James Edward Staley v The Financial Conduct Authority

A senior manager acts recklessly, and therefore without integrity, where he knows that statements supplied to the regulator are inaccurate, appreciates the risk that the regulator will be misled, and unreasonably takes that risk. The regulator’s enquiry must be answered with an accurate account of matters material to fitness and propriety; an individual cannot rely on others’ drafting where he alone knows the relevant facts.

The same conduct may breach the duties to act with integrity, to be open and cooperative, and to disclose appropriately under the Authority’s conduct rules. In assessing a financial penalty, the Tribunal must give due regard to DEPP but apply it flexibly. Deferred share awards that will not vest should not be treated as relevant income when the Tribunal determines the reference.

The Financial Conduct Authority issued a Decision Notice finding that James Edward Staley, while chief executive of Barclays, had approved a 2019 letter to the Authority containing inaccurate statements about the closeness of, and his last contact in, his relationship with Jeffrey Epstein. It imposed a financial penalty of £1,812,800 and decided to prohibit him from senior management and significant influence functions.

Mr Staley referred both decisions to the Upper Tribunal. He denied that the statements were misleading, contended that the Authority’s enquiry was confined to whether he knew of or participated in Epstein’s misconduct, and challenged the calculation of the penalty.

1. Reference dismissed save as to penalty. The Tribunal unanimously held that both statements in the letter were objectively inaccurate. The relationship was close, both professionally and personally, and direct and indirect contact continued until shortly before, and after, Mr Staley joined Barclays.

2. The Authority’s enquiry required Barclays to inform itself about the association and whether there was a risk of impropriety. The closeness of the relationship and recency of contact were material because they affected whether further fitness-and-propriety enquiries were required.

3. Applying Seiler, Whitestone and Raitzin v The Financial Conduct Authority [2023] UKUT 00133 (TCC), the Tribunal held that recklessness required awareness of the relevant risk and an objectively unreasonable decision to take it. Mr Staley knew the statements were inaccurate and knew there was a risk that the Authority would rely on and be misled by them. It was unreasonable to take that risk.

4. His approval of the letter therefore breached ICR 1, ICR 3 and SMCR 4. Recklessness as to the truth of statements made to a regulator that may rely on them amounted to a lack of integrity. The same inaccurate account also failed to be open and cooperative and failed to disclose appropriately information of which the Authority would reasonably expect notice.

5. The prohibition decision was reasonably open to the Authority. A prohibition order was protective, not punitive, and the serious integrity failures of the chief executive of a major institution engaged the integrity objective in Financial Services and Markets Act 2000. The non-disciplinary reference was dismissed.

6. For the disciplinary reference, the Tribunal applied DEPP flexibly. Unvested deferred shares which had lapsed were not benefits received as relevant income. It reduced the penalty to £1,107,306.92, retained the 10% aggravating uplift, and found no mitigating factors.

• Upper Tribunal (Tax and Chancery Chamber): On a reference from the Authority’s Regulatory Decisions Committee Decision Notice of 30 May 2023, dismissed the challenge to the prohibition decision and determined that the financial penalty should be reduced.
• Financial Conduct Authority Regulatory Decisions Committee: Issued a Decision Notice imposing a £1,812,800 penalty and deciding to make a prohibition order.