My thanks go to ShareSoc member Tony Johnson – for bringing to my attention, a recent lecture given to the Banking Standards Board by Sir Geoffrey Vos, Chancellor of the High Court of England and Wales. In the lecture, Sir Geoffrey considers the present state of integrity of our financial institutions and our judiciary.
For those with plenty of time, you can read the full script of his lecture here –
https://www.judiciary.gov.uk/wp-content/uploads/2018/03/chc-speech-banking-standards-board-lecture.pdf
For those with less time, I summarise below :
Sir Geoffrey is well-qualified to speak on this subject, having undertaken litigation arising out of some of the biggest financial scandals of the day over some 32 years at the Bar. He was involved in the early 1980s in Alexander & Alexander, which was one of the earliest Lloyd’s scandals and also acted for the finance director of Guinness in the Guinness/Distillers takeover in the mid-1980s. From there, he moved on to act for the MGN Pension Fund trustee in the Maxwell affair. He later acted for the Lloyd’s names in their successful claims against the Gooda Walker syndicates, and then in the Barings scandal, and in many more later such sagas. He has continued to be involved in many financial fraud cases up to the present day.
In assessing the integrity of the financial services industry, Sir Geoffrey has the following to say:-
“The subject of honesty and integrity is, always a difficult one, because generally, people prefer not to talk about it, assuming, when the evidence is often to the contrary, that it exists in greater measure than it actually does. The BSB’s latest survey of some 35,000 employees in some 25 banking institutions shows that integrity is far from a universal feature. In answer to the statement “I see instances where unethical behaviour is rewarded”, 25% of respondents either agreed or neither agreed nor disagreed. In commenting on the statement that “my colleagues act in an honest and ethical way”, 9% either disagreed or neither agreed nor disagreed.”
He concludes that :
“These results and some of the financial scandals that I have already mentioned, and many that I have not, demonstrate quite clearly that a lack of integrity in financial services surfaces in every generation.”
Given this backdrop, defrauded investors must depend from time to time on recourse to the legal system for justice. Therefore the integrity of the legal system is paramount in maintaining fair play and in deterring foul play.
So, this is what Sir Geoffrey has to say about the legal system in general and the judiciary in particular :
“How well, then, has the legal system done in maintaining its integrity over the years? First, we should not assume, as many do, that legal systems across Europe are equally reliable. Some 11,712 judges participated in a recent survey undertaken by the European Network of Councils for the Judiciary. Those judges came from some 25 European countries. In 18 of those 25 European countries, more than 10% of judges thought that some of their colleagues either were taking bribes or were not sure whether they were. Those countries where over 50% of judges thought their colleagues either were taking bribes or where they were not sure were Bulgaria, Latvia, Romania, Croatia, Czech Republic, Italy, and Lithuania. That is by itself a shocking list, but when you know that even France, Germany, Belgium and Austria and Spain are included in those countries where more than 10% of judges thought their colleagues either were taking bribes or where they were not sure, the level of concern is increased. Only Sweden, the UK, Ireland, Finland and Denmark produced entirely negative results in this part of the survey.”
So, a rather worrying position for those who invest in certain jurisdictions, but some comfort that, in the UK, we can be reasonably confident of fair treatment.
However, Sir Geoffrey points out that there is no room for complacency in the future :
“I would not want to be pessimistic, but I think the very speed of some of the advances I have spoken about (eg, fintech) gives rise to a greater risk of fraud in our financial and legal systems than ever before……I would not dare to predict where the next great financial scandal is likely to arise. But I am sure they will not stop coming”
And he concludes that:
“For these reasons, I think that the judiciary and the legal and regulatory community need to work more closely with those providing financial services to ensure that there is adequate vigilance in the context of a rapidly changing financial environment.”
So, it sounds like there will continue to be an ever-increasing need for the existence of a stronger and larger ShareSoc if we are to ensure a level playing field for individual investors in a rapidly changing financial future.
Mike Dennis
Q: When talking of our institutions, what four-word phrase most reliably tells you a Brit is deceiving himself?[1]
A: “Best in the World”
The bizarre notion of an incorrupt judiciary is a prime instance of that. We don’t see it because judicial immunity and contempt of court rules fiercely protect the institutions, no matter how stupid or corrupt they may get. That’s in sharp contrast to more accountable institutions like the police or politicians.
[1] Or more rarely, herself.