Cole’s FSA departure leaves a lasting legacy but no surprise, says industry

February 16, 2012

By Martin Coyle

LONDON/NEW YORK, Feb. 16 (Thomson Reuters Accelus) – City lawyers have praised Margaret Cole’s legacy following her decision to depart the Financial Services Authority and have said her successor faces a tough job continuing her good work as head of enforcement. Observers also noted that Cole’s failure to secure the top job at the new Financial Conduct Authority meant that her departure was inevitable. Cole, managing director and board member, announced her exit from the regulator yesterday after seven years. Cole, who joined the regulator as director of enforcement in 2005 from U.S. law firm White & Case, is widely credited with pushing forward the FSA’s recent tough approach to combating financial crime and market abuse. The importance of her departure was perhaps reflected as the news was briefly ‘trending’ on Twitter yesterday.Under Cole, the FSA secured a host of criminal convictions that began in March 2009 when solicitor Christopher McQuoid was imprisoned for insider trading. Later that year the FSA also successfully prosecuted father and son Neel and Matthew Uberoi on 12 counts of insider trading; both were jailed. Previously, the FSA had been accused of being ‘soft’ on the crime. In 2011 the FSA secured 11 prosecutions for insider trading, while 16 others await trial; it also collected fines totalling £66 million.

Cole lobbied successfully for the FSA to be given its tougher powers and publicly stated that the FSA’s previous use of civil sanction had failed to clean up the City. In 2009 she told the regulator’s annual financial crime conference that people would only take the FSA seriously if they were threatened with prison. “Criminals in suits masquerading as City professionals will be seen for what they are — and will face serious consequences,” she said. Last year Cole called on the government to increase the sentences in the UK for insider trading from seven to 10 years in order to encourage U.S.-style plea agreements.

Despite her good work some observers were unsurprised at Cole’s departure. It is understood that she unsuccessfully applied for the role of chief executive of the new Financial Conduct Authority (FCA). One industry source said it was “no surprise” she had decided to leave the regulator after not getting the top job.

Tim Dolan, head of Pinsent Masons’ financial services regulatory team, agreed and questioned whether the FSA would manage to retain other senior staff over the course of the year as the establishment of the new regulatory architecture takes place.

Philip Rubens, a partner at Finers Stephens Innocent, said that Cole’s reign at the FSA should be viewed as a success. He told Thomson Reuters that having been head of enforcement, and failed to get the top FCA role there were perhaps no attractive positions left at the FSA for her. “She had reached a ceiling,” he said.

Cole, 50, said that the FSA had shown that it was unafraid to take on difficult cases and fight wrongdoing in the financial services industry. She said that plenty had been achieved in her time at the regulator, adding that people were now sitting in prison as a result of her team’s commitment. She said that she was seeking a fresh challenge and had left the role in safe hands.


Carlos Conceicao, a partner at Clifford Chance, and a former head of the FSA’s wholesale group in enforcement, said her departure was a loss to the FSA and FCA. “Her direct style and her willingness to challenge the assumption that enforcement should only have a peripheral part in regulation, even when this view was unfashionable, have made a significant impact. It is testament to the success of her approach that the FSA’s Enforcement Division has, by and large, escaped the criticisms made of other parts of the FSA, and indeed has garnered plenty of positive headlines,” he told Thomson Reuters.

Martyn Hopper, partner at Herbert Smith and former head of department in the FSA’s enforcement division, said that the regulator achieved a great deal under her leadership. Hopper said that she was “rightly” respected for the work she had carried out during her tenure. “The FCA will inherit a stronger enforcement function as a result. The big challenge for her successor will be meeting public and political demand for ever more robust and aggressive enforcement while respecting the need for fairness, the rule of law and vibrant, competitive financial markets,” he told Thomson Reuters.

Simon Morris, a partner at CMS Cameron McKenna, said that Cole had made the City stand up and take the FSA’s enforcement capabilities seriously. “Margaret Cole has, more than anyone else, put the FSA on the map as a regulator the City takes seriously. Her doctrine of “credible deterrence” has made a significant contribution to restoring investor confidence in financial services,” he told Thomson Reuters.

Brian McDonnell, a partner at Olswang, said that Cole had made a big difference to the regulatory landscape. “Margaret made a hugely positive impression on the FSA at a time when FSA enforcement was coming into its own. She will leave an impressive legacy, not least her courage in deciding to pursue insider dealers through the criminal courts which was always a high risk approach but has so far proved to be largely successful. She led on the strategy of credible deterrence which supported compliance with a range of regulation including, in particular, treating customers fairly,” he told Thomson Reuters.

Richard Burger, a partner at Reynolds Porter Chamberlain who also worked at the FSA, said that Cole left the regulator having put regulation at the top of the agenda in the boardroom. He said that Cole formed the ‘backbone of the FSA’s credible deterrence approach.

“She has made a huge impact on enforcement of regulatory issues against financial services firms and their directors. We are now at the point where the FSA is at the vanguard of developments in regulatory enforcement,” Burger said.

Cole, who led an enforcement division of 450, will remain in her current role and on the FSA board until the end of March. She will then be on gardening leave until the end of August.


(This article was produced by the Compliance Complete service of Thomson Reuters Accelus.  Compliance Complete ( ions/regulatory-intelligence/compliance- complete/) provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges.)


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