The Notebook: Lucy McNulty on why the FCA must rethink its chairmanship
Where the City’s top thinkers get a few things off their chest. Today, Lucy McNulty, editor of the Following the Rules podcast, takes the pen.
The FCA must rethink its chairmanship
When the former Financial Conduct Authority (FCA) chair Charles Randell revealed that his decision to resign from his post three years into a five-year term was motivated in part by the prolonged “intensity” of his role, you would expect the UK markets watchdog to take note.
But its new chair Ashley Alder appears to be similarly overloaded according to a Freedom of Information (FOI) request. And that raises serious questions about the FCA’s governance structure.
Randell said in July that his decision to leave his post had in part been influenced by his becoming “really quite executive”.
“I don’t think it’s a good thing for a non-executive chair to become executive,” he told Following the Rules, a podcast, in reference to a workload which included new responsibilities and regulatory reforms in the wake of Brexit, challenges arising from the pandemic and significant personnel changes. “And when they do, it’s very difficult to revert back to being a non-executive chair.”
But, he said, he was unable to find “a way of doing that job that didn’t tend towards being very, very full time”.
It is troubling therefore that the regulator’s current chair Ashley Alder faces similar struggles.
“We can confirm that between 20 February and 1 September 2023 our chair Ashley Alder worked on average five days a week and that the role of the chair was advertised as 2-3 days per week,” the FCA said in response to a FOI request from Following the Rules.
Sure, Alder’s to-do list is no shorter than Randell’s. He will also undoubtedly be keen to put in overtime as he makes his mark on the regulator and builds relationships in the City after decades in Hong Kong. But no chair in any organisation should be working full-time.
This is a role that – as Randell suggests – functions best when the incumbent is sufficiently removed from the day-to-day operations of the business.
The FCA’s own governance structure references the need for such a separation.
That a full-time chair appears to be the norm at the FCA, however, indicates that the watchdog needs to rethink its governance, and the way it engages its senior team.
A cause for reflection
Odey Asset Management’s wealth business is to close months after multiple allegations of historic sexual assault and harassment against the company’s founder Crispin Odey.
The case has raised questions as to the effectiveness of the FCA’s efforts to clamp down on so-called non-financial misconduct, or the misbehaviour of regulated financial services workers outside of their day job. Odey remains under investigation by the watchdog.
Whatever the outcome, this case should change the way the sector and its regulators respond to similar allegations in future.
Report fatigue?
The news that “report fatigue” in the City has prompted delays to proposals for another new vision for the City’s regulatory future is hardly surprising. Seven years on from the UK’s vote to leave the European Union, the City is growing weary of the unprecedented volume of regulatory change arising from the need to rethink the UK rulebook post-Brexit.
But now is no time for weariness. Policymakers still have far to go in their efforts to future-proof and foster competition within the UK’s finance sector. More proactive input from City executives on the best way to achieve those goals would go some way to helping them be realised.
What I’ve been reading this week
‘Humanizing Rules: Bringing Behavioural Science to Ethics and Compliance’ by Christian Hunt
Yes, this is a book written with compliance professionals in mind. But don’t let that put you off. It’s a practical and easy-to-read guide to mitigating the risk of people behaving badly or stupidly.
It uses relatable stories and plenty of humour to explain to readers how behavioural science can be used to encourage compliance in an organisation. And it offers strategies to put the theory into practice. The subject matter may seem dull, but this is written in an accessible way.
It is a must-read for anyone working in compliance. But it’s also useful to anyone with management responsibilities.
And the author is no lightweight. Christian Hunt’s career includes stints as chief operating officer at the PRA and global head of compliance and operational risk at UBS Asset Management.