Regulatory Duties for Directors in the Financial Services Sector and Directors' Duties in Company Law: Bifurcation and Interfaces

摘要

Directors in the financial services sector are now subject to direct and enhanced obligations to the financial services regulators in the UK. These obligations, worded broadly, are in some respects similar to how directors' duties under company law are framed. Directors in the financial services sector are accountable to regulators in respect of the discharge of these obligations, and the history of enforcement by financial services regulators in the UK has shown that tough sanctions are meted out. Directors' duties in general company law are, however, owed to the company as a whole, and are enforced by the company, the shareholders through derivative litigation, or the liquidators at winding up. Civil enforcement against directors in company law has been quiet in the UK in spite of the revelation of senior level failures in banks during the global financial crisis of 2007-09. Questions may be asked as to why the directors' duties regime in company law seems ineffective to address senior level weaknesses in the banks embroiled in crisis in 2007-09, and continue to appear unable to hold senior figures to account in the more recent episodes of bank malpractice and mis-selling. Further, with the advent of the regulatory regime governing senior persons' conduct in the financial services sector, it is queried whether the regulatory regime will become the main means of discipline for senior persons, making the directors' duties regime irrelevant. This article examines the relationship between the two legal regimes, and seeks to eludicate the role of regulatory governance of directors in the financial services sector alongside the directors' duties regime in company law. This article argues that directors' duties in company law serve different purposes from the regulatory regime for senior persons' conduct in the financial services sector, and hence the approach taken to separately regulate directors' conduct in financial services is a correct one. The regulatory regime is intended to encourage greater senior level internalisation of important public policy objectives that cannot be introduced in company law. It will be argued that the regulatory regime should be seen as a distinct mode of prudential and conduct regulation in financial services, and not as a form of governance that eclipses the enforcement of directors' duties under company law. The interface between the two regimes should not result in the marginalisation of the company law regime and can indeed lead to better mitigation of information asymmetry for the purposes of civil enforcement of directors' duties under company law. The article, however, acknowledges that owing to the role of D & O insurance, it may make no practical difference what in theory is achieved by either regime. The article also provides some cautionary notes regarding the impact of the regulatory regime on directors' conduct which will inevitably spill over and shape the discharge of directors' duties under company law.