Financial Times: FSA decides not to pursue individuals: “Item two: in July last year it fined Royal Dutch/Shell £17m for mis-stating its oil reserves. Item three: after an inquiry that lasted well over a year into the role of "certain individuals", it announced yesterday that it would not be taking any further action.”: “Perhaps it was some mischievous computers that took it into their hard drives to concoct all those inflated numbers.”: Thursday 10 November 2005

By Martin Dickson

Published: November 10 2005

Let's play spot the credibility gap. Item one: the Financial Services Authority wants to make senior managers in the City and beyond take greater responsibility for their actions, on the grounds that this will spur better corporate behaviour.

Item two: in July last year it fined Royal Dutch/Shell £17m for mis-stating its oil reserves. Item three: after an inquiry that lasted well over a year into the role of "certain individuals", it announced yesterday that it would not be taking any further action.

That will be a huge relief to Sir Philip Watts, chairman of Shell at the time the mis-statement came to light, who had been under investigation by the regulator. Sir Philip had taken an unusually aggressive stance, arguing (unsuccessfully) before an independent tribunal that the FSA had treated him prejudicially by publishing its formal notice fining the company, which he said failed to give due weight to audits or acknowledge the subjectivity of reserves judgments.

But the FSA's credibility in matters of enforcement cannot be bolstered by having established such a high-profile, heavily fined offence by a company for which no individuals appear responsible. Perhaps it was some mischievous computers that took it into their hard drives to concoct all those inflated numbers.

And while the FSA's enforcement arm may pursue individuals, cases it perseveres with are judged by the supposedly independent Regulatory Decisions Committee. In the wake of the FSA's row earlier this year with Legal & General, and complaints the RDC did not have enough distance from enforcement, the system has been revamped, with new checks on the inquiry process and a separate RDC legal team. There is no saying what role, if any, all this played in the Shell case. But Sir Philip, and anyone else under investigation, may have been glad of the reforms. 

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