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.
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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:
24 May: FCA publishes a Decision Notice against Angela Burns. The FCA has published a Decision Notice which fines Angela Burns GBP 154,800 and prohibits her from performing any role in regulated financial services for failing to disclose her conflicts of interest. In January 2009 and May 2010, Ms Burns became a non-executive director (NED) and chair of the investment committee for two UK mutual societies. Ms Burns did not tell the mutual societies that she was at the same time trying to obtain work from a US based investment manager and, in the FCA's opinion, attempted to use her NED positions to benefit herself. During Ms Burns' tenure as NED and chair of the investment committees at both mutual societies, one mutual society placed a GBP 350 million mandate, and the other was considering placing a GBP 750 million mandate with the investment manager. In the FCA's opinion, Ms Burns had a duty to disclose her interest in seeking consultancy work from the investment manager to her fellow mutual societies' directors. Ms Burns made no such disclosure. In the FCA's view, Ms Burns also attempted to use her NED positions to benefit herself. Ms Burns has referred the matter to the Upper Tribunal. The FCA made no criticism of the mutual societies or the investment manager.
Press release: http://www.fca.org.uk/ news/decision-notice-angela-burns
Decision Notice: http://www.fca. org.uk/static/documents/decision-notices/angela-burns.pdf
Speeches:
No new developments this week.
Final notices:
23 May: JP Morgan International Bank fined for systems and controls failings in its wealth management business. The FCA has published a Final Notice fining JP Morgan International Bank Limited (JP Morgan) GBP 3,076,200 for failing to comply with Principle 3 and SYSC 9.1.1R. The FCA concluded that JP Morgan failed to take reasonable care to organise and control its affairs in relation to its provision of retail investment advice and portfolio investment services. The failings had persisted for two years and were not corrected until the FCA brought them to the firm's attention in the course of its thematic review into wealth management firms and the suitability of their advice. Among the issues identified by the FCA were:
- Client files which were not kept up to date or that did not retain important client suitability information
- A computer-based record system that did not allow sufficient information to be retained
- Inadequate suitability reports that did not explain the client's demands or needs, or indicate why a particular investment was suitable to those needs
- Communications to confirm client suitability profiles were not always sent to the client
JP Morgan agreed to settle at an early stage of the FCA's investigation and therefore qualified for a 30% discount. Were it not for this discount, the FCA would have imposed a financial penalty of GBP 4,394,695.
Press release: http://www.fca.org.uk/news/jp-morgan-international-bank-fined-systems-controls-failings
Final Notice: http://www.fca.org.uk/static/documents/final-notices/jp-morgan-international-bank-limited.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:
22 May: PRA statement on bank capital. The PRA has published a statement on bank capital which notes that it will be taking forward with the major UK banks the adjustments to capital positions identified by the Financial Policy Committee (FPC) relating to expected future losses, conduct costs and prudent risk-weighting. The PRA states that it has set out the capital requirements for Lloyds Banking Group and The Royal Bank of Scotland and that the two banks have advanced their plans to a position where disclosure is appropriate. Once discussions have concluded with all banks, more information will be provided along with confirmation that, where necessary, banks will take appropriate steps to ensure that they meet the FPC's recommendations.
http://www.bankofengland.co.uk/publications/Pages/ news/2013/066.aspx
21 May: FCA factsheet: Covered bond issuers. The FCA has published a factsheet on covered bond issuers. It explains the role of the FCA in supervising regulated covered bond programmes and regulated covered bonds. The factsheet highlights key features of the regime and provides an overview of the FCA's stress testing of regulated covered bond programmes.
http://www.fca.org.uk/static/documents/factsheets/ factsheet-004-cbi.pdf
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):
23 May: FOS technical note on misrepresentation and non-disclosure. The FOS has published a technical note explaining its approach to complaints where an insurer says a consumer did not "disclose" everything they should have when taking out an insurance policy.
21 May: Challenge to FOS final decision dismissed in R (on the application of Calland) v Financial Ombudsman Service Ltd (2012). The High Court has dismissed a challenge to a FOS final decision which upheld a complaint brought against the claimant, Mr Calland, an Independent Financial Adviser, and ordered compensation of GBP 48,355 plus interest to be paid. Mr Calland had challenged that decision on three grounds: (1) that the time taken by the FOS to determine the complaint was unreasonable; (2) that the decision was taken without convening an oral hearing; and (3) that in all the circumstances, the FOS investigation was carried out in a way which was unfair. The court dismissed the first ground, stating that considering all the circumstances, including the repeated and lengthy challenges made by Mr Calland during the investigation, it would be highly artificial to find that the time taken by the FOS to reach a final determination constituted a breach of Mr Calland's Article 6 rights (the right to a fair trial). The second ground was dismissed as the court decided that this was not a case where fairness required an oral hearing to be held and that the FOS had been able to decide the matter without an oral hearing. Finally, the court found that, considering all the circumstances, there was no valid basis on which the FOS's decision could be quashed, which would have been a thoroughly disproportionate remedy and highly unfair to the complainant.
http://www.lawtel.com/UK/FullText/ AC0137074QBD(Admin).pdf
London Stock Exchange (LSE):
20 May: Lloyds Bank becomes a dedicated market maker on ORB. Lloyds Bank has become a dedicated market maker on the London Stock Exchange's Order book for Retail Bonds (ORB). Lloyds Bank will quote continuous two-way pricing throughout the trading day in gilts and corporate bonds listed on ORB. Lloyds Bank is the second Gilt-Edged Market Maker to join the platform as market maker. Since its launch in 2010, GBP 3.3 billion has been raised on ORB from an increasingly diverse range of issuers, and it is becoming an established platform for companies seeking alternative sources of funding with the growing popularity of retail-sized bonds being reflected in the increasing number of issuers.
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