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23 Dec 2014

FCA extending the boundaries of the fit and proper test to conduct outside the workplace?

The Financial Conduct Authority (FCA) has recently banned former BlackRock managing director, Jonathan Burrows from any role in the financial services industry after he was caught evading £43,000 in fares on his daily train commute into London.

Burrows was stopped last November at the exit gates of London Cannon Street station and was found to have failed to purchase a valid ticket for the entire journey while travelling on the Southeastern train service from Stonegate railway station, East Sussex.  He later admitted to evading fares on a number of occasions during an interview under caution.

Despite reaching a settlement with Southeastern railways in March 2014 and avoiding criminal prosecution by the British Transport Police, the FCA launched an investigation following a public outcry. His conduct was subsequently considered to not be ‘fit and proper’ and he was prohibited from performing any regulated activities as an authorised person earlier this month. Burrows left his role at BlackRock in July of this year, the company later stating that his conduct was contrary to their values and principles.

“Approved persons must act with honesty and integrity at all times and, where they do not, we will take action” (emphasis added) the FCA said in a statement.

The case is interesting, not simply because the subject matter relates to a relatively minor misdemeanour with serious consequences, but more so since it blurs the lines of private and professional arenas. The majority of individuals who are found to have failed the ‘fit and proper’ test often commit offences whilst at work, but Burrows’ misconduct occurred outside of the workplace and was arguably unrelated to the work he did. However, it was specifically noted in the Decision Notice that individuals who are approved to work within the financial services industry should conduct themselves with honesty and integrity in both their ‘professional and personal capacities’.

Prohibiting someone from the industry therefore over conduct outside of the workplace illustrates how far the regulator is willing to go in cracking down on  ‘immoral’ conduct as it attempts to rebuild trust in London’s financial markets.  The regulator’s increasing focus on ethics comes in the wake of financial scandals such as the banking crisis and the mis-selling of various financial products. In a bid to increase transparency and increased professionalism, the FCA implemented a series of  reforms, in 2012, under the Retail Distribution Review (RDR). The industry itself has since responded positively, with the Chartered Institute for Securities & Investment (CISI), becoming the first professional body to introduce an ‘integrity test’ in April 2013 for all UK candidates. It could be said that this latest case is a move to bring the financial industry under the same codes of conduct that apply to other professionals such as Accountants and Solicitors.

Minor infringements of the law outside the workplace may or may not be investigated and prosecuted but it remains to be seen where the FCA will draw the line. The present matter suggests that whether the actions are considered to be ‘dishonest’ will be the deciding factor. Moreover, although the FCA did not penalise Burrows for not informing his employer of the circumstances, they did take this into account in deciding what action to take. It is important therefore for individuals under threat of investigation or prosecution to engage early and seek advice on their employment position in addition to any civil and criminal proceedings.

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