"This brings to question whether the shocking lack of honesty or the violent nature of the offence should have led to the ban."
When Mr. Ari Harris was convicted for grievous bodily harm, it was no surprise when the FCA made the decision to revoke his qualifications as a financial adviser, and also cancel his firm's permissions. What is surprising, however, is that the reasoning behind this decision does not seem to have been the individual’s conviction, sentenced to three years in prison after he stabbed a man twice in the neck, nor their custodial sentence which occasioned the ban.
Rather, the FCA stated that his repeated efforts to conceal the violent criminal conviction and incarceration clearly show a shocking lack of honesty and integrity.
In order to remain as an FCA-approved senior manager, an individual must pass the “fit and proper” test, which considers a person’s honesty, integrity and reputation; competence and capability; and financial soundness. In light of this decision, it appears that the FCA doesn’t factor an individual’s criminal history and past violent behaviour when determining "fit and proper" status.
Integrity before innocence?
This brings to question whether the shocking lack of honesty or the violent nature of the offence should have led to the ban. Although the outcome is the same, it is interesting to consider which route the FCA took to get to this decision.
Most market participants know of the recent emphasis from the FCA of the need for a positive work culture within firms, especially under the Senior Managers & Certification Regime. The regime seeks to enable firms and regulators to hold people to account, and to encourage staff to take personal responsibility for their actions, improving conduct at all levels.
However, this recent ruling demonstrates that the FCA chooses not to go down the culture route. Instead, they’ve secured a ban on the safer grounds of dishonesty.
This compartmentalised approach, especially in a clear-cut case, means the FCA does not have to assess the relative severity of any offences caused by its constituency. But how far does this compartmentalised approach stretch? Whilst the FCA calls for firms to have the right type of culture, “good culture” is near impossible to define and uncertainty is not helpful when ordering a ban.
It is reasonable to expect that every case will be assessed on its own details. In this instance, it does not seem that the individual committed a financial crime. As such, the offence does seem to directly impact on his ability to do his job and the FCA do not seem to have commented on whether their decision took the safety of customers or colleagues into account. For the FCA, it was the dishonesty that mattered.
Where then, does this leave culture? While the FCA appears to account for specific offenses when considering broader implications, there is a growing contention that the regulator does not think that cultural shortcomings are sufficient grounds for imposing or upholding a ban on appeal. This may be due to limitations within the current legislative framework, but such an argument seems to shift blame rather than address the systemic issues that may have contributed to those shortcomings.
