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City Trader's Dismissal for Breach of Confidentiality Unfair

on Friday, 19 February 2016.

The Employment Tribunal has held that an employee's dismissal for the sharing of confidential client information with traders from other banks was unfair.

In reaching its decision, the ET identified a variety of procedural flaws in the disciplinary process.

The Facts

Mr Stimpson was employed by Citibank (Citi) as a foreign exchange (FX) trader. In 2009 and 2010, he was encouraged by his manager to join Bloomberg's online chat room facilities (a relatively new development at the time) to further his market knowledge by discussions with traders from other banks.

Little guidance was given on the use of such chat rooms until January 2013, when Citi instructed its FX traders to stop using chat rooms to share information outside of Citi.

Citi's code of conduct prohibited the disclosure of confidential information about clients to anyone outside of Citi. Its disciplinary policy specified such breach of confidentiality as gross misconduct.

In 2015, Mr Stimpson was accused of sharing confidential client information with external traders in chat rooms on 12 occasions between February 2010 and August 2011. These allegations came at a time when Citi was embroiled in the Forex price fixing scandal that led to millions of pounds in fines from regulators globally, including the Financial Conduct Authority (FCA), which was investigating Citi at the time. Mr Stimpson's own line manager was dismissed for his involvement in that scandal.

Mr Stimpson's principal defence was that he had not considered his conduct to be in breach of the rules due to the widespread culture of information sharing in the FX industry. He also said that some of the information was already in the public domain at the time, so there was no breach of confidentiality in respect of it.

The ET's Decision

The ET upheld Mr Stimpson's claims.

The employment judge found that the disciplinary officer, Mr Kemp, failed to consider whether an investigation stage was required, either before or after the disciplinary hearing.

Had Mr Kemp conducted a reasonable investigation, he would have been aware that there was evidence to support Mr Stimpson's arguments about the information-sharing culture.

Specific procedural failings identified by the judge included:

  • the failure of Mr Kemp to interview an individual identified by Mr Stimpson at his disciplinary hearing as a potential witness
  • Mr Kemp's decision to delegate a witness interview to a member of HR without the requirement for a full transcript, thus depriving himself of the opportunity to assess the reliability and credibility of the witness' evidence
  • the failure to adequately investigate the allegation that frontline managers encouraged the use of chat rooms
  • Mr Kemp's overreliance on the existence and wording of a policy on paper, without investigating the extent to which the policy was known and applied in practice
  • after Mr Stimpson had repeatedly requested that his disciplinary proceedings were delayed until the outcome of the FCA investigation was known, it was unfair for the HR department not to inform Mr Kemp of the outcome of the FCA's investigation before confirming to Mr Stimpson that he was dismissed. This was particularly so, as the final notice of the investigation confirmed that there was evidence of an inappropriate culture at Citi, in which frontline managers were involved.

The judge did however accept that Mr Stimpson's behaviour had been foolish and had contributed to the decision to dismiss. He was therefore satisfied that there be a reduction in damages for contributory fault.

Best Practice

This case is a useful reminder of the importance of ensuring that the disciplinary process engages with any defence put forward by an employee and that a proper investigation is undertaken.

Citi's failure to adequately investigate Mr Stimpson's defence was a key reason for the finding of unfair dismissal in this case. Fairness, in these circumstances, will not turn on what the dismissing officer knew when reaching his decision, but what they reasonably ought to have known, had there been a reasonable investigation.

The judge in this case was also critical of the 'great deal of trust'  Mr Kemp placed in HR, and their involvement in the investigation following the disciplinary hearing. Notably, HR's failure to draw the FCA final notice to Mr Kemp's attention, notwithstanding the fact that it bolstered Mr Stimpson's defence, and was significant in the finding that there had been a failure to carrying out a reasonable investigation.

For more information, please contact Bob Fahy in our Employment Law team on 01923 690 021.

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