Domino, Impact, Continuity.

Crispin Odey- dinosaur or domino?

Readers of the Corterum blog will likely be aware of the sudden fall from grace of Crispin Odey, one of the City’s most celebrated hedge fund managers. The founder of Odey Asset Management (OAM), Mr Odey was the subject of a highly critical article in the FT on 8 June, alleging a series of sexual assaults over 25 years and detailing accusations of “harassment, abuse and fostering a toxic workplace culture”. Mr Odey had previously faced charges in a February 2021 court case which he went on to win. The difference between this earlier allegation and those raised by the FT is that OAM’s prime brokers have moved very quickly to dissociate themselves from the firm and its founder. Morgan Stanley publicly cut all ties with OAM on the date of the article’s publication. Since then, it has been widely reported that Goldman and Exane have ceased prime brokerage arrangements, JP Morgan has both its prime brokerage and custodian relationships and Schroders has exited investments in OAM funds. Mr Odey has been removed from the firm’s board and management of his funds has been transferred to others in the group.  At this point, It should be emphasised that the FT’s allegations, however numerous and detailed, are still allegations; there has been no misconduct actually proved. Public (or at least peer) opinion has acted as judge, jury and executioner with extreme rapidity and unanimity.  Given the long period over which the offences are alleged to have occurred, it can’t be said that that these reactions display a zero tolerance policy for these (again alleged) behaviours, but they certainly display a marked aversion to the consequent contagion and possible adverse publicity.

What does this mean, if anything, for those who are subject to the SMCR? The FCA is reopening (possibly extending) an investigation into Mr Odey, and will be considering his eligibility as a “fit and proper person”. Mr Odey has long been referred to as “eccentric” or sometimes “colourful”, make of this what you will. However, there is no doubt that he has long enjoyed a place at the top table of the City elite. The question is whether his alleged behaviour has long been so anomalously egregious that even such a powerful and well-connected figure had to face disgrace or whether this represents a new and determined focus on the culture of finance. Alongside the #MeToo movement and wider shifts in cultural mores, has the SMCR actually changed the culture of banking and money-management? As always, the answer isn’t entirely simple, though it seems certain that a wider social change has made even the most tangential association with these and similar allegations entirely unacceptable. The degree to which this can be credited to the SMCR is hard to tell; however, the SMCR has definitely given Regulators the sharp-edged tools to excise actors who fall foul of a relatively new, and much to be welcomed, moral climate.  It remains to be seen whether Mr Odey is an outlier, or whether his sudden defenestration heralds a new focus on the finance industry and its working practices.

Either way, while the SMCR is a Regulator’s sword, it is also a shield for the Regulated. Follow all its precepts to the letter and the spirit. Document compliance correctly. Do the right thing, but also be able to prove you have done.