Regulator emphasises that an approved person must “be the dog that barks”
In a speech on 23 February 2012 giving an update on its investigations and enforcement regime, Tracy McDermott of the Financial Services Authority drew on a number of recent cases – including the Einhorn / Greenlight / Punch Taverns market abuse affair – to stress that approved persons have a duty to alert the FSA to wrongdoing and to suspect transactions.
This duty takes precedence over loyalty to colleagues or to employers. Approved persons must not remain silent but must meet their regulatory obligation to speak up if there are rule breaches:
“…we see some cases where, to paraphrase Arthur Conan Doyle in the Memoirs of Sherlock Holmes, the most curious thing is the dog that did not bark. The recent Greenlight market abuse case is a good example of a situation where a series of approved persons failed to meet their obligations.
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Similarly, earlier in the year, we fined and banned Sandradee Joseph – former compliance officer at a hedge fund for her failure to question or challenge a particular investment in the face of numerous concerns having been raised. She said her job was to set up systems not to investigate or question such transactions. Which brings us nicely back to Holmes who explained the importance of the dog …
‘I had grasped the significance of the silence of the dog…The Simpson incident had shown me that a dog was kept in the stables, and yet, though someone had been in and fetched out a horse, he had not barked enough to arouse the two lads in the loft. Obviously the midnight visitor was someone whom the dog knew well.’
The key message is the same in our cases – where people put their relationships with colleagues, employers, sources of income, etc, above their obligations as approved persons we will take action. Because of your relationship to the wrongdoer you become the dog that doesn’t bark, and we will pursue you.”
See also: Head of Financial Conduct Authority on how regulation will be delivered in the future
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