The charges laid against Allan Hubbard as announced by the Serious Fraud Office earlier this week raise a couple of interesting points, the first of which is corporate governance. The SFO release states that “….we believe from the available evidence that Mr Hubbard was effectively in sole control of both ASL and HWF at all relevant times….”. If a business is to operate in a best practice manner and in the interests of all stakeholders then control has to be spread amongst independent directors and a group of executives. Strategy decisions need to be discussed and agreed upon, along with major spending and investment decisions. Any decision to transfer funds has to be signed off and recorded.
The distinct impression you get from the SFO’s comments is that Allan Hubbard made all the decisions with little regard for best practice and changing business standards.
Secondly there is the responsibility of managing other peoples’ money. The government has just introduced a raft of new legislation that significantly increases the skills and qualifications necessary to give advice, including strict rules around fact finding, disclosure and conduct. Can the Hubbard companies comfortably say that they placed the interests of clients first when it seems that investment assets owned by some clients were pledged elsewhere as security for loans and where some securities were recorded in the books at values that were overstated?
Governance and the responsibilities that flow from managing money for other people will be huge points of discussion in future, both in and out of the courtroom.
Graeme Thomas