Barclays’s Staley Probed for Trying to Unmask Whistle-BlowerBy , , and
Regulators review whether bank chief tried to unmask tipster
Anonymous complaint about Barclays official sparked inquiries
Barclays Plc Chief Executive Officer Jes Staley faces a “significant” pay cut and a regulatory probe for trying to unmask an anonymous whistle-blower last year.
The U.K. Financial Conduct Authority is investigating both Staley’s individual conduct relating to the complaint and the bank’s responsibilities and controls in connection with whistle-blowing, the bank said in a statement. The violation of policy leaves Staley, 60, open to a fine or even a ban from the industry if the FCA deems him not “fit and proper” to lead the firm. Staley, who will be reprimanded by the firm, has admitted his error and apologized.
The former JPMorgan Chase & Co. executive made restoring Barclays’s reputation the centerpiece of his tenure, after the bank was fined billions of pounds over scandals including rigging Libor, gaming currency markets and wrongfully selling customers insurance products they didn’t need. The FCA and Serious Fraud Office are separately investigating the bank’s 2008 emergency fundraising backed by Qatar, where questions have been raised about the proper disclosure of fees and services agreements between the two parties.
“At present Staley will probably survive as CEO, but if other allegations of unethical behavior emerge, this could change,” said Andre Spicer, a professor specializing in organizational behavior at the Cass Business School at City University in London. "No one within the bank is likely to trust the whistle-blowing system any more."
Staley tried to identify a tipster who alerted the bank to a personal matter involving a senior executive, the bank said, confirming what a person with knowledge of the matter told Bloomberg earlier Monday. An investigation by law firm Simmons & Simmons LLP commissioned by Barclays concluded that Staley “honestly, but mistakenly” believed that it was permissible to identify the author of the letter. The case is also under scrutiny by the Department of Financial Services in New York, the person said.
“I have apologized to the Barclays board and accepted its conclusion that my personal actions in this matter were errors on my part,” Staley said in the statement. “I will also accept whatever sanction it deems appropriate. I will cooperate fully with the FCA and the Prudential Regulatory Authority, which are now both examining this matter.”
Barclays shares dropped as much as 1.2 percent in London trading, before rising 0.7 percent to 216.75 pence as of 1:04 p.m. The stock has fallen about 3 percent this year, after climbing 61 percent in the second half of 2016.
Staley has recruited several former colleagues from JPMorgan Chase & Co., where he spent more than three decades, since joining in December 2015. The CEO rebuffed calls to spin off or radically shrink the securities unit, instead opting to speed up sales of unwanted assets and sell down the firm’s African banking stake to reduce the bank’s capital requirements.
Staley received a 1.3 million-pound ($1.6 million) annual bonus and he may be docked the entire amount as a result of the scandal, according to a person familiar with the board’s investigation. The bank will not make a decision about how much to deduct until after the U.K. regulators complete their investigation. The CEO was awarded 7.53 million pounds in total compensation including benefits for last year.
Given the bank’s history of regulatory mishaps, the latest investigation is a “very significant embarrassment” for the board as it tries to rebuild Barclays’s reputation, and a “serious knock” for Staley, Shore Capital analyst Gary Greenwood wrote in a note to investors, adding he doesn’t think the CEO should be fired. “It remains to be seen whether the PRA and FCA come to the same conclusion as the board in allowing him to remain in his post. It is possible that the group may also be fined by the regulators.”
The attempt to identify the whistle-blower came to the attention of Barclays directors early this year after an employee raised concerns. The board notified the FCA and the PRA and other authorities.
“The board has concluded that Jes Staley, group chief executive officer, honestly, but mistakenly, believed that it was permissible to identify the author of the letter and has accepted his explanation that he was trying to protect a colleague who had experienced personal difficulties in the past from what he believed to be an unfair attack, and has accepted his apology,” Chairman John McFarlane said in the statement.
In June, the board received a letter and a senior executive another anonymous letter raising concerns about an employee recruited by Barclays earlier that year. Among other issues, the letters raised concerns of a personal nature about the senior employee, Staley’s knowledge of and role in dealing with those issues at a previous employer.
Staley requested that the bank’s Group Information Security team identify the author, yet was informed it was “not appropriate” to do so. The following month, the CEO again asked the GIS team to unmask the whistle-blower and this time received assistance from a U.S. law enforcement agency, according to Barclays’s statement.
The allegations in the letters relate to Tim Main, who was hired in June as chairman of the bank’s global financial institutions group, according to a person familiar with the case. Main joined from Evercore Partners Inc. and previously worked under Staley at JPMorgan.
Other Barclays employees, in addition to Staley, are also under probe for violating conduct, the person said.
A spokeswoman for Barclays declined to comment on Main’s behalf. Patrick Burton, a spokesman for JPMorgan in London, declined to comment.