The Delegation Fail.
The following events are based on a true story.
Banque de Chance, London Headquarters, 8.00am.
This is Phil.
Managing Director at Banque de Chance for over five years. Phil has always focused on the big picture. He never really took much notice of the nitty gritty.
When the FCA imposed a hefty fine on a competitor, Phil was tickled.
A competitor’s retail banking division had been caught using aggressive sales tactics to persuade customers to switch accounts. It had been misleading them about potential benefits.
After his competitive smugness subsided Phil started to worry that similar things might be happening at his bank. After all, he really didn’t have a very good grip on its day-to-day activities. Phil decided to delegate a review of the bank’s sales tactics.
He gave responsibility to a new member of his senior management team, Jim.
Jim had no prior experience of retail banking or Treating Customer Fairly issues, but he was keen to help, despite having already been given lots of other responsibilities in his first month. But being stretched was the department norm, so he didn’t think to question it.
Jim had told Phil that he would do his best. But boy did he struggle, especially as Phil was never around to discuss issues and answer questions at their weekly catch-up.
Phil always had to cancel or postpone with some excuse or other.
Jim put a team in place to help him complete the review. However, its scope was too limited, it failed to identify the high level of account switching which had occurred in the past year.
It also didn’t identify that sales staff were being heavily incentivised for getting customers to switch accounts, and the language being used was overly aggressive and very misleading.
So, the final report turned out to be inadequate and provided false assurances.
Months later, a wave of customer complaints uncovered the oversight.
Phil was surprised Jim hadn’t spotted this problem in his review. But he didn’t think he’d be in any serious trouble with the regulator.
Jim was an approved person, and it was his mistake. Jim would be the one to face the music.
Even though the FCA did take action against Jim, it concluded that Phil had not properly delegated or supervised the review, and was also personally responsible.
Phil was fined £120,00 and banned from holding similar senior management roles in the future.
The bank was given a £3 million fine for the breach, and forced to carry out an extensive customer redress programme.
Poor delegation and supervision is a ticking time bomb.
What Phil should have done was…
Delegation to an individual who had the time, resource, skills and experience to do the job properly.
Ensured that he received regular updates on the progress of the review.
Carefully reviewed the final report and robustly challenged the scope, findings and conclusions where necessary.
Ensured that any recommendations and action points from the review were fully and appropriately implemented.
Effective delegation and supervision is critical.
Don’t become a cautionary tale.
Personal risk deserves personal advice.
Brought to you by BLP’s Financial Regulation Group.
Phil Kelly lost his job and was handed a sky-high regulatory fine after making a series of simple mistakes.
Had Phil been on top of his regulatory duties and followed a few key steps, the consequences could have been avoided.
Deputy Head of Litigation & Corporate Risk, and Co-head of the Investigations, Financial Regulation and White Collar practice group. Specialises in complex regulatory issues for financial…View Nathan Willmott's full profile