Things to bear in mind when an employee goes rogue.

The One Ten Associates team were delighted to host Darren Fox and Liz Wake from the Financial Services Regulation and Employment teams at Simmons and Simmons to discuss the approach that firms should take when they discover that an employee may have committed a serious breach of regulation or internal policy. 

The event was an interactive workshop in which the Simmons and Simmons team worked through a case study relating to an example rogue employee. The example employee had been engaging in trading and other conduct which was contrary both to the firm’s policies and to the applicable regulations.

Three key takeaways from the event are as follows:

Don’t panic!

Even when the clock is ticking (for example, when there is a requirement to inform the regulator promptly about a suspected breach), it’s important to be methodical and go through the correct internal process both from an employment law and regulatory perspective.  Communications generated as a knee-jerk reaction in the heat of the moment can cause further problems, such as suggesting that the firm may have pre-judged the outcome of the relevant processes.  

A joined-up approach (between the HR process and dealing with regulatory obligations) is essential  

The employment disciplinary process needs to operate in tandem and closely with the regulatory investigation. Forward planning is therefore key.  For example, it may be necessary to shield some senior individuals from the initial disciplinary investigation and process so that they can later consider any appeal by the employee or make a separate determination in relation to conduct rule breaches/fitness and propriety. 

Understand the applicable regulatory obligations

There may be a number of regulatory obligations that flow from the employee’s suspected breach. It’s important to understand what they are at an early stage and ensure that they are made in a timely manner. For example, in the case study used at the event, the firm had to report the suspected wrong-doing to the FCA via a STOR and ultimately a Form C for the individual, as well as submit a suspicious activity report to the NCA. 

Having complementary external advisers who work as a team can help achieve this aim. 

The session highlighted the need for clear governance and risk policies within a regulated firm, carefully structured internal processes, and the value of external resources such as those provided by Darren and Liz.

The team at One Ten work with asset managers to place experienced compliance and legal individuals in regulated firms. If you would like to understand more about this, please contact harry@onetenassociates.com