We are only a couple of weeks into 2024 and the year is already throwing up governance, risk and compliance challenges for individual directors and senior managers.
The downside risk of falling asleep at the wheel, or knowingly acting recklessly, has been brought into focus by two high profile and expensive actions against individuals in the past couple of weeks. Firstly, it was announced that two ex-directors of a previously regulated specialist lender had been ordered to pay £19.9m after the High Court found they had arranged a series of fraudulent loans. This was quickly followed by the PRA announcing that it had fined a former CEO of a bank £118,000 for breaches of the PRA’s Conduct and Senior Manager Conduct Rules.
There is no doubt there is a renewed focus by shareholders, stakeholders and regulators on the fiduciary duties of individual directors. All directors should know their fiduciary duties cover legal and ethical obligations to act in the best interests of a company and its stakeholders, but they also include loyalty, care, acting in good faith in decision-making, prioritizing the company’s success, and safeguarding shareholders’ interests while avoiding conflicts of interest. Sometimes we feel people don’t take their responsibilities seriously, a risky strategy at best, bearing in mind the above legal and regulatory examples show how expensive it can be when they let standards slip.
Even if a transgression is not so serious to warrant financial sanctions or recovery of financial losses, individuals can be removed as a director and their companies hit with injunctions, shareholder proceedings, and setting aside of transactions.
Rockstead exists to help companies and directors raise governance, risk and compliance standards and we have helped design, implement and oversee robust internal controls and governance frameworks. It is only through robust compliance management processes that companies can mitigate risks and safeguard directors from potential liabilities.
While we are best known for our reputation in oversight activities in mortgage and capital markets, our passion for raising standards throughout the wider financial services world has resulted in us bringing our expertise to the wider areas of governance, risk and compliance as well as in traditional due diligence projects. Get in touch to learn how we can help you.