Rise in FCA senior management probes – D&O study

The number of investigations of senior managers by UK regulator the Financial Conduct Authority (FCA) is rising, according to a study from insurance broker Willis Towers Watson and legal firm, Allen and Overy.

At least a third of those C-suite directors polled had experienced a claim or investigation involving a senior manager of their company, according to the survey into directors’ and officers’ liability (D&O) insurance.

The 33% who had experienced regulatory probes or D&O claims was up from 27% just a year ago.

Willis Towers Watson said the survey revealed the compliance challenge facing UK firms from increased FCA scrutiny and the emergence of new regulation, including the extension of the UK’s Senior Managers Regime and corporate governance reform.

Threats from new and emerging risks such as cyber and data loss were also cited as increasing board level concerns. 

“It is no surprise that in all five of our annual reports, the threat of regulatory investigation has topped our poll of liability concerns,” said Francis Kean, an executive director in Willis Towers Watson’s financial and executive risks practice.

Only 43% of respondents were aware of the regulator’s proposals to extend its Senior Managers Regime to all directors of FCA-regulated UK companies. 

Some 78% of those who responded were unaware of the individual personal liability that board members can incur for incorrect tax returns in some jurisdictions, such as Italy, Germany and Greece.

“Now for the first time though there is independent evidence to support the fact that this threat has become reality,” said Kean.

“As explained in the report, there has been a recent and striking increase in investigations opened by the Financial Conduct Authority against individuals,” added Kean.

Nearly one in four (24%) of respondents had experience of a cyber-attack or data loss serious enough to get the attention of the board.

“What’s clear is that directors and officers are under increasing scrutiny, with greater emphasis being placed on personal accountability and liability,” said Joanna Page, partner and head of Allen and Overy’s insurance litigation group.

“Allied to this is the broader uncertain geopolitical environment, not least the impact of Brexit, and a raft of new regulation and legislation,” she said.

“It’s clear that corporate leaders feel, and are, exposed to a broader range of risks than ever before across the entirety of their business operations,” Page added.