This weekly update from Clyde & Co's Financial Services Regulatory Team summarises new developments as reported by the FSA, 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.
Consultation papers:
No new developments this week.
Discussion papers:
No new developments this week.
Policy statements:
22 March: Distribution of retail investments: RDR Adviser Charging and Solvency II disclosures – feedback to CP11/25 and final Adviser Charging rules. The FSA has published its feedback to the responses it received in relation to CP11/25 (which it released for consultation initially in November 2011) and its final Adviser Charging rules. The consultation paper covered:
- Issues on facilitating the payment of adviser and consultancy charges under the Retail Distribution Review (RDR) rules
- Whether product providers should report investment amounts on a net or gross of any adviser or consultancy charges being facilitated when reporting data under the FSA's data requirements
- Minor changes to the Conduct of Business sourcebook (COBS) in relation to disclosure requirements which were made in order to implement the requirements of the Solvency II Directive
Respondents to the first area were generally in favour of the guidance so no changes were made. Only a minor change was made to the wording of the second area which had mistakenly referred only to adviser charges rather than to both adviser and consultancy charges. In relation to the COBS amendments, respondents agreed with the FSA's general approach but asked for clarification of the intention and scope of two of the Directive's provisions which the FSA has therefore provided in its response.
Rules on the facilitation of payment of adviser and consultancy charges and on reporting investment amounts will come into effect on 31 December 2012 (at the same time as the main RDR Adviser Charging rules).
http://www.fsa.gov.uk/static/pubs/policy/ps12-05.pdf
Press releases:
22 March: FSA Publishes Business Plan 2012/13. The FSA has published its business plan for 2012/13 detailing the FSA's initiatives for the year ahead. In view of the FSA's forthcoming split into the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), this is likely to be the FSA's final business plan. The plan focuses on five main areas:
- The delivery of the regulatory reform programme
- The continued influence on the international and European policy agenda
- The delivery of financial stability
- The delivery of market confidence and credible deterrence
- The delivery of FSA initiatives to improve consumer protection (early product intervention, the RDR and MMR)
http://www.fsa.gov.uk/library/communication/pr/2012/031.shtml
21 March: FSA secures £32 million High Court Judgment against three land banks but victims are unlikely to get their money back. The FSA has successfully secured a judgment against James Kenneth Maynard, Countrywide Landholdings Limited ("Countrywide") and Plateau Development & Land Limited ("Plateau") which operated a collective investment scheme without FSA authorisation, and sold plots of land unlawfully to UK customers. Maynard has been banned for life from selling land for business purposes in the UK. In addition, Maynard and Countrywide have been ordered to pay £32 million to the FSA and Plateau (now in liquidation) has been ordered to pay just under £1 million.
The unlawful scheme involved selling plots of land to investors which was promised to increase in value once planning permission was obtained. Planning permission was never intended to be sought, however, and was unlikely ever to be granted for the plots sold (some being in areas of outstanding natural beauty). Although the FSA does not regulate land sales, it does regulate collective investment schemes. Unfortunately for the victims of this scheme, because it did not have FSA authorisation, losses incurred will not be covered by the Financial Services Compensation Scheme.
http://www.fsa.gov.uk/library/communication/pr/2012/030.shtml
18 March: WorldSpreads Limited enters Special Administration Regime. The FSA has confirmed that WorldSpreads Limited ("WorldSpreads") has entered the Special Administration Regime. During the course of 16 March 2012, WorldSpreads became aware of accounting irregularities that made it apparent that the company was unable to continue business. In order to mitigate losses for customers, the company has been placed into special administration by its directors. As much cash as possible will be returned to each customer and any shortcomings may be recoverable by some customers under the Financial Services Compensation Scheme. Customers are advised to contact administrators to ascertain how the administration will affect them personally.
http://www.fsa.gov.uk/library/communication/pr/2012/029.shtml
Speeches:
No new developments this week.
Bulletins and newsletters:
No new developments this week.
Final notices:
20 March: Martin Russell Lafrance. The FSA has issued a final notice, dated 20 March, prohibiting Martin Lafrance from continuing to perform any controlled function in relation to the exercise of significant influence in relation to any regulated activity. Lafrance was an authorised person working at General Finance Centre Limited ("GFC") in Dorset. GFC was a mortgage broker that arranged regulated mortgages on a non-advised basis. In 2006, the FSA identified concerns in relation to GFC's lack of systems and controls, inadequate sales process and failure to identify possible fraudulent mortgage applications. Some remedial action was taken but in 2008 the FSA conducted a desk-based review of GFC's sale process and six customer files which led to a formal investigation and findings that:
- GFC had inadequate safeguards in place to prevent financial crime
- Lafrance was inadequately supervising the Operations Department
- Discrepancies in customer's files were not investigated by GFC, even when identified
- Customer applications were not being handled with the due level of skill, care and diligence
- Lafrance failed to understand his regulatory responsibilities
Though Lafrance initially referred the matter to the Upper Tribunal (Tax and Chancery Chamber) on 8 November 2011, he later withdrew his reference and the Prohibition Order against Lafrance therefore takes effect as of 20 March 2012.
http://www.fsa.gov.uk/static/pubs/final/martin-lafrance.pdf
16 March: David John Sime. The FSA has issued a final notice, dated 16 March 2012, refusing David Sime's application for approval as a sole trader. It does so following the decision of the Upper Tribunal on 10 January 2012, that Mr Sime was not a fit and proper person to perform the controlled functions to which his applications for approval relates and for the reasons stated in the judgment of the Tribunal. Specifically, Mr Sime:
- Did not treat the application to perform controlled functions with sufficient seriousness
- Failed to declare certain aspects of his history demonstrated an uncooperative attitude to the FSA's requirements
- Signed a false declaration
http://www.fsa.gov.uk/static/pubs/final/david-sime.pdf
http://www.tribunals.gov.uk/financeandtax/Documents/decisions/sime_v_fsa_decision.pdf
16 March: Elmswood EU Ltd. The FSA has issued a final notice, dated 16 March 2012, refusing Elmswood EU Ltd's ("Elmswood") application for Part IV permission under section 40 of the Financial Services and Markets Act 2000. It does so following the decision of the Upper Tribunal on 10 January 2012 that it cannot ensure that Elmswood will satisfy, and continue to satisfy, the threshold conditions in relation to all of the regulated activities for which it would have permission if the application were granted. The reasons for the Tribunal's decision, and therefore the decision of the FSA, is that Mr Sime has not been held to be a fit and proper person to carry out the controlled functions to which his application relates and, due to insufficient human resourcing, Elmswood would be wholly dependent upon Mr Sime to carry out its regulated activities.
http://www.fsa.gov.uk/static/pubs/final/elmswood-eu.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 FSA publications:
23 March: FG12/09: Retail Product Development and Governance – Structured Product Review. The FSA has published the feedback it received, as well as its responses to that feedback, in relation to the November 2011 Guidance Consultation on Retail Product Development and Governance - Structured Product Review. The review specifically looked at how firms were designing structured products, identifying their target markets and how they handled post-sales responsibilities. Findings and good-practice guidance is provided for each of these areas.
http://www.fsa.gov.uk/static/pubs/guidance/fg12-09.pdf
22 March: FSA Publishes Handbook Notice 118. The FSA has published Handbook Notice 118 setting out the changes made to it by the FSA Board through nine instruments.
http://www.fsa.gov.uk/static/pubs/handbook/hb-notice118.pdf
21 March: FSA updates Solvency II website. The FSA has updated the materials available to firms to assist them in adapting to the changes arising out of the Solvency II Directive (2009/138/EC). Changes have been made to the Questions and Answers document to include items from the panel session at its industry briefing on 27 February 2012 and "Submission notes: approval to use an internal model" has been published which provides guidance on specific Articles under the Directive.
http://www.fsa.gov.uk/static/pubs/international/qanda-february-2012.pdf
http://www.fsa.gov.uk/static/pubs/international/sol-ii-submission-notes.pdf
21 March: Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011: Explanatory Document for Credit Unions. The FSA has published an explanatory document for credit unions on the Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011. The Order came into effect on 8 January 2012 and removes restrictive legislative provisions that affect credit unions as well as introduces a new class of shares for credit unions. In this explanatory document, the FSA also reminds credit unions that many of the new powers created by the Order can only be exercised if the union's registered rules specifically provide for them to do so. This document is not official FSA guidance.
http://www.fsa.gov.uk/smallfirms/pdf/lro-explanatory.pdf
UKLA publications:
21 March: UKLA publishes Primary Market Bulletin, Issue No. 1. The UKLA has published the first Issue of Primary Market Bulletin, replacing List!. The new publication provides broad coverage of topics relevant to issuers, sponsors, advisers and other persons who engage with the UK Listing Authority. The Bulletin will usually be split into sections; the first consisting of a brief discussion on proposed revisions to the Technical and Procedural Notes, the second setting out the proposed amendments to the Notes. This first Issue sets out the outcome of the UKLA's 2011 review of its helpdesk and provides further background to its proposals for providing individual guidance.
http://www.fsa.gov.uk/static/pubs/ukla/ukla-pmb-issue1.pdf
Upper Tribunal (Tax and Chancery Chamber) (formerly Financial Services and Markets Tribunal (FSMT)):
No new developments this week.
Financial Ombudsman Service (FOS):
No new developments this week.
London Stock Exchange (LSE):
22 March: London Stock Exchange welcomes Scotland's Energy Assets Group Plc to the Main Market. The London Stock Exchange has welcomed Energy Assets Group Plc ("Energy Assets") to a Premium Listing on the Main Market. The Company joins the market with a market capitalisation of £57 million, raising £15 million on admission.
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.
Michael Tang - Global Financial Services Digital Transformation Leader, Aug 2017 (Video)
