Background
Mr Odey is the founder and majority shareholder of Odey Asset Management (OAM). Between September 2020 and January 2021, OAM’s Executive Committee (ExCo) investigated allegations of sexual misconduct made by two employees against Mr Odey. The ExCo concluded that, while Mr Odey had behaved inappropriately and fallen short of the firm’s expected standards, his conduct did not amount to a breach of the FCA’s Code of Conduct and he continued to be fit and proper to perform a regulated role for OAM. A final written warning was issued to Mr Odey which imposed, among other things, conditions on Mr Odey’s interactions with staff.
In September 2021, the FCA opened an investigation into Mr Odey’s alleged non-financial misconduct and, shortly after, OAM initiated a second investigation following concerns that he might have breached the conditions of his final written warning.
The FCA found that Mr Odey deliberately frustrated this second disciplinary process and tried to persuade the ExCo not to make adverse findings against him by:
- Refusing to engage with the ExCo on the issue and placing pressure on individual ExCo members to discontinue the disciplinary process;
- Threatening to litigate against individual ExCo members if they made adverse findings against him; and
- Twice firing all ExCo members, appointing himself as the sole member of ExCo, and then postponing the disciplinary proceedings.
Mr Odey’s second disciplinary process was eventually concluded in December 2022. The ExCo found that, whilst Mr Odey had technically breached the final written warning, those breaches did not constitute substantive breaches or inappropriate conduct which could reasonably be considered harassment.
The FCA found that Mr Odey’s conduct lacked integrity in breach of Individual Conduct Rule 1 (“You must act with integrity”) and that he is not fit and proper.
Influential individuals: Potential risk to robust governance
Mr Odey used his majority shareholding of 74.9% to dismiss all existing ExCo members and appoint himself as the sole ExCo member. He then used this position to unilaterally postpone his disciplinary hearing indefinitely, citing the absence of an impartial ExCo member to conduct his disciplinary hearing – a situation he himself had created. The FCA found that Mr Odey’s actions obstructed OAM’s ability to assess if he remained fit and proper to perform his role.
By dismissing all ExCo members, Mr Odey assumed sole responsibility for their functions. He relied on the “12-week rule” to temporarily perform two Senior Management Functions. The FCA found that this arrangement compromised OAM's ability to maintain appropriate separation between its risk management and other operational units, leading to breaches of specific regulatory governance requirements.1
Although a disciplinary hearing was ultimately convened and concluded in December 2022, the FCA found that Mr Odey’s actions in the intervening period to frustrate the disciplinary process undermined the credibility and effectiveness of OAM’s governance structures, which the FCA observed he was prepared to override “at will” in order to protect his own interests.
To justify his actions to OAM’s members, Mr Odey alleged that ExCo had been subject to undue pressure to take a particular view regarding the disciplinary hearings and that the FCA might compel ExCo into actions that would require OAM to be wound down. When questioned by the FCA, Mr Odey claimed that the ExCo could not conduct a fair disciplinary process and that he thought the “predetermined views” of one ExCo member would prejudice the disciplinary hearing. The FCA found Mr Odey’s explanations “lacked candour” supporting the finding that he lacked integrity.
Most senior individuals in regulated firms do not wield as much power as Mr Odey, such as the ability to dismiss an entire ExCo. However, the FCA’s findings about Mr Odey and the impact of his power on OAM’s handling of his alleged misconduct offer broader lessons. For example:
- This case highlights the influence that senior individuals may have, or the pressure that they may be able to put others under, during investigations and disciplinary processes. It underscores the need for firms to have strong governance arrangements to handle these processes, possibly involving non-executive directors or external advisers.
- Although Mr Odey’s actions to frustrate his disciplinary process were extreme, the FCA is likely to disapprove of any senior individual who uses their position to intentionally and without good reason disrupt internal processes intended to investigate and address suspected misconduct.
Cutting through the silence: The importance of speak-up culture
During its investigation, ExCo noted that some employees had been reluctant to raise concerns either because of a desire not to “ruffle feathers” or because they thought nothing would be done. This limited the breadth of evidence available to it in reaching a decision on Mr Odey’s conduct.
The FCA has recently emphasised that working environments where people do not feel safe to speak up can become a “breeding ground for even bigger problems”. These concerns are echoed by Therese Chambers in her comments about the FCA’s proposed action against Mr Odey when she described the risk to consumers and markets posed by “a culture of silence”.
In its findings against Mr Odey, the FCA highlighted that Mr Odey’s misconduct continued over a long period of time with no apparent challenge, meaning that it became normalised within OAM. This observation emphasises how it is incumbent on firms to ensure that they promote a workplace culture where employees feel able to speak up in the knowledge that improper conduct will be challenged. Firms’ processes for identifying and escalating concerns should also be clearly documented in policies and procedures and further embedded through regular training.
Non-financial misconduct: What next?
The FCA has taken enforcement action against individuals for having committed non-financial misconduct: for example Ashkan Zahedian and Jon Frensham. As a result, some have queried why the FCA did not take this approach here but instead focused on Mr Odey’s conduct to frustrate his disciplinary hearing and the wider governance ramifications of this conduct. The FCA does not address this point in its findings, but in the past the FCA has only included substantive non-financial misconduct as the basis for enforcement action where that non-financial misconduct has resulted in a criminal conviction. That said, the FCA could, in principle, expand its case against Mr Odey at the Upper Tribunal to include his alleged non-financial misconduct but it remains to be seen if the FCA ultimately decides to do so.
The FCA remains in the process of finalising its guidance on non-financial misconduct, stating recently that it would provide an update on this work by the end of June 2025.
Footnotes
1. These include: (i) SYSC 4.2.1R and SYSC 4.2.2R (management of an AIFM must be undertaken by at least two persons of good repute); and (ii) FUND 3.7.2R (there must be functional and hierarchical separation between the risk management and operating units of an AIFM).
