When the Financial Conduct Authority (FCA) announced earlier this year that it was investigating non-financial behaviour at banks and intermediaries, its February 6 letter asked businesses to answer three questions; how many and what type of incidents have been recorded, and whether these came from whistleblowing or other means; whether complaints led to a warning, dismissal or no action; and whether non-disclosure agreements or employment tribunals followed. Firms scrambled to meet the deadline (23% failed to comply in time) but, unbeknownst to many, the FCA was facing its own complaint for bullying – over the alleged action of its previous director of enforcement, Mark Steward.
And it appears that the FCA has some explaining to do over its own non-financial behaviour.
In a major embarrassment for the regulator, following disclosure that the FCA had not even spoken to Steward about the claims, an independent commissioner has retracted a ‘final report’ that called for it to apologise for Steward’s allegedly aggressive behaviour. The FCA has now reopened the original investigation.
In the original complaint, the complainant claimed that Steward, who managed some of the FCA’s most prominent and controversial enforcement cases, was “[accusatory], excessively aggressive, unpleasant and bullying” on “multiple occasions”.
Initially, the Financial Regulators Complaints Commissioner Rachel Kent published a “final report” that supported the allegations against Mark Steward, the former director of enforcement and market oversight at the FCA. The report suggested the FCA should apologise to a creditor of a collapsed payments firm due to Steward’s alleged conduct.
However, after The Times inquired about the report with Steward and the FCA, the independent commissioner’s website removed the report, and the FCA announced it would revisit the original complaint.
The complainant, who requested anonymity, questioned: “Why and how are senior FCA officers allowed to interfere with an independent review? Has this ever happened before? What process does the commissioner follow for removing a final report?”
Kent, who replaced Law Society chair Amerdeep Somal earlier this year, is responsible for adjudicating complaints against financial regulators, and did not comment on whether this was the first instance of a final report being withdrawn.
The newspaper discovered that Steward had not been informed by the FCA about the complaint against him, nor was he given an opportunity to present his side of the story. Additionally, potential witnesses were not contacted.
Despite this, the FCA had previously informed the complainant that they accepted their version of events and deemed Steward’s behaviour as not meeting expected standards. The commissioner used this information to uphold the complaint, recommending the FCA apologise and pay the complainant £250 for their “experience”.
An FCA spokeswoman stated: “We made a number of errors, contrary to our standard procedures, in our handling of this complaint. Therefore, our original response and the commissioner’s report have been withdrawn and we will reconsider the complaint. We have apologised to those affected.”
Rachel Kent, the commissioner, remarked: “I have decided to take down the final report whilst my office reviews the handling of the complaint.”
The complainant revealed to The Times that they were informed by Sheree Howard, executive director of risk and compliance oversight, that the commissioner’s findings were being retracted. Howard joined the FCA in 2017, following stints at Direct Line and RBS Insurance.
Melbourne-educated Steward, who departed from the FCA last year and became a member for the Australian Law Reform Commission, was replaced by Therese Chambers and Steve Smart. “I was not contacted about this by the FCA or the complaints commissioner at all and have not seen the complaint,” he told The Times.
The commissioner’s office, which often issues critical findings about the regulator, evaluates documents and evidence from both regulators and complainants.
Previously, commissioners were appointed by regulators. Kent, a financial services lawyer at Hogan Lovells, was the first commissioner appointed by the Treasury, a change intended to enhance the role’s independence.
