This weekly update from Clyde & Co's Financial Services Regulatory Team summarises new developments as reported by the FCA, the PRA, the UKLA, the Upper Tribunal, the Financial Ombudsman Service and the London Stock Exchange over the past week, with links to the full documents where these are available.
We hope that you will find this update useful. If you have any queries about any of the information in this update or financial services regulatory matters generally, please contact one of the individuals listed in the 'Contacts' section of this publication.
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Consultation papers:
No new developments this week.
Discussion papers:
No new developments this week.
Policy statements:
No new developments this week.
Press releases:
22 July: FCA v former iSOFT directors. The FCA has published a press release announcing that it has decided not to pursue a second retrial in the case against Stephen Graham, Timothy Whiston and John Whelan (formerly of iSOFT plc) at Southwark Crown Court. The FCA will also not be pursuing the prosecution of Patrick Cryne (former chairman of iSOFT plc). The jury was discharged by the Judge following legal argument about an exhibit handling issue that arose late in the trial. The Judge ruled that the issue did not, in itself, prevent the case proceeding to the jury. However, procedural issues involving the cross examination of counsel for the prosecution meant it was not possible to resolve the matter in this trial. The FCA announced that after much careful consideration of the options available it had decided that it would not be in the public interest for a second retrial to be pursued.
www.fca.org.uk/news/fca-v-former-isoft-directors
Speeches:
No new developments this week.
Bulletins and newsletters:
No new developments this week.
Final notices:
26 July: Final Notice: Foneshiled (UK) Limited. The FCA has published a Final Notice cancelling the permission granted to Foneshield (UK) Limited (Foneshield). The FCA concluded that Foneshield was failing to satisfy the threshold conditions because it had failed to pay regulatory fees and levies owed totalling GBP 1,870.72 and failed
to respond to repeated requests to do so. Therefore, the Authority decided that Foneshield had not been open and co-operative in all its dealings with the Authority and was failing to manage its business in such a way as to ensure that its affairs were conducted in a sound and prudent manner.
www.fca.org.uk/static/documents/final-notices/ foneshield.pdf
25 July: Final Notice: Churchill Securities (UK) Limited. The FCA has published a Final Notice cancelling the permission granted to Churchill Securities (UK) Limited (Churchill). The FCA concluded that Churchill was failing to satisfy the threshold conditions because it had failed to co-operate with the Authority in that it had failed to respond to communications from the Authority requesting confirmation of Churchill's trading status. These failures led to Authority to conclude that Churchill had failed to manage its business in such a way as to ensure that its affairs were conducted in a sound and prudent manner, and therefore that it was not a fit and proper person.
http://www.fca.org.uk/static/documents/final-notices/ churchill-securities.pdf
24 July: RBS fined GBP 5.6 million for failing to properly report transactions. The Royal Bank of Scotland (RBS) has been fined GBP 5,620,300 by the FCA for incorrectly reporting transactions they made in the wholesale markets, and in some instances, failing to report transactions at all. RBS failed to properly report 44.8 million transaction between November 2007 and February 2013; and failed altogether to report 804,000 transactions between November 2007 and February 2012. This represents 37% of relevant transactions carried out by RBS in this period, and breaches FCA rules on transaction reporting and its requirements for firms to have adequate measures and controls. These failures are particularly serious because the FCA already provides extensive guidance to firms on how to submit and check these reports, and has taken action against seven firms, including Barclays and Credit Suisse, for similar reporting errors. The size of the fine reflects the serious nature of the issue. RBS received a 30% reduction after agreeing to settle at an early stage of the investigation.
Press release: http://www.fca.org.uk/news/rbs-fined
Final Notice: http://www.fca.org.uk/static/fca/documents/ final-notices/rbs-plc-nv.pdf
22 July: FCA fines US based oil trader USD 903,176 for market manipulation. The FCA has fined High Frequency Trader, Michael Coscia, USD 903,176 (GBP 597,993) for deliberate manipulation of commodities markets. Between 6 September 2011 and 18 October 2011 Coscia used an algorithmic programme of his own design to instigate an abusive trading strategy known as "layering". Taking advantage of the price movements generated by his layering strategy, Coscia made a profit of USD 279,920 over a 6 week period of trading at the expense of other market participants - primarily other High Frequency Traders or traders using algorithmic and/or automated systems. Coscia is not a member of ICE or an FCA Approved Person, and traded from the US through a Direct Market Access (DMA) provider. The penalty reflects the serious nature of the deliberate market abuse and the significant impact on ICE, as well as depriving Coscia of the financial benefit derived from this activity. Coscia received a 30% discount on the fine by agreeing settlement under the FCA's executive settlement procedures; otherwise Coscia would have been fined just over USD 1.15 million (GBP 764,000). This is the first time the FCA has taken enforcement action against a High Frequency Trader, and reflects the FCA's objective of enhancing the integrity of the UK's financial markets.
Press release: http://www.fca.org.uk/news/fca-fines-us-based-oil-trader
Final Notice: http://www.fca.org.uk/static/documents/final-notices/coscia.pdf
Application refusals:
No new developments this week.
Approved person refusals:
No new developments this week.
Research publications:
No new developments this week.
Consumer research:
No new developments this week.
Other FCA and PRA publications:
26 July: FCA Statement on CRD IV. On 26 July 2013, the EBA published an implementing technical standard regarding FINREP (Financial Reporting) and COREP (Common Reporting) which finalises the rules surrounding harmonised reporting, pending publication in the Official Journal of the EU. These rules are directly binding on CRD IV firms as an EU regulation. Accordingly, relevant FCA prudentially regulated and PRA prudentially regulated firms should be aware of this, and carefully consider the content when ensuring compliance with and building systems to implement COREP, and where applicable, FINREP.
httphttp://www.fca.org.uk/news/firms/fca-statement-on-crd-iv
25 July: Retail Distribution Review six months in – how firms are implementing the RDR. The FCA has published an early review (TR13/5) of how advisory firms have implemented some of the core aspects of the Retail Distribution Review (RDR) months after its implementation. Undertaken between February and April 2013, the research found that the majority of firms have made progress and that there was a willingness to adapt to the new rules. However, common issues included:
Providing charges in percentages, rather than using cash terms, which some consumers found confusing
Firms describing themselves as independent but in fact choosing products from a limited number of providers or products
Not clearly explaining what service customers will receive for on-going fees
The FCA is sending a factsheet to over 6,000 advisory firms to help them assess whether the common issues found apply to them. This review is the first of three planned over the next year to assess what progress advisory firms are making to meet the new RDR rules. The FCA will carry out further
assessments with a wider sample of firms from October 2013 to test whether firms have acted on its feedback.
Press release: http://www.fca.org.uk/news/rdr-six-months-in
Thematic Review: http://www.fca.org.uk/static/documents/ thematic-reviews/tr13-05.pdf
Factsheet for advisors: http://www.fca.org.uk/static/ documents/factsheets/fca-factsheet-no-007.pdf
25 July: FCA financial crime newsletter. The FCA has published its first financial crime newsletter. The publication includes articles on:
- The Financial Crime Conference
- The FCA's new report on its 'concern' about money laundering and terrorist financing risks in trade finance
- EFG Private Bank's fine of GBP 4.2m
- The Financial Action Task Force
- New European anti-money laundering
- New investment fraud trends
http://www.fca.org.uk/static/documents/newsletters/ financial-crime-newsletter-1.pdf
25 July: Anti-money laundering annual report 2012/13. The FCA has published its first annual report on anti-money laundering. The report sets out the FCA's obligations relating to anti-money laundering, its approach to carrying out those obligations, and the trends and emerging risks in money laundering that it is seeing in the firms it regulates. The report focuses on money laundering, financial sanctions breaches and terrorist financing, which it identifies as some of the most important risks that financial crime currently poses to the FCA's objectives.
http://www.fca.org.uk/static/documents/anti-money-laundering-report.pdf
24 July: Ensuring markets work well for consumers and for firms – FCA publishes guidance on its approach to objectives. The FCA has published further guidance on how it intends to deliver its statutory responsibilities. The guidance sets out what firms and consumers can expect from the regulator and reaffirms that the FCA will seek to be more judgement-based in its action, dealing with potential issues at the earliest possible stage. It also states that the FCA will collate the widest source of information from behavioural insight to market analysis to inform any required action to potential market problems.
In 'The FCA's approach to advancing its objectives', Martin Wheatley focused on the objective to promote effective competition in consumers' interests, saying that markets that worked well offer consumers the best chance to get the products they need on the right terms. The FCA will examine whether consumers are in a position to drive healthy competitive markets and if not, what needs to change. This will include how easily new businesses can enter the markets, whether existing regulation distorts competition and the ease with which consumers can understand their needs, access suitable products and change suppliers. Mr Wheatley also noted that when the FCA has indentified where competition is ineffective, it will not hesitate to take proportionate action to enhance competition. Whether it be through industry self-regulation, enhancing consumer awareness or introducing new rules.
Press release: http://www.fca.org.uk/news/fca-publishes-guidance-on-its-approach-to-objectives
Guidance: http://www.fca.org.uk/static/documents/fca-approach-advancing-objectives.pdf
22 July: Monthly PPI refunds and compensation. The FCA has published its monthly update on PPI refunds and compensation for May 2013. During May 2013, GBP 422 million was paid back to customers who complained about the way they were sold PPI, taking the total paid out since January 2011 to £10.5 billion. The figures come from 24 firms that made up 96% of complaints about the sale of PPI last year.
22 July: Alternative Investment Fund Managers Directive. On 22 July 2013 the UK law implementing the Alternative Investment Fund Managers Directive (AIFMD) came into force. The legislation creates a tighter regulatory framework for alternative investment fund managers of hedge funds, private equity firms and investment trusts. There is a section of the FCA website which is devoted to the AIFMD, with sections on what is changing, a timetable of implementation and relevant publications.
http://www.fca.org.uk/firms/markets/international-markets/ aifmd
UKLA publications:
No new developments this week.
Upper Tribunal (Tax and Chancery Chamber):
No new developments this week.
Financial Ombudsman Service (FOS):
25 July: FOS board scheme of delegation. The FOS has published a board scheme of delegation. The purpose of the scheme of delegation is to define and record:
- The functions and obligations specifically reserved to the FOS board under the Financial Services and Markets Act 2000, and amended by the Financial Services Act 2012
- The delegation of certain FOS board functions and obligations to the Chief Ombudsman and the FOS executive, and the FOS executive's powers of further delegation. The FOS board has established sub-committees to carry out specific functions including delegated functions where appropriate
http://www.financial-ombudsman.org.uk/about/Board- Scheme-of-Delegation-2013.pdf
23 July: FOS feedback statement: updating the scope of its voluntary jurisdiction. The FOS has published a feedback statement to its March 2013 consultation paper setting out proposed amendments to its voluntary jurisdiction. The FOS received no responses to the consultation and therefore proceeded on the basis set out in the consultation and
amended its rules accordingly. The amendments have been approved by the FCA Board and will come into effect on 22 July 2013.
http://www.financial-ombudsman.org.uk/publications/ consultations/VJ-feedback-statement-jul13.pdf
London Stock Exchange (LSE):
No new developments this week.
Legislative updates
No new developments this week.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
