The City watchdog failed to thoroughly investigate a serious allegation of market abuse during Andrew Bailey’s tenure as chief executive, a whistleblower has claimed in documents filed at the High Court.
Former NatWest employee Mark Wright alleges that the Financial Conduct Authority has been complicit in a long-running cover-up of market abuse by former Royal Bank of Scotland executives that wiped out billions of pounds of employees’ savings.
He has filed court papers requesting permission for a judicial review into how his complaint against the FCA was handled.
In the application, he alleges that former FCA boss Mr Bailey, now governor of the Bank of England, misled him regarding what the regulator knew about the matter.
Mr Wright’s former MP, Sir Norman Lamb, who is backing the call for a judicial review, told The Independent that he also believed he had been misled by Mr Bailey.
“I believe [the FCA] have completely failed to investigate serious allegations from a whistleblower,” Sir Norman wrote in a letter supporting Mr Wright’s application.
Mr Bailey, who headed up the regulator from July 2016 to March last year, did not respond to a request for comment.
It is the second time in a week that the accuracy of the Bank of England governor’s comments has been called into question.
Former senior judge Dame Elizabeth Gloster wrote to the Treasury Select Committee to say that she disagreed with Mr Bailey’s testimony about the London Capital & Finance scandal.
The judicial review application is the latest development in Mr Wright’s battle with the FCA which began when he first blew the whistle in 2013. He subsequently made further allegations about widespread forgery of customers’ signatures by staff at RBS, which rebranded as NatWest last year.
Mr Wright alleges that former senior RBS executive Chris Sullivan posted a statement on the bank’s intranet on 17 September 2008, weeks before a £45bn taxpayer bailout, claiming that the bank was “well capitalised” and in good financial health.
The note remained on the bank’s internal system for several months, during which time RBS’s share price collapsed, wiping out billions of pounds for shareholders.
Among them were thousands of employees who had been encouraged to put their savings into RBS shares even though top bosses knew the bank was insolvent, Mr Wright’s account concludes.
It later emerged that the Bank of England had been in covert talks with RBS and had secretly provided £36.6bn in emergency funding from early October 2008. Mr Bailey was in charge of the Bank of England’s special operations to stabilise the banking sector throughout the financial crisis.
Meanwhile, RBS staff were told to read out Mr Sullivan’s misleading statement to customers, in order to provide false reassurance about the bank’s financial health, Mr Wright alleges. He is calling for anyone with knowledge of the statement to come forward.
NatWest has denied that it misled the markets but refuses to allow the FCA to publish the document.
When Mr Wright blew the whistle, the FCA initially denied knowledge of an RBS statement about its financial health before admitting years later that it had a copy in its possession.
Instead of thoroughly investigating the matter, the regulator also reported Mr Wright’s name back to RBS, breaching its duty to protect whistleblowers’ anonymity.
He says he was forced out of the bank, ruining his career, and causing severe mental health problems. He argues that the FCA damaged his reputation by falsely claiming that the statement did not exist. The regulator’s actions denied him the opportunity to challenge his ousting from RBS on the basis that he had been victimised as a whistleblower, Mr Wright says.
The regulator subsequently apologised for its conduct.
In February 2018, Mr Bailey met Mr Wright at Portcullis House in Westminster to discuss the market abuse allegations.
Mr Bailey told four witnesses including Sir Norman Lamb that, while the FCA did have a statement that was posted on the RBS intranet in 2008, it was different to the one that Mr Wright believed existed.
The statement in the FCA’s possession was already in the public domain and had been made by Sir Fred Goodwin, not Chris Sullivan, Mr Bailey said, adding that the matter had been investigated by the House of Commons Treasury Committee. The committee confirmed that it had never received a copy of any such statement.
Mr Wright later obtained internal FCA emails appearing to contradict Mr Bailey’s account.
In one email from March 2014, an FCA employee wrote: “The intranet notice that Mr Wright refers to was online between 17 September 2008 and January 2009 … Staff could have used it to take reassurance that all was well, which would tend to support Mr Wright’s allegations.”
Despite the new evidence, Mr Bailey maintained that the statement the FCA possessed was not the one Mr Wright referred to.
He wrote to Sir Norman Lamb that the March 2014 internal email did “not appear to refer to the statement which Mr Wright alleges to have been put to RBS’s intranet”.
Mr Bailey reaffirmed his assertion that the statement had been “in the public domain” for 10 years.
He later clarified his position, saying that he meant that the fact that such a statement existed had been in the public domain for 10 years – but the statement itself had never been made public.
Mr Wright lodged a grievance with the complaints commissioner about the FCA’s conduct. Last year, the commissioner ruled that the FCA had properly looked into the matter.
Mr Wright is now seeking a judicial review into how the commissioner assessed his complaint, arguing that it could not have carried out its duty fairly and impartially because key evidence was never looked at.
The commissioner confirmed that it could not be certain the statement it had reviewed was an unedited version of what appeared on the RBS intranet.
The FCA is named as an interested party in the judicial review application. The commissioner and the FCA declined to comment on ongoing legal proceedings.
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