Angela Burns’ failure to prevent publication of a Decision Notice by the Financial Conduct Authority (FCA) is a clear warning to all non-executive directors (NED).
It signals that issues relating to corporate governance and NED integrity are likely to be actively pursued by the FCA. That entails serious publicity implications for individuals unless the presumption of public interest in publication is outweighed by a significant likelihood of potential damage to their livelihood.
Why Was the Decision Notice Published?
As noted by Tracey McDermott, Director of Enforcement and Financial Crimes, a NED’s position is significant to the successful functioning of a board and maintaining the confidence of their customers. Given the NED practice of having a portfolio of appointments, it therefore follows that NEDs have to be particularly scrupulous about conflicts of interest and the principles of good corporate governance.
In the case of Angela Burns, the FCA took action against her for breaching her duty of integrity under Statement of Principle 1 for failing to disclose conflicts of interest. The matter was referred to the Upper Tribunal but Ms Burns was unsuccessful in securing an order to prevent publication of the Decision Notice.
Ms Burns failed to convince the Upper Tribunal that her livelihood rather than her reputation was at stake and that publication would cause her disproportionate damage.
What Were the FCA’s Allegations?
Angela Burns is the chief executive and owner of an investment consultancy business in the UK investment market. The FCA alleged that in 2006 Ms Burns reached out to a US Investment Manager with a business proposal, recommending they use her services to enter into the UK investment market. It was not taken up but in 2008 the Investment Manager contacted Ms Burns as it had decided to enter the UK market.
In 2009 and 2010 Ms Burns was approved to take a non-executive directors position with Marine and General Mutual Life Assurance Society (“MGM”) and Teachers Provident Society (“Teachers”). As both societies were regulated by legislation Ms Burns was required to disclose any conflicts of interest.
Upon embarking on her new roles, it was alleged Ms Burns immediately informed the Investment Manager about her new positions and procured work in her capacity as an investment consultant for her business. Over the course of 2009 and 2010 the FCA found three emails from Ms Burns to the Investment Manager that suggested she attempted to use her NED positions for personal benefit.
During her time as NED and serving as chair on the societies’ investment committees the FCA claimed she oversaw the Investment Manager receiving a £350 million investment mandate from MGM and Teachers consider placing a £750 million investment mandate with them. According to the FCA, at no time did Ms Burns declare her interest to either MGM or Teachers about her consultancy work for the Investment Manager.
In the FCA’s opinion Ms Burns lacked integrity and it banned her from performing duties in the regulated financial sector and fined her £154,800. The final decision of the Upper Tribunal is awaited.
Comment
NEDs should be very mindful of their disclosure obligations. The risk of enforcement proceedings is now exacerbated by a high risk of damaging publicity even where a final decision is pending. For more information please contact James Crichton via e-mail jcrichton@rollingsons.co.uk or by telephone on 0207 611 4848.
