the academy “signals a new era for compliance.”

Barclays itself has been going through what can only be described as a period of extreme non-compliance. Last year it admitted in a prospectus for a share sale that the Financial Conduct Authority wanted to fine it £50 million for behaving ‘recklessly’ in raising funds during 2008 to keep itself away from a government bailout. It failed to tell investors all they were entitled to know about two agreements it made with Qatar Holding and is still taking court action to contest this fine. It also colluded with other banks to rig the London Interbank Offered Rate for years with the knowledge of the authorities, as a string of uncovered emails proved. It was the first bank to settle terms over Libor in 2012, paying £290 million in fines.

A fresh 'spin' on the same criminogenic personality

One criminologist, ex-Fraud Squad policeman Rowan Bosworth-Davies, has described the Cambridge initiative thus: “It was probably inevitable that when Barclays decided that they had better do something to re-engineer the public perception of their criminogenic personality, they chose to engage in the symbolic way that all high rollers do when they need to buy good opinions, by giving away lots of money to charity, albeit in a novel manner.”

The amount of money is unknown, as is the reason why Barclays describes this initiative as ‘a first.’ BPP University runs a postgraduate course in financial regulation and compliance, the ICMA Centre at Reading University runs an MSc course in Capital Markets, Regulation and Compliance and Westminster Business School’s MSc in finance, banking and insurance has a standalone compliance module, to name but a couple of instances. The Barclays website, however, proclaims: “For the first time the academy offers compliance professionals technical and behavioural training that places customers and clients at the heart of decision-making and helps the business achieve success in the right way.” Some days ago the chairwoman of the centre, Dame Sandra Dawson, told Compliance Matters that she would ring to answer questions when she had time, but has not yet done so.

Bob Diamond and Marcus Agius resigned as chief executive and chairman of Barclays over the Libor scandal, with Sir David Walker coming in as chairman. Sir David heralded the founding of the ‘centre for trust’ with the words: “I would like us to be a thought-leader.” Although he is thought of as a safe pair of hands in the City, Sir David has not stopped the steady tidal wave of fines and criminal allegations from engulfing his bank. Only last month, New York Attorney General Eric Schneiderman started suing Barclays for allegedly telling the corporate customers of its ‘dark pool’ – the second largest such trading platform in the US – that it would shield their interests from high-frequency trading firms while actually catering to such businesses.

Meanwhile, on Barclays’ own website, its chief compliance officer states: “At Barclays the compliance function is currently undergoing a wide programme of change to position it as we strive to be the gold standard for the industry,” language that cannot help but recall the involvement of Barclays in manipulating the gold markets, for which the FCA fined it £26 million in May.

Good training is a regulatory requirement. FCA rules state that every firm must employ people with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them (SYSC 5.1.1 R). Its “training and competence source-book” contains more stipulations for specified retail activities (SYSC 5.1.3 G). Firms which carry out activities that are not subject to ‘T&C’ may nevertheless wish to take it into account in complying with the competence requirements in SYSC (SYSC 5.1.4A G). Lastly, the rules state that a firm may choose to establish, implement and maintain a T&C scheme (TC2.1.14 G).

The real 'gold standard'

For some real experience in this field, Compliance Matters turned to Steve Jenkins, a director at the Chartered Insurance Institute, whose chartered members number 4,235. The title Chartered Financial Planner is the most widely accepted “gold standard” qualification available for professional financial planners/financial advisors in the UK. The qualification fits into the National Qualifications Framework at Level 6, equivalent to a Bachelor’s (first) Degree.

When asked about his members’ qualification, he replied: “These are not level 4 – that’s the ‘licence to practise’. These people ef fectively represent the pinnacle of the financial advice profession. They are about 15% of the total of financial advisors. It is a degree level qualification. To be a CFP, you need to do a number of ad vanced qualifications and be a member of the Personal Finance So ciety, a subsidiary of the CII. This can only be done through the CII. The ICAEW does the same for chartered accountants.

“We have been doing this since 2001. We are an emerging profes sion that is still in its relative infancy, although developments such as the RDR have been brining it to public attention more and more.”

A whole range of organisations offer the level 4 diploma for which the Retail Distribution Review calls – these are the ‘accredited bodies’ or Abs (a term invented by the Financial Conduct Author ity). Level 4 is the minimum that someone needs if they want to offer financial advice. The CII, on the other hand, is analogous to hospital consultants and general practitioners in medicine, i.e. they are educated to ‘level 6’. Jenkins continued.

An educational requirement and not a regulatory one

“For a moment, let us forget the RDR and regulatorspeak and think of education. Every formal qualification in the UK is graded in QCF, the Qualifications and Credit Framework which is the national credit transfer system for educational qualifications. It’s regulated by Ofqual, the education regulator, and there’s reference to this on the Ofqual website.

“Any profession or qualification can have its qualifications ‘benchmarked’ in the lattice that QCF provides. That way, the man in the street knows the level to which someone is qualified. That’s where the term ‘level 4’ comes from. All the ABs stretch the financial advisor who wants to qualify for this to the same level.

“Why, I hear you ask, doesn’t every AB offer easier terms than the next, in the hope of attracting more fee-paying IFAs onto its courses? If such a thing were allowed to happen, there would be a ‘race to the bottom,’ with the half-dozen ABs clamouring to outdo each other in laxity. Ofqual – not the FCA – oversees us all and periodically sends in a SWAT team to each AB to audit its efforts. I am using the word ‘audit’ in the loosest possible way to mean ‘gauge’ instead of ‘crunch numbers’, although the team does look at accounts as well. It also looks at the syllabus, the questions, the way in which the AB moderates the courses, the quality of the support material it hands out, exam conditions, how the papers are marked – everything. All in all, we’re regulated very heavily.”

The 'Training & Competence' consultants

Julia Kirkland, an eminent T&C consultant, told Compliance Matters: “I don’t think we’re very far away from firms insisting that compliance officers are qualified.”

It is well-known in the UK that private banks and asset-management firms are so desperate for compliance staff that they are making extravagant employment offers to staff at the Financial Conduct Authority, the Financial Ombudsman Service and other regulatory bodies and lifting them out of their posts at increasingly immature stages of their careers. At the same time, they are drafting others in from the periphery of the financial regulatory world. In an atmosphere like this, CM suggested, there seems to be little prospect of firms insisting on qualifications or anything else that might diminish the supply of candidates. Julia agreed but thought that the industry as a whole might soon take a hand.

“No, no, possibly not, but I think there’ll be more investment by firms to encourage them and pay for them to get qualified. I think that probably includes RDR (retail distribution review) level 4 technical qualifications as well. I’ve encountered more and more people with those going into compliance offices. There’s quite a lot now who do that.

“Suddenly, over recent weeks, there also seem to be people who are ex-financial planners being drafted in. They are qualified by (a) their experience and of course (b) their RDR qualifications. Many are chartered financial planners.”

The value of the Barclays course

The Barclays project, although less unique than it purports to be, might map out one route forward for training in the financial services industry. Cash-strapped universities are needful of corporate money and corporations need respectability. When asked whether the basic Barclays idea of using private money to fund a new foundation in collaboration with an academic institution represented the future at least in principle, Julia was unequivocal.

“I think so, without a doubt. It’ll be interesting to see if the awarding bodies – which include the CII, the ISS and the CISI – take it up and play the role that Cambridge plays in the Barclays model. Or they can ‘buddy up’ with one of the academic business schools, of which there are a few around the country now.”

Julia said that there was no sign of regulators involving themselves in regulatory training plans and qualifications, but thought that this was about to change.

“The regulators haven’t involved themselves in training, but I have a feeling that they are going to get more involved. I’ve heard that they’re thinking of doing it from various people and they could be making an announcement soon. Of course they’d have to dedicate some of their own people to help with that. They might have to recruit more people too.”

In a certain way, it is slightly surprising that the prospect of regulatory insistence on qualifications has not become widespread already. Even in 1997, with the advent of the Labour government and its decision to merge all financial regulators into one, many compliance officers were saying that compulsory qualifications for their positions were only a matter of a few years, but they were wrong. Perhaps this is merely another instance of the unpredictability of political decision-making.