The Wall Street Journal reports today (see the article here) that the FSA missed warnings and signs in relation to the Libor scandal and did not act to prevent the rigging. Curious, I would say the least, that I can recall many FSA enforcement actions where a key argument held for launching an investigation and eventually imposing hefty fines was (yes, you guessed it!), that the individual should have known better or should have acted earlier.
For example, Barclays, in relation to LIBOR fixing:
“Barclays should have ensured that the systems and controls around its submissions processes were adequate”
Or Mr. Einhorn, in relation to Greenlight Capital and Punch Taverns:
“Given Mr Einhorn’s position and experience, it should have been apparent to him that the information he received on the Punch Call was confidential and price sensitive information that gave rise to legal and regulatory risk.”
There are many other examples where the FSA took action based on expected behaviours and not on clear breaches of rules. It has become normal for regulated firms and individuals to live in an regulatory environment where behaviours need to comply not only with the letter and spirit of the rules but also with the conduct expected by the FSA. However, the FSA asks for integrity to financial sector players and forget to act with integrity itself.
All this should make some politicians and the public ask themselves a few chilling questions: Does the FSA have any accountability? Is it hypocrisy, recklessness, dishonesty or arrogance what makes the FSA ask the financial sector to comply with certain standards of conduct it does not apply to itself?