UK: FCA takes enforcement action against Crispin Odey

Why should I read this?

The FCA has issued a Decision Notice to Mr Odey imposing a significant fine and prohibiting him from performing regulated activities in the financial services sector. The FCA’s case is based on Mr Odey’s conduct in relation to disciplinary proceedings by OAM that arose from allegations of non-financial misconduct against him. As Mr Odey has referred the case to the Upper Tribunal, the findings are provisional and the fine and prohibition have not taken effect.

The FCA has made it clear that non-financial misconduct falls squarely within its remit as a financial services regulator. Tackling this type of misconduct is central to the FCA’s work on improving culture in financial services. While the FCA is not taking enforcement action against OAM, the Decision Notice highlights the regulatory risks and reputational damage that firms may face if they fail to deal appropriately with non-financial misconduct issues involving their staff. 

What’s the background to this case?

Mr Odey’s role at OAM

Mr Odey was the founder and majority owner of OAM. During the relevant period (December 2021 to November 2022), he held senior management functions and was a certification employee at the firm, and was subject to the FCA’s Conduct Rules.

The first internal investigation

Between September 2020 and January 2021, following allegations of sexual harassment against Mr Odey, OAM’s Executive Committee (ExCo) conducted an internal investigation into his conduct. The investigation found that Mr Odey had behaved inappropriately towards a number of female staff members. While ExCo concluded that his behaviour had fallen short of OAM’s standards, they did not find that he had breached the Conduct Rules and judged that he continued to be fit and proper to perform a regulated role within OAM. 

A final written warning

In February 2021, OAM issued Mr Odey with a final written warning requiring him to comply with certain conditions, one of which was that his interactions with staff would be ‘professional’. One factor in ExCo’s decision to issue a final written warning rather than dismiss Mr Odey was that he had “demonstrated an acceptance that he needed to change and had shown signs of contrition”.

The final written warning gave examples of behaviour that would not be considered professional. The behaviours included touching staff (other than in the context of a professional handshake), taking unaccompanied female staff members to lunch unless approved by HR or the Chief Executive, and exchanging messages with female staff members other than in the course of business using the firm’s communication systems.

The final written warning stated that failure to comply with the conditions was likely to lead to Mr Odey’s removal from OAM.

FCA investigations and a second internal investigation

In September 2021, the FCA opened investigations into the non-financial misconduct allegations against Mr Odey and OAM’s handling of those allegations.

In October 2021, due to concerns that Mr Odey may have breached the terms of the final written warning, OAM opened a second internal investigation. A disciplinary hearing, to be conducted by ExCo, was scheduled for early January 2022.

Removal of ExCo members

On 24 December 2021, Mr Odey used his majority shareholding in OAM to remove ExCo’s existing members and appoint himself ExCo’s sole member. During an ExCo meeting on 6 January 2022 at which he was the sole member, Mr Odey decided that the disciplinary hearing would be postponed indefinitely since he was “unable to conduct it with impartiality”. The following month, he appointed two new ExCo members, who he sought to persuade not to proceed with the disciplinary hearing until the conclusion of the FCA’s investigation into his alleged non-financial misconduct.

On 3 March 2022, ExCo became aware of a further non-financial misconduct allegation against Mr Odey, which was added to the scope of the second internal investigation. Later that month, ExCo proposed safeguarding measures that could be put in place pending the outcome of the investigation. The measures were resisted by Mr Odey.

On 31 March 2022, Mr Odey again used his majority shareholding to remove ExCo’s members and appoint himself sole ExCo member. Mr Odey took this step despite being aware of the FCA’s concerns about governance and compliance at OAM following his previous removal of ExCo members. 

The disciplinary hearing

New ExCo members were appointed by Mr Odey in July and October 2022, and the disciplinary hearing eventually took place on 29 November 2022, almost a year after it had originally been scheduled. The outcome was a finding that, while Mr Odey had technically breached the final written warning, the breaches did not constitute substantive breaches or inappropriate conduct which could reasonably be considered harassment. ExCo required Mr Odey to undertake further training, imposed a one-year management embargo on him, and continued the terms of the final written warning for 12 months.

What were the FCA’s findings?

Mr Odey

The FCA considered that Mr Odey’s removals of ExCo members created a risk of a lack of effective risk management and governance at OAM. His actions removed necessary checks and balances and risked undermining effective decision-making and challenge within the firm. 

The Decision Notice makes the following comment on the impact of Mr Odey’s actions on potential non-financial misconduct complainants within OAM:

“Mr Odey’s repeated threats and interventions in OAM’s disciplinary proceedings against him were likely further to entrench the view which existed within OAM that OAM was not effectively able to scrutinise [his] conduct at work or hold him accountable for inappropriate conduct towards female members of staff. This view was reflected in the Final Written Warning, which identified that because of “a desire not to ‘ruffle feathers’ or because of concerns that nothing would be done… [some] employees would rather say nothing or even resign instead of lodging a complaint”.

The FCA considered that Mr Odey’s actions:

• were deliberately designed to frustrate OAM’s disciplinary process into his conduct in order to protect his own interests; and
• showed a reckless disregard for OAM’s governance and caused OAM to breach certain regulatory requirements

The FCA also considered that the explanations Mr Odey gave to it and to OAM about his reasons for dismissing ExCo members lacked candour.

The FCA found that Mr Odey’s conduct demonstrated a clear lack of integrity. Accordingly, the FCA considered that he breached Individual Conduct Rule 1 and is not a fit and proper person to perform any function in relation to regulated activities.

The financial penalty of £1,835,200 is significant and reflects:

• an increase of 20% (from an initial figure of £765,000) for aggravating factors – namely, Mr Odey’s actions in removing ExCo members a second time despite being aware of the FCA’s regulatory and governance concerns; and
• a further increase of 100% for deterrence purposes

The decision to prohibit Mr Odey reflects the FCA’s view that he poses an ongoing risk to its market integrity and consumer protection objectives. 

OAM

As OAM is in the process of being wound down and is no longer authorised, it is not subject to enforcement action. However, the Decision Notice sets out regulatory breaches by OAM that arose from Mr Odey’s conduct. The FCA considered that Mr Odey caused OAM to breach the following regulatory requirements:

• SYSC 4.2.1 R and 4.2.2 R, which require the management of an alternative investment fund manager (AIFM) such as OAM to be undertaken by at least two persons of sufficiently good repute and with sufficient experience so as to ensure the sound and prudent management of the firm
• FUND 3.7.2 R, which requires there to be functional and hierarchical separation between the risk management and operating units of an AIFM; and
• the Certification Regime, which requires firms to assess the fitness and propriety of those performing certification functions at least annually

What are the lessons for firms?

The Decision Notice includes a reminder of why non-financial misconduct is a regulatory issue:

“A failure to deal effectively with inappropriate behaviours in the workplace can lead to a culture where people feel unable to report concerns and have confidence that they will be independently and fairly assessed, and creates a risk that issues are not raised and improper conduct is not challenged. This has the potential to put consumers and markets at risk.”

The FCA’s case against Mr Odey is based on his conduct in relation to OAM’s disciplinary process. By focusing on this aspect, the FCA has avoided the difficult exercise of having to reach conclusions on the underlying non-financial misconduct allegations against him.

While OAM is not subject to enforcement action, the Decision Notice sets out breaches by the firm that were caused by Mr Odey’s conduct. Had the firm retained its authorisation, it may have faced enforcement action in relation to its handling of the non-financial misconduct allegations against Mr Odey. This should serve as a warning to firms – turning a blind eye to non-financial misconduct, or failing to take appropriate action to address it, may lead to FCA intervention. 

Publication of FCA guidance on non-financial misconduct has been delayed, and an update on next steps is now expected by June 2025. Had the guidance proposed in FCA CP23/20 been in force at the relevant time, OAM’s internal investigations into Mr Odey’s conduct may have had a different outcome, while the FCA’s enforcement case may have focused on the non-financial misconduct allegations rather than Mr Odey’s response to the OAM’s disciplinary process.

Despite the delay to the FCA guidance, firms cannot afford to wait to put their houses in order when it comes to tackling non-financial misconduct, especially as a new legal duty on employers to prevent the sexual harassment of employees is already in force. Compliance with that duty should be addressed alongside preparations for implementing the expected FCA guidance.

When it comes to addressing non-financial misconduct, the FCA’s position is that it is not a substitute for firms’ disciplinary processes, Employment Tribunals or criminal investigations. It expects firms to act. At a basic level, meeting the FCA’s expectations around non-financial misconduct involve treating it as a risk issue, with appropriate systems and controls to identify, monitor and manage the risk, and for managers to be appropriately trained to deal with it effectively. Firms should use the findings of the FCA’s 2024 culture and non-financial misconduct survey to evaluate whether their own processes for detecting, investigating and reporting incidents of non-financial misconduct are fit for purpose. Discussions about non-financial misconduct should be taking place at senior management and board level – this is not an issue that should be left solely to firms’ HR or compliance teams to deal with. Firms that fail to take these steps may find themselves having uncomfortable conversations with the regulator. In the most serious cases, investigation and enforcement action may follow.

Further reading on non-financial misconduct

• FCA culture and non-financial misconduct survey findings
• Eversheds Sutherland briefing | Implications of FCA non-financial misconduct survey findings
• Eversheds Sutherland thought leadership | Broadening regulatory scope: Tackling non-financial misconduct in financial services
• Treasury Committee ‘Sexism in the City’ report