On the same day as HM Treasury’s publication of an action plan setting out a ‘new approach’ to ensure regulators support growth, the Financial Conduct Authority (FCA) has sent a clear message to the financial services industry that it is prepared to tackle non-financial misconduct which it considers demonstrates a lack of integrity and to impose serious sanctions on those that break the rules and ignore good governance. 

Following last week’s announcement that the FCA remains ‘committed’ to this area and will set out next steps by the end of June, the FCA has published a Decision Notice in respect of Mr Crispin Odey, pending his referral to the Upper Tribunal. 

The FCA’s proposal to fine and ban Mr Odey is focused on his behaviour in the context of disciplinary proceedings against him by the firm that he founded (rather than the underlying allegations of inappropriate conduct by members of staff that had been under investigation by both the firm and the FCA). In a mark of the seriousness with which such misconduct will be treated, the FCA doubled the proposed penalty in the course of applying its penalty policy in order to achieve deterrence. 

Our ‘notice in a nutshell’ summary, including key takeaways for firms, is set out below.  

Notice in a nutshell: Crispin Odey has referred to the Upper Tribunal an FCA decision to impose on him a fine of £1,835,200 and a prohibition for lack of integrity 

The FCA has published a Decision Notice concerning its decision to impose on Mr Odey a fine of £1,835,200 and a prohibition as a result of conduct it considers demonstrates a clear lack of integrity. Mr Odey has referred this decision to the Upper Tribunal which will make a decision on the appropriate action for the FCA to take. We summarise below the key facts and potential impact. 

• Individual: Crispin Odey: the founder and majority owner of Odey Asset Management LLP (OAM); a certified person; and holder, at certain times, of senior management functions.
• Fine: £1,835,200. The starting point for the calculation was 30% of Mr Odey’s relevant income for a 12-month period preceding the end of the breach period which was uplifted on account of aggravating factors and then doubled for deterrence.
• Settlement: No.
• Provision breached: Individual Conduct Rule 1: “You must act with integrity”.  
• Relevant period: 24 December 2021 to 17 November 2022.
• FCA’s factual findings:
  • February 2021: Mr Odey received from OAM, and signed, a final written warning for misconduct imposing certain conditions on him following allegations of sexual harassment by two employees, an internal investigation and conclusion that he had behaved inappropriately but had not breached the FCA’s Conduct Rules and remained fit and proper. 
  • September 2021: The FCA commenced investigations into alleged non-financial misconduct of Mr Odey and OAM’s handling of the allegations.
  • October 2021: OAM commenced a second investigation following concerns Mr Odey may have breached the terms of the final written warning in relation to a temporary staff member including following the individual’s departure.
  • November 2021: OAM notified Mr Odey of a disciplinary hearing scheduled for 14 December 2021 but agreed to postpone this to 6 January 2022 to allow Mr Odey to take legal advice.
  • 24 December 2021: Mr Odey used his shareholding to remove OAM’s Exco members and appoint himself the sole member and sent a letter to OAM’s members indicating that he had taken this action because he believed OAM was under threat due to the “overreaching action” of the FCA and Exco had been subjected to “undue pressure”.
  • January 2022: Mr Odey postponed his disciplinary hearing on the basis that he was unable to conduct it impartially; appointed new Exco members and resigned from Exco. He also held a call with the FCA in which he sought but failed to obtain confirmation from the FCA that the disciplinary did not need to be held pending the outcome of the FCA’s investigation.  
  • March 2022: A further allegation of non-financial misconduct was received regarding conduct in connection with a future employee. Mr Odey again removed all the Exco members and reappointed himself as the sole member (despite having been warned by the FCA of the regulatory and governance consequences following his first removal of Exco members).
  • July 2022: Two new Exco members were appointed and Mr Odey again resigned.  
  • December 2022: OAM issued an outcome letter to Mr Odey setting out its findings that, whilst he had breached the final written warning, these breaches were not substantive and did not amount to harassment and setting out a number of requirements. 
  • December 2023: The FCA closed its original investigation into OAM and changed the scope of its investigation into Mr Odey to reflect the above matters.  
• FCA’s conclusion on failings
  • The FCA concluded that Mr Odey’s conduct demonstrates a clear lack of integrity and that he is not fit and proper to perform any function in relation to regulated activities for reasons which include the following:
    • his actions were deliberately designed to frustrate OAM’s disciplinary process into his conduct in order to protect his own interests;
    • his conduct demonstrated that he considered OAM’s policies and procedures less important than his own interests;
    • he operated in a firm where he could not be held fully accountable for his conduct;
    • his December 2021 letter to members and his explanations to the FCA at interview lacked candour;     
    • he showed a reckless disregard for OAM’s governance, causing OAM to breach regulatory requirements, including FCA Handbook provisions regarding the management of an AIFM and the ongoing assessment of his fitness and propriety, and impacting OAM’s ability to meet the threshold conditions.  
  • The FCA also comments that:

“A failure to deal effectively with inappropriate behaviours in the workplace can lead to a culture where people feel unable to report concerns and have confidence that they will be independently and fairly assessed, and creates a risk that issues are not raised and improper conduct is not challenged. This has the potential to put consumers and markets at risk.”

• Impact: Notwithstanding Mr Odey’s referral to the Upper Tribunal, there are a number of clear takeaways for firms from the decision regarding the FCA’s views and expectations with regards to non-financial misconduct including:
  • non-financial misconduct including lack of adherence to good governance and a firm’s policies and procedures should be taken into account by firms when assessing an individual’s compliance with the Conduct Rules and fitness and propriety;
  • firms should have appropriate procedures in place to facilitate the reporting and escalation of concerns; and 
  • when concerns are raised it is important that these are investigated appropriately and defensible outcomes reached, having regard to the risk that a firm’s handling of the matter may be subject to FCA scrutiny.

We regularly advise firms in relation to such matters and we also track regulatory decisions so please get in touch if a conversation would be of interest.