Do we need a new duty of care in financial services?

On 17 July 2018, the FCA published a paper on its Approach to Consumers (the Approach), accompanied by a discussion paper DP18/5 (the DP) on the possible introduction of a new duty of care and other alternative approaches (a New Duty).

The Approach sets the FCA’s vision for well-functioning markets that work for consumers, and builds on the November 2017 consultation on its Future Approach to Consumers. The aim is to provide greater transparency on when and how the FCA will act to protect consumers, its policy positions on key issues, and its strategy for ensuring that it advances its consumer protection objective with the greatest impact. For our full briefing on the matter, please click here.

 

Jenny Stainsby
Jenny Stainsby
Partner
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+44 20 7466 2995
Karen Anderson
Karen Anderson
Partner
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+44 20 7466 2404
Jon Ford
Jon Ford
Senior Associate
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+44 20 7466 2539

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Filed under Announcements, FCA, Regulatory Reform, Sector Updates by Herbert Smith Freehills, UK, UK Government

Latest bank victory – Hong Kong High Court dismisses mis-selling claim

The Hong Kong Court of First Instance has recently handed down its judgment in Shine Grace Investment Ltd v. Citibank, N.A. and Another (HCCL 28/2008), a case relating to alleged mis-selling of equity accumulator contracts by Citibank.

In dismissing the plaintiff’s claim, Mr Justice Peter Ng applied the Hong Kong Court of Appeal’s (CA’s) reasoning in Chang Pui Yin & Ors v Bank of Singapore [2017] 4 HKLRD 458 that a bank-customer relationship alone does not without more give rise to a duty to advise on the part of the bank. Instead, whether the bank has assumed any such duty or legal responsibility will be assessed objectively, for instance through the contractual terms and any other relevant factual circumstances concerning the bank and its customers.

This is another welcome decision for banks, affirming the central importance of the contractual terms themselves. As a matter of contractual interpretation, the court rejected an argument that the SFC’s main code of conduct had been incorporated by the express terms of the relevant contractual documents. Apart from the contractual terms, the relative sophistication and character of the customer in question was also highly relevant to the court’s decision.

Going forward, financial institutions will no longer be able to rely on their contractual terms to exclude or limit liability in relation to investments entered into after 9 June 2017. Since that date, where a written client agreement is required under SFC regulations (ie, primarily where individual investors and inexperienced corporate investors are involved), a financial institution subject to the regulations is required to include a mandatory suitability clause in the agreement, and may not derogate from this requirement by way of any other contractual arrangement. In the longer term, this is likely to mean fewer mis-selling cases along the lines of Shine Grace.

For our full briefing on the matter please click here.

Gareth Thomas
Gareth Thomas
Partner, Head of Commercial Litigation, Hong Kong
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+852 2101 4025
Dominic Geiser
Dominic Geiser
Partner, Hong Kong
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+852 2101 4629
William Hallatt
William Hallatt
Partner, Head of Financial Services Regulatory, Asia, Hong Kong
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+852 2101 4036
Hannah Cassidy
Hannah Cassidy
Partner, Hong Kong
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+852 2101 4133
Joanna Caen
Joanna Caen
Partner, Hong Kong
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+852 2101 4167

 

 

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Filed under Announcements, Hong Kong, Sector Updates by Herbert Smith Freehills

India’s new anti-corruption law targets bribe-givers and establishes corporate liability offence modelled on the UK Bribery Act

India’s long-awaited Amended Prevention of Corruption Act 2018 came into force on 26 July. Originally proposed in 2013, the amendments introduce a new regime and highlight the emerging focus in Asia on supply-side bribery and corporate liability. Companies and businesses operating in India should familiarise themselves with the new provisions and ensure that they implement adequate compliance procedures.

Please click here for our e-bulletin which summarises the main amendments relevant to corporates.

 

Kyle Wombolt
Kyle Wombolt
Head of Global Corporate Crime & Investigations Practice, Hong Kong
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+852 2101 4005
Robert Hunt
Robert Hunt
Partner, Hong Kong
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+852 2101 4128
Pamela Kiesselbach
Pamela Kiesselbach
Senior Consultant, Hong Kong
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+852 2101 4032
Christine Cuthbert
Christine Cuthbert
Senior Associate, Hong Kong
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+852 2101 4124

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Filed under Announcements, Bribery and Corruption, Hong Kong, India, Sector Updates by Herbert Smith Freehills, UK

First wave of United States sanctions against Iran re-imposed on 7 August 2018, as the amended EU Blocking Statute comes into effect on the same day

End of first wind-down period

Following President Trump’s decision on 8 May 2018 to withdraw the United States from the Joint Comprehensive Plan of Action (“JCPOA”), the US government announced that it would re-impose pre-JCPOA nuclear related sanctions (both primary and secondary) that were lifted under the JCPOA. As we reported previously, two ‘wind-down’ periods – of 90 and 180 days respectively – commenced from the day of the announcement, during which non-US, non-Iranian companies were encouraged by the US government to withdraw from operations in Iran that would be affected by re-imposed sanctions.

On 6 August 2018 the first of these wind-down periods expired. President Trump issued a new Executive Order (“New EO”) re-imposing sanctions effective as of 7 August 2018. For our full briefing on the matter, please click here.

 

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Filed under Announcements, Bribery and Corruption, Corporate Crime, Iran, Sanctions and Money Laundering, Sector Updates by Herbert Smith Freehills, US

HONG KONG’S ANTI-GRAFT COMMISSIONER WARNS OF CORRUPTION ON BELT AND ROAD

The head of Hong Kong’s Independent Commission Against Corruption (ICAC) has warned local investors to beware of rampant corruption in some Belt and Road countries.

ICAC commissioner Simon Peh Yun-Lu pledged the support of the agency, one of the world’s most respected and effective anti-corruption agencies, in helping investors and Belt and Road countries themselves with graft training.

Concern at corruption is far from new; President Xi Jinping highlighted the need for international counter-corruption cooperation at China’s Belt and Road Forum in May 2017. Continue reading

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Filed under Announcements, Asia, Herbert Smith Freehills, Hong Kong, Regulatory Reform, Sanctions and Money Laundering, Sector Updates by Herbert Smith Freehills

HKMA publishes open API framework for Hong Kong banking sector and launches own open API

On 18 July 2018, the HKMA announced that it had concluded a consultation on its intended approach to open application programming interface (API) for the Hong Kong banking sector, and had published its final framework and implementation plan.

The open API is one of seven initiatives announced by the HKMA in September 2017 to bring Hong Kong into a “new era of smart banking”. Brief details of the consultation can be found in our briefing of February 2018.

The framework focuses at this stage on retail banking, but banks are welcome to extend the framework to other banking businesses as they consider appropriate. Please click here to read more.

 

William Hallatt
William Hallatt
Head of Financial Services Regulatory, Asia
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+852 2101 4036
Hannah Cassidy
Hannah Cassidy
Partner, Hong Kong
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+852 2101 4133
Valerie Tao
Valerie Tao
Professional Support Lawyer, Hong Kong
Email
+852 2101 4125

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Filed under Hong Kong, Regulatory Reform, Sector Updates by Herbert Smith Freehills

MANDATORY REFERENCE CHECKS TO STOP ROLLING BAD APPLES – MAS ISSUES CONSULTATION PAPER ON PROPOSED REQUIREMENTS

On 6 July 2018, the Monetary Authority of Singapore (MAS) issued a Consultation Paper which, among other things, proposes requirements for Financial Institutions (FIs) to conduct and respond to reference checks on representatives (Reference Check Consultation Paper). Submissions on the Reference Check Consultation Paper close on 6 August 2018.  Continue reading

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Filed under Announcements, Asia, Hong Kong, Sector Updates by Herbert Smith Freehills

The FSB’s Crypto-assets framework: What does it mean for firms?

The Financial Stability Board (FSB) has published its framework to monitor crypto-assets as part of its wider report to the G20 on work by the FSB and standard-setting bodies on crypto-assets. The report is provided at the request of the G20 Finance Ministers and Central Bank Governors, and will be discussed at their meeting on 21-22 July 2018. Continue reading

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Filed under Europe, European Regulation, International, Sector Updates by Herbert Smith Freehills, UK Government

TAX ENFORCERS UNITE AGAINST INTERNATIONAL TAX CRIME: ENABLERS, CRYPTOCURRENCIES AND CYBERCRIME ARE PRIORITIES

Tax authorities in the UK, the USA, Canada, Australia and the Netherlands have joined forces to launch the Joint Chiefs of Global Tax Enforcement, or “J5” alliance against transnational tax crime and money laundering. Continue reading

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Filed under Announcements, Bribery and Corruption, Corporate Crime, Investigations, Sanctions and Money Laundering, Sector Updates by Herbert Smith Freehills

SFC proposes to implement revisions to AML/CFT guidelines on 1 November 2018 ahead of FATF Hong Kong evaluation

On 5 July 2018, the Securities and Futures Commission (SFC) issued a consultation paper on proposals to amend the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (Main Guideline) and the Prevention of Money Laundering and Terrorist Financing Guideline issued by the Securities and Futures Commission for Associated Entities (Guideline for AEs). Comments on the proposals are required to be submitted by 9 August 2018. Continue reading

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Filed under Announcements, Bribery and Corruption, Consultations, Corporate Crime, Hong Kong, Regulatory Reform, Sector Updates by Herbert Smith Freehills