As regulation and legal red tape increases, are professionals in the city and financial services becoming the scapegoats?
Since the 2008 financial crisis, banks and other City organisations have faced a more intense glare from the spotlight of regulators. Record penalties have been handed out, such as the $5.6bn in fines imposed on some of the most well-known global banks in relation to foreign exchange manipulation early last year.
Some banks have reacted to this increased regulatory attention by dismissing employees. Over the years, we have acted for numerous City workers who have been used as scapegoats by their former employer, with the cases often settling for large sums out of court.
In the Employment Tribunal case of Stimpson v Citigroup in September 2015, the judge accepted that the former trader had been unlawfully dismissed by the bank because it had failed to take into account his argument that the conduct for which he faced disciplinary action reflected what was expected of him at the bank.
In other words, Stimpson was fired simply for doing what was asked of him at Citi.
In Stimpson’s case he was accused of inappropriate sharing of confidential information. Other employees are, for example, accused of carrying out improper trades (such as wash trades – i.e. risk free trades which do not have a legitimate rationale). In some cases, employees who have blown the whistle on bad behaviour have also found themselves accused of misconduct.
While Stimpson’s case suggests that Employment Tribunal judges are alert to the possibility of City staff being used as scapegoats, the professional and personal harm suffered by an employee who is accused of wrongdoing or fired is always very damaging, even if that person is ultimately shown to be innocent.
Moreover, for every Stimpson who decides to take on their former employer and challenge the unfair circumstances of their departure, there are likely to be other employees who, for various reasons – not least financial – decide not challenge the legal muscle of their former company.
That employees should be treated as scapegoats in this way is not just a personal and usually career-ending tragedy for the individuals involved, it also risks obscuring genuine problems within the financial system. If regulators believe that bad apples are being plucked from banks when the reality is that the wrong people are being removed as scapegoats, the integrity of the markets is put at risk.