Financial Times: Executives escape City watchdog's bite: “The FSA said yesterday it stood by the fine it imposed on Shell for overstating its oil and gas reserves between 1998 and 2003.”: Thursday 10 November 2005

By Barney Jopson, Financial Correspondent

Published: November 10 2005

The Financial Services Authority's decision to close its investigation into Sir Philip Watts and other Royal Dutch Shell executives left the regulator facing questions of its own yesterday.

The FSA has said it is committed to making senior executives take responsibility for wrong-doing. But although it fined Shell £17m last August, yesterday's announcement indicated that none of the blame could be laid on individuals.

"The FSA hasn't had much success in holding senior individuals to account, one of its key themes, so I imagine that this will be a step taken through gritted teeth," said Robert Turner, partner at law firm Simmons and Simmons.

Outside the blue chip league, however, the regulator succeeded last month in its first contested criminal trial. Two former directors of AIT Group, an Aim-listed software company, were jailed for "recklessly" making a "misleading, false and deceptive" statement to the stock exchange.

"No doubt the FSA will be asked to reconcile the two [cases]," said Mr Turner. "Without knowing more, there isn't an obvious answer."

The FSA said yesterday it stood by the fine it imposed on Shell for overstating its oil and gas reserves between 1998 and 2003. Trying to put the scandal behind it, the company paid the fine without admitting any wrong-doing, meaning the charges were not then tested.

The decision notice released with the fine last August nonetheless infuriated Sir Philip, who said he was implicitly "identified and prejudiced" by it, even though he was not named.

In September, however, an independent financial services tribunal dismissed a complaint from the former Shell chairman to that effect.

In spite of the fireworks created by the reserves scandal, which broke at the beginning of last year, the FSA said yesterday: "This is not going to have any impact on our appetite for taking further cases against individuals."

The regulator remained committed to making senior management take responsibility, it said. The burden of proof in cases against individuals is higher than in cases against companies.

Yesterday's decision, the FSA said, "demonstrates we act fairly when a case hasn't been sufficiently proven".

The final judgment was made by the FSA's Regulatory Decisions Committee, a group that decides whether enforcement investigations warrant further action.

Other lawyers agreed the result was a success for the FSA's revamped enforcement process, proving that the RDC was an effective check on the FSA's enforcement division.

Enforcement processes were overhauled this year after a review sparked by an FSA case against Legal & General. 

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