UK: Weekly Financial Services Regulatory Update - Week To 12.10.12

Consultation papers:

No new developments this week.

Discussion papers:

No new developments this week.

Policy statements:

No new developments this week.

Press releases:

No new developments this week.


11 October: Mansion House Speech: Adair Turner, FSA chairman.

The FSA has published a speech by Adair Turner in which he reflects upon his tenure as FSA Chairman and the issues the financial services industry has faced during recent years. He considers the causes of the financial crisis and comments that they should have been foreseeable. The failings he says came not only from the FSA for conducting a too light touch system of regulation, but also that there were deficient rules, a deficient structure and a dangerous culture surrounding the financial markets. The rules allowed banks to function with equity capital resources and liquidity buffers which were well below safe levels. The structure of governance gave the FSA too much to do in combining good conduct and prudential regulation in one body.

In addition, neither the FSA nor the Bank of England gave adequate attention to the risks posed by increases in leverage, booming credit supply and asset prices. Failings in banking culture came from too much focus and importance being placed on short-term return, increasing leverage and higher return for shareholders. Not enough appreciation was given to how the market would be affected if a bank were to fail. Turner also sets out the steps already taken to combat the issues of the financial crisis as well as those still in consideration. These include the creation of the FCA, PRA, and FPC. In addition, there have been European capital liquidity requirements put in place and the recommendations from the Vickers' Commission on banking. He praises the City for work already done and concludes that while many new systems are coming into place, there is still much to be done to recover from the events of 2007/8.

Bulletins and newsletters:

No new developments this week.

Final notices:

8 October: Final Notice – John Blake

The FSA has published a final notice issued to John Blake, former MD of Welcome Financial Services Ltd (Welcome) (a subsidiary of Cattles Plc, now Cattles Ltd), banning him from performing any function relating to any regulated activity and issuing a fine of £100 000.

The FSA found that Mr Blake who was MD at Welcome between August 2007 and February 2009 engaged in market abuse and approved (along with other directors) Welcome's 2007 report which contained false and misleading statements. This report was fed into Cattles Plc's annual report and also its rights issue prospectus in 2008. In March 2012, the FSA published the final notices it issued to Cattles and Welcome, as well as James Joseph Corr (former finance director of Cattles) and Peter Douglas Miller (former finance director of Welcome). The FSA considered this a serious breach as it took place over a sustained period of time. The publication of Mr Blake's final notice was delayed as he referred the FSA's decision to the Upper Tribunal, but subsequently withdrew his referral.

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:

11 October 2012: FSA Handbook Release 130

The FSA has published updates to the Handbook including changes to the glossary, regulatory processes, redress, business standards, high level standards and prudential standards. There are also changes to the specialist sourcebook, COLL.

11 October: FSA Frequently Asked Questions

The FSA has published three sets of FAQs to help firms complete sections of the retail mediation activities return. These data reporting requirements will form part of the FSA's supervision and monitoring of compliance with the requirements of its new retail distribution review.

9 October 2012: FSA to repeat Insurance stress test exercise

The FSA has updated its webpage on the quantitative techniques and tools it has developed in relation to insurance firms in its internal model approval process (IMAP) under Solvency II. The FSA plans to repeat the general insurance stress test carried out in 2011. This will help the FSA monitor firms' internal models and focus future discussions with firms. The FSA will update firms by the end of 2012. e

10 October: Details of £54m package for CF Arch cru investors

The FSA has published details on its website relating to Arch cru following on from the announcement of the £54m package for investors in the suspended CF Arch cru Diversified Funds and CF Arch cru Investment Funds on 21 June 2011. A webpage providing latest news and FAQs was also made available on the same date.

9 October: FSA updates Payment Services Regulations approach document

The FSA has updated its approach document aimed at helping firms implement the relevant rules and guidance of the Payment Services Regulations 2009. This revised document incorporates changes the FSA has made in response to its consultations in April and September 2012.

Other publications:

12 October: HM Treasury publishes draft Financial Services (Banking Reform) Bill

HM Treasury has published a paper on its proposals for banking reform. The paper includes a draft version of the Financial Services (Banking Reform) Bill, and sets out an overview of Government policy on banking reforms as well as explanatory notes to the Bill. The draft Bill is intended to give the Treasury the power to implement the recommendations of the Independent Commission on Banking, including the ring-fencing proposals. The draft Bill will now be subject to pre-legislative scrutiny by the Parliamentary Commission on Banking Standards, which is scheduled to report by 18 December 2012. The government intends to introduce the Bill formally to Parliament in early 2013.

9 October: Serious Fraud Office revises policies on facilitation payments, business expenditure (hospitality and gifts) and corporate self reporting

The SFO has issued revised statements of policy on facilitation payments, business expenditure (hospitality and gifts) and self-reporting which will take immediate effect and supersede previous statements of policy or practice. The SFO confirmed that facilitation payments (for example, payments to perform a pre-existing duty) are illegal under the Bribery Act 2010. The purpose of the revised policies is to restate the SFO's primary role as an investigator of fraud and corruption and ensure there is consistency with other prosecuting bodies. All decisions to prosecute will be governed by joint SFO/ CPS guidance.

9 October: Complaints Commissioner recommends FSA waive fees for e-money issuer

The Office of the Complaints Commissioner has published a decision (dated 4 September) in response to a claim against the FSA brought by a small firm offering e-money services. The firm was registered with the FSA under the Payment Services Regulations 2009 and the complaint stated that it was not made aware, when it registered with the FSA, that it would be expected to pay annual fees to the FSA.

The FSA has accepted that the information was not sufficiently clear and agreed to waive the fees for the 2010/11 period The decision, however, recommends the FSA also waive the fees for 2011/12 as it only waived the fees for the 2010/11 period once the firm became liable for the 2011/12 period.

The FSA has accepted this decision and will implement the recommendation.

8 October 2012: Financial Services fines to go to the Exchequer

HM Treasury has issued a press release stating that financial services fines (in excess of enforcement case costs) will no longer be directed back into the industry. £35 million of fines revenue relating to attempted LIBOR manipulation has been earmarked to support Britain's Armed Forces, and in future, regulatory fines (excluding enforcement case costs) for the year will go to the Exchequer. Currently this revenue is used to reduce the annual levy placed on other financial institutions. These new arrangements will be set out in amendments to the Financial Services Bill and will apply to fines received from 1 April 2012, which will include the penalty imposed on Barclays in relation to LIBOR, and all fines imposed by the new FCA and PRA, and to fines imposed by the Bank of England in the course of exercising its regulatory powers in relation to financial services.

UKLA publications:

No new developments this week.

Upper Tribunal (Tax and Chancery Chamber) (formerly Financial Services and Markets Tribunal (FSMT)):

No new developments this week.

Financial Ombudsman Service (FOS):

10 October: Ombudsman News Issue 105

The Financial Ombudsman Service has published issue 105 of Ombudsman News. Contents include: complaints statistics for the second financial quarter, case studies on travel insurance complaints, and a question and answer section including distinctions between technical terms.

London Stock Exchange (LSE):

11 October: Direct Line Insurance Group raises £787m in London's largest UK capital-raising of 2012

The group was valued at £2.6bn when Paul Geddes CEO opened trading on the London Stock Exchange. Direct Line Insurance group opened for conditional dealings in its shares ahead of its admission to the LSE on 16 October. The group's shares were priced at 175p each and the offering raised £787m making this the largest company fundraising on London's markets this year.

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.

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