Mark Kleinman: FCA is naming and shaming itself, not the City
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly City PM column. Today, he tackles name and shame at the FCA, a gamble at Entain and a business group revamp
FCA is naming and shaming itself, not the City
It’s rare to get a consensus this strong – but then it’s rare to get a set of proposals as fundamentally misguided and cackhandedly communicated as the Financial Conduct Authority’s ‘name-and-shame’ rules.
The row between the City watchdog and the City itself has been rumbling for months; and in the context of the government’s increasingly desperate efforts to project a pro-business stance, it has left the regulator and its chief executive, Nikhil Rathi, increasingly out on a limb.
A letter I’ve obtained from eight of the UK’s leading financial services trade associations – including UK Finance, the Investment Association, the ABI and AFME – as well as Canada Corporation makes clear the overwhelming disdain for the FCA’s revised proposals.
In the letter, the bodies make clear their strong opposition to the reforms.
“Our principal concerns are twofold: around the potential for unwarranted damage to firms’ reputations; and the risk of undermining UK competitiveness,” it said.
“We also believe that the introduction of a new, broad ‘Public Interest Test’ in place of the narrower ‘Exceptional Circumstances Test’ is both unnecessary and would increase the culture of regulatory uncertainty which our members report is already proving damaging to the UK’s competitiveness.”
The joint letter advocates a number of alternatives that the FCA could pursue, such as sharing anonymised information on enforcement activity, and reserving public notifications of enforcement probes for “the harmful activities of unregulated firms and regulated firms operating outside the regulatory perimeter”.
At a time when Britain’s economic regulators are under scrutiny like never before, ploughing on with its revised proposals is a non-starter for the FCA, as Rathi and his chairman, Ashley Alder, must now surely accept.
With the Treasury obliged to announce in the next few months its plans for the leadership of the FCA – Rathi’s contract expires at the end of September – there is every incentive for ministers to lean harder on the watchdog to amend its plans far more radically, or scrap them altogether. For Rathi, ending his tenure on the note of an unseemly scrap he cannot hope to win must seem equally unpalatable.
Is Stella David Entain’s next gamble as permanent CEO?
I did say it was a gamble. Last summer, I wrote here that whoever took the job of Entain chief executive would be taking a risk with their reputation. I hadn’t envisaged, however, that the owner of Ladbrokes would appoint someone so apparently unsuited to running a major public company.
The announcement last week that Gavin Isaacs, a former Scientific Games Corporation executive, was stepping down after just five months in the job reflects a flagrant lack of due diligence on both sides.
Look back at this from then-Entain chairman Barry Gibson at the time of Isaacs’ appointment: “We are confident,” he gushed, “that his proven leadership and operational experience mean that Gavin is the right person to take Entain into its next chapter”.
It turns out to have been more of a haiku than a chapter – and that confidence seems to have been entirely misplaced. Not that you’d know it from the company’s announcement of his departure, which referred merely to an exit “by mutual agreement”. Investors who have stuck by a business for years mired in scandal, governance musical chairs and poor financial performance deserved better.
According to one, uncorroborated, account of Isaacs’ brief tenure, Entain board members were surprised to learn that their new CEO was having multiple discussions with bankers about disposals, without fellow directors’ blessing.
“He didn’t really appreciate the division between the chair and CEO roles which is the essence of UK corporate governance standards,” said one person briefed on tensions between Isaacs and the board.
Now, chair Stella David gets yet another go at running the show, fuelling the suspicion among some that she has wanted the permanent CEO role all along. Sounds like one for the Investor and Issuer Forum to me?
Revamp of TheCityUK’s top team underlines its standing
Few senior figures in the Square Mile now argue against the notion that TheCityUK has come of age amid growing pressures on the international competitiveness of Britain’s financial and professional services sectors. Under the stewardship of chief executive Miles Celic, the lobbying association is widely seen as having punched above its weight by members and its peers – particularly since the pandemic.
So the City is likely to pay particular attention to an announcement due out this morning revealing a reshuffle at the top of the organisation.
I understand that Omar Ali, EY’s global financial services leader, will become its next board chair, succeeding Dame Anne Richards, the former M&G and Fidelity executive, who will move to chair its leadership council.
Meanwhile, Sir Edward Braham, the current chair of M&G, will replace Carnegie-Brown as chair of TheCityUK’s next generation leadership council.
This might resemble a mere reshuffling of deckchairs, but it comes during a critical period for the City, with capital markets competitiveness at the top of its agenda.
“I look forward to leading a progressive agenda for our industry as it contends with rapidly evolving technology, geopolitical and macroeconomic challenges,” Ali said.
“The UK has an ambitious reform agenda to safeguard its position as an internationally competitive and leading financial hub, and TheCityUK plays a critical role in supporting its implementation.”