Second fine by PRA for breach of Senior Manager Conduct Rules

The Prudential Regulation Authority (PRA) has fined the former CEO of Wyelands Bank Plc £118,808 for breaching PRA Conduct Rules over a four year period. The individual was also given an undertaking which effectively prevents him from performing any regulated function in the future. The penalty follows on from the PRA’s public censure of Wyelands Bank in April 2023 for multiple regulatory failings, including in relation to large exposure limits, capital reporting, governance and risk controls and inadequate retention of WhatsApp messages.

The PRA found that the former CEO failed to take reasonable steps to, among other things:

1. ensure that large exposures risks related to Wyelands business were appropriately managed; and 
2. verify the accuracy of statements he made to the PRA. The PRA noted that the failings were sustained and wide-ranging. The PRA had written to the former CEO in July 2018 identifying weaknesses in the firm’s risk management framework, yet his failings continued until the end of the investigation period in May 2020.

The finding shows the willingness of the PRA to take action against individuals who commit material breaches of the rules. The Final Notice states:

“The PRA places great reliance on regulated individuals complying with the Individual Conduct Rules and Senior Manager Conduct Rules. If senior individuals fail to so comply, it undermines the trust in financial institutions and the financial system itself.”

The PRA also commented on the high standard of conduct expected of CEOs, noting that:

“The CEO has a crucial role to play in ensuring their firm meets the standards expected of it and requires the relevant individual to exercise sound judgement. The standard required of [the individual] as SMF1 CEO was consequently more exacting than for the Firm’s other SMFs and employees.”

This is the second PRA enforcement action against a senior individual for breaches of the Senior Manager Conduct Rules (see our thoughts on the first enforcement action). We are yet to see any published FCA enforcement outcomes relating to a breach of the equivalent SM&CR rules. However, given the large number of investigations that have been opened by the FCA into senior managers’ conduct, we would expect 2024 to see outcomes and final notices. We would also expect there to be Upper Tribunal judgments on contested SM&CR cases in the medium term.