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.
Consultation papers:
No new developments this week.
Discussion papers:
No new developments this week.
Policy statements:
25 May: UK Implementation of Amending Directive 2010/73/EU – Simplifying the EU Prospectus and Transparency Directives. The FSA has issued a joint policy statement with HM Treasury on the main issues arising from its consultation paper on the 'UK implementation of Amending Directive 2010/73/EU: Simplifying the EU Prospectus and Transparency Directives'. The statement summarises the responses that were received during that consultation and outlines the policy decisions that were made as a result. The statement also sets out the changes that HM Treasury is making to FSMA and the changes that the FSA is making to its rules. Member states have until 1 July 2012 to implement the Amending Directive into national legislation.
http://www.fsa.gov.uk/static/pubs/policy/ps12-09.pdf
Press releases:
21 May: Tribunal upholds FSA decision to ban and fine former UBS advisers £1.3 million for not being fit and proper in relation to an unauthorised trading scheme. The Upper Tribunal (Tax and Chancery Chamber) has directed that the FSA should fine Sachin Karpe (former Desk Head of the Asia II Desk at UBS AG (UBS) in London) £1.25 million and Laila Karan (a former Client Advisor on the Asia II Desk in London) £75,000 and ban them both from performing any role in financial services, for failing to act with integrity and for not being fit and proper persons. Between February 2007 and January 2008, Karpe carried out substantial unauthorised trading involving billions of pounds across 39 client accounts, 21 of which suffered substantial losses. Although Karan was not actively involved in the unauthorised trading, she was aware that unauthorised activity was being carried out on customer accounts for which she was responsible and assisted Karpe in concealing it.
The FSA previously fined UBS £8 million for its failings and the firm has since paid customers $42 million in compensation. Other former client advisers on the Asia II Desk, Jaspreet Singh Ahuja in 2011 and Andrew Cumming in 2009, have also been fined for their involvement.
For the related judgments, please see the relevant section of this update.
http://www.fsa.gov.uk/library/communication/pr/2012/057.shtml
Speeches:
No new developments this week.
Bulletins and newsletters:
25 May: Policy Development Update No. 147. The FSA has published policy development update number 147, outlining the publications which have been issued since the previous update, providing information about Handbook updates and setting out a timetable for forthcoming publications. Recent publications include policy statements on pension transfer value analysis assumptions, the regulatory prudent valuation return, and a consultation paper on the consumer redress scheme in respect of unsuitable advice to invest in Arch cru funds.
http://www.fsa.gov.uk/static/pubs/newsletters/pdu-newsletter-may12.pdf
Final notices:
22 May: Derek William Wright. The FSA has issued a final notice, dated 26 April 2012, prohibiting Derek William Wright from performing any function in relation to any regulated activity. The FSA has published this final notice following the Upper Tribunal's decision in Derek William Wright v FSA. Mr Wright was held to have acted dishonestly, with a lack of integrity and with a "cavalier attitude to the FSA and to compliance with regulation". Specifically, Mr Wright:
- Was disciplined for misconduct by Lloyd's disciplinary tribunal
- Performed controlled functions without FSA approval;
- Submitted inaccurate and misleading information to the FSA, thereby demonstrating a lack of competence and a lack of honesty;
- Failed to cooperate with the FSA
- Attempted to deliberately mislead the FSA
http://www.fsa.gov.uk/static/pubs/final/derek-wright.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 May: Treasury Committee publishes correspondence with FSA and FOS on mis-selling. The Treasury Select Committee has published correspondence between the Chairman of the Committee, the Chair of the Financial Services Authority and the Chairman of the Board of the Financial Ombudsman Service. The letters published demonstrate the concerns expressed by the Chairman of the Committee in relation to the way in which a number of small businesses have been sold complex interest rate derivative products by major banks.
UKLA publications:
No new developments this week.
Upper Tribunal (Tax and Chancery Chamber) (formerly Financial Services and Markets Tribunal (FSMT)):
15 May: Sachin Karpe v FSA. Mr Karpe was a Desk Head of the Asia II Desk in the London branch of UBS which provided wealth management services to customers in India. He was approved to perform the Investment Adviser controlled function which was superseded by the Customer controlled function on 1 November 2007. On 9 July 2010, the FSA issued Mr Karpe a Decision Notice fining him £1.25 million for breaching Principle 1 of the FSA's Statements of Principle and Code of Practice for Approved Persons and prohibiting him from performing any function in relation to regulated activity on the basis that he is not a fit and proper person. The Upper Tribunal concluded that a financial penalty of £1.25 million is an appropriate penalty given the circumstances.
http://www.tribunals.gov.uk/financeandtax/Documents/decisions/FS0019_Sachin_Karpe.pdf15 May: Laila Karan v FSA. Ms Karan was a client adviser within the London branch of UBS's wealth management division. Mr Karpe was Ms Karan's line manager. On 9 July 2010, the FSA issued Ms Karan a Decision Notice fining her £90,000 for breaching Principle 1 of the FSA's Statements of Principle and Code of Practice for Approved Persons and prohibiting her from performing any function in relation to regulated activity on the basis that she is not a fit and proper person. The Upper Tribunal concluded that the appropriate penalty should be £75,000, a lower amount than the FSA's proposed level of fine.
http://www.tribunals.gov.uk/financeandtax/Documents/decisions/FS10_0025_Laila_Karan_v_FSA.pdf
Financial Ombudsman Service (FOS):
21 May: Free-standing additional voluntary contribution (FSAVC) schemes. The FOS has updated its online technical resource in relation to how it handles complaints involving FSAVCs. It outlines how FSAVCs operate, including how much can be invested, the alternatives and the relevant rules before giving examples of the most common complaints and the approach taken by the FOS.
http://financial-ombudsman.org.uk/publications/technical_notes/FSAVC.html
22 May: Ombudsman service publishes annual review of personal finance disputes. The FOS has published an annual review of personal finance disputes which highlights that the ombudsman received 1.2 million consumer complaints last year, with one in five resulting in formal disputes, up 28% on the previous year. 60% of those formal disputes related to the mis-selling of PPI and overall 64% of all cases brought before the ombudsman resulted in compensation for the consumer.
http://financial-ombudsman.org.uk/news/updates/annualreview-May-2012.htm
London Stock Exchange (LSE):
23 May: Vanguard picks London Stock Exchange and FTSE for European ETF debut. Vanguard Asset Management has commenced trading as a new ETF issuer on the main market. It so far has listed five ETFs which are the first products of this type that it has issued in Europe.
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