UK: Weekly Financial Services Regulatory Update - Week To 15.02.13

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. 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.

If you have any comments on the content or format of the update or if you no longer wish to receive it, or have a colleague who would like to receive it, please email publications@clydeco.com.

Consultation papers:

No new developments this week.

Discussion papers:

No new developments this week.

Policy statements:

No new developments this week.

Press releases:

13 February: FSA secures Supreme Court win in satellite warranty case. The Supreme Court has unanimously dismissed appeals by Digital Satellite Warranty Cover (DSWC), and Bernard Freeman and Michael Sullivan, trading as Satellite Services (Satellite). The FSA had previously secured winding up orders from the High Court against DSWC and Satellite on 31 January 2011 on the basis that the firms were offering consumers extended warranty cover for satellite TV equipment, which amounted to contracts of insurance, without FSA authorisation. An important feature of the cover was that neither DSWC nor Satellite were required to pay their customers money - the cover involved the repair or replacement of the equipment in the event of breakdown, malfunction or physical damage. However, the High Court ruled that the extended warranties amounted to contracts of insurance – something that requires FSA authorisation. The Supreme Court upheld that decision.

http://www.fsa.gov.uk/library/communication/pr/2013/015.shtml

13 February: FSA publishes the results of a mystery shopping review into the quality of investment advice in banks and building societies. The Financial Services Authority (FSA) has published the results of a mystery shopping review, carried out between March and September 2012, looking into the quality of investment advice given by banks and building societies. This is the first time that the FSA has published the results of a mystery shopping exercise since the Payment Protection Insurance (PPI) mystery shopping exercise in September 2008. This mystery shopping review assessed six major firms in the retail banking sector, focusing on the quality of advice given to customers looking to invest a lump-sum. The use of mystery shopping as a supervisory tool is an example of the more intrusive approach that will be used by the Financial Conduct Authority (FCA). This commitment was made in 'Journey to the FCA' which was published in October 2012.

The FSA assessed 231 mystery shops across six major firms in the retail banking sector, focusing on the quality of advice given to customers looking to invest a lump sum. The results show that, while approximately three-quarters of customers received good advice, there were concerns with the quality of advice in the other quarter, where in 11% of cases customers received poor advice and in 15% of cases advisers did not gather enough information to ensure the advice was suitable. In response to this report, the firms involved have agreed to retrain advisers, make substantial changes to their advice processes and controls for new business, and undertake past business reviews to identify historic poor advice and put this right for customers. Firms have also been required to employ an independent third party to either carry out or oversee this work. One firm has been referred to enforcement.

Press release: http://www.fsa.gov.uk/library/communication/pr/2013/014.shtml

Full review: http://www.fsa.gov.uk/static/pubs/other/thematic_assessing_retail_banking.pdf

11 February: FSA secures High Court victory against illegal land banking firm, Asset Land. The FSA has won a key victory in the battle against unauthorised businesses after the High Court declared that David Banner-Eve, Stuart Cohen, Asset Land Investments Plc and Asset L.I. Inc. ran an illegal land bank by operating a collective investment scheme without FSA authorisation. Following this judgement the FSA will seek orders from the High Court banning Banner-Eve and Cohen for life from selling interests in land banking schemes for business purposes in the UK. The FSA will also seek orders from the High Court for the payment of at least £15 million by Banner- Eve, Cohen and the Asset Land companies to return to investors. Although freezing injunctions obtained last year will remain in place, the FSA has not yet identified any assets that would enable more than a small proportion of these payments to be made, and therefore it is unclear how much will ultimately be returned to investors. The FSA is continuing to make enquiries to trace the funds paid by investors. The FSA does not regulate the sale of land, but land banking can amount to collective investment, something that does require FSA authorisation. Banner- Eve, Cohen and the Asset Land companies have never been authorised by the FSA to sell land in this way so their land sales were unlawful. Furthermore, as their business activities were unauthorised, victims of the scam were not covered by the Financial Services Compensation Scheme.

http://www.fsa.gov.uk/library/communication/pr/2013/012.shtml

Speeches:

11 February: Market Force and the Chartered Institute's Nicholas Barbon Lectures. On 11 February 2013 the FSA published a speech, dated 6 February 2013, by Andrew Bailey, Managing Director of the Prudential Business Unit, on market forces. Mr Bailey discussed why it makes sense to place prudential supervision of insurance in the Prudential Regulation Authority (PRA) alongside banks and major investment firms, citing the common necessity of assurance of continuity of access to critical financial services as one of the core reasons. He also noted that in creating the "twin peaks" model, the with-profits area has been the most challenging. Mr Bailey spoke on the issue of systemic risk in relation to insurers and he noted that there were some insurance firms and specific sectors that, because of their size and complexity pose a greater risk to the financial system. Mr Bailey noted that for these firms, the PRA would adopt a more enhanced and intensive style of supervision.

http://www.fsa.gov.uk/library/communication/speeches/2013/0206-ab

Bulletins and newsletters:

The FSA has published its final newsletter on the Retail Distribution Review (RDR). The newsletter includes:

  • Advice on whether an advisory firm can meet the independence rule if it only recommends "passive investments"
  • A reminder of the new RDR data requirements.
  • A reminder about the limited circumstances in which adviser charges can be paid over a period of time
  • A summary of the key findings from research conducted last year among retail investment advisers to track progress against the RDR professional standards requirements

The newsletter also contains a link to FAQs on the new RDR rules which have been published by the FSA.

http://www.fsa.gov.uk/static/pubs/newsletters/rdr9.pdf

Final notices:

14 February: FSA fines Nestor Healthcare Group £175,000 for clearance to deal failings. The FSA has fined Nestor Healthcare Group Limited (Nestor) £175,000 for failing to take adequate steps to ensure that its board members and senior executives complied with the share dealing provisions of the FSA's Model Code. Although Nestor had a policy on how senior staff should obtain clearance to trade in the company's shares, breaches occurred because Nestor's weak procedures allowed this policy to be forgotten by the board. The FSA concluded that between 18 October 2006 and 30 June 2010, Nestor did not take all proper and reasonable steps to secure the compliance of persons discharging managerial responsibility in accordance with paragraphs 3-7 of the Model Code. By failing to do so, Nestor breached Listing Rule 9.2.8. Nestor also failed to take reasonable steps to enable its directors to understand their responsibilities and obligations under the Model Code or to maintain adequate procedures, systems and controls to enable it to comply with its obligations under Listing Rule 9.2.8. As a result of these failings, a number of share purchases were carried out without the required approval or proper clearance. The FSA does not allege that any of the dealings referred to in the Final Notice were based on inside information. This is the first fine imposed on a company by the FSA for breaches of the Listing Rules and the Listing Principles relating to compliance with the Model Code. Nestor agreed to settle at an early stage and therefore qualified for a 30% discount. Were it not for this discount, the FSA would have imposed a financial penalty of £250,000.

Press release: http://www.fsa.gov.uk/library/communication/pr/2013/016.shtml

Final Notice: http://www.fsa.gov.uk/static/pubs/final/nestor.pdf

13 February: Final Notice: Ryan & Company Insurance Brokers. The FSA has published a Final Notice cancelling Ryan & Company Insurance Brokers' Part IV permission. The FSA concluded that Ryan & Company Insurance Brokers was not a fit and proper person because it has failed to comply with the regulatory requirement to submit its Retail Mediation Activities Return for the period ended 31 July 2012 (the RMAR). The FSA also considered that Ryan & Company Insurance Brokers had not been open and co-operative in all its dealings with the FSA, in that it failed to respond to the FSA's repeated requests for it to submit the RMAR, and that therefore it failed to comply with Principle 11.

http://www.fsa.gov.uk/static/pubs/final/ryan_company.pdf

12 February: UBS fined £9.45m for failings in its sale of AIG fund. The FSA has fined UBS AG (UBS) for failures in the sale of the AIG Enhanced Variable Rate Fund (the Fund). These failures led to UBS customers being exposed to an unacceptable risk of an unsuitable sale of the Fund. UBS also failed to deal properly with complaints about sales of the Fund. Between 1 December 2003 and 15 September 2008 UBS sold the Fund to 1,998 high net worth customers. After conducting a sample review of sales of the Fund to 33 customers, the FSA found that 19 were mis-sold and there was a considerable risk that 12 of the remaining 14 may have also been mis-sold. UBS's failings were serious and included:

  • Failing to carry out adequate due diligence on the Fund before selling it to customers and failing to ensure that advisers could correctly determine its suitability for customers
  • Recommending the Fund to customers even though it did not provide the level of capital security they sought.
  • Wrongly indicating that the Fund was a cash fund that invested in money market instruments
  • Failing to respond appropriately during the 2007-8 financial crisis when UBS had concerns about the fund
  • Failing to fairly assess customer complaints relating to sales of the Fund
  • Not maintaining adequate sales records, including a record on what basis customers were sold the Fund

As a result of these failings, UBS breached Principle 9 and Principle 6 of the FSA's Principles for Business. UBS agreed to settle at an early stage entitling it to a 30% discount on its fine. Were it not for this discount, the FSA would have imposed a financial penalty of £13.5 million on UBS.

Press release: http://www.fsa.gov.uk/library/communication/pr/2013/013.shtml

Final Notice: http://www.fsa.gov.uk/static/pubs/final/ubsag.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:

14 February: Interest rate hedging products announcement. Following the recent announcement that Barclays, Lloyds and RBS would start work on reviewing sales of interest rate hedging products (IRHPs) to small businesses, a number of other banks have also agreed to conduct a review. Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire banks (part of the National Australia Group (Europe)), Co-operative Bank and Santander UK have now also agreed to review their sales of IRHPs in line with the approach set out in the FSA's report.

http://www.fsa.gov.uk/library/other_publications/interest-rate-swaps/interest-rate-swaps-feb-update-2013

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):

No new developments this week.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.