From senior managers to the junior ranks, bankers are now wary that every casual aside in an email or mobile phone exchange could face scrutiny by the Financial Services Authority.
This was brought home this week after the FSA fined JP Morgan banker Ian Hannam, a prominent dealmaker, £450,000 (€539,723) for passing on inside information in emails.
The FSA’s more intrusive stance, alongside a tightening of British takeover guidelines last year, is having an effect. Merger and acquisition specialists, bond bankers, and advisers on stock market listings say they are far more cautious than they ever were before.
“My risk director was emailing me to make sure that I understand the rules after [the Hannam case], it has made everybody in the market sit up and take notice,” said one banker at a rival firm.
The FSA had wanted to bag a big name as a deterrent, so that awareness of protocol should, more than ever, be part of a top banker’s job.
Some bankers defended Hannam, saying the evidence against him was thin and that the FSA recognised he did not act “deliberately” or “recklessly”.
The FSA began its crackdown after the 2008 financial crisis, and also after criticism that the regulator was soft compared to its US counterpart, the Securities and Exchange Commission.
Hannam, who is appealing the regulator’s decision, has not been barred from working in financial services, while Nicholas Kyprios, a Credit Suisse high-yield bond specialist fined in March for disclosing inside information to a potential investor without following the right guidelines, kept his job.
The regulator is stepping up the pressure, with spot checks becoming a more regular occurrence, bankers say.
The regulator has been co-operating more closely with the City of London police, Philip Rubens, a litigation partner at law firm FSI, said, and is using search warrants more regularly to take away hard drives and mobile phone records.
The crackdown is likely to continue and includes clamping down on bankers’ compliance with the spirit as well as letter of the rules.