FCA confirms how it will use new powers to publicise warning notices

On 15 October 2013, the FCA published its Policy Statement (PS13/9) on the publication of information about warning notices under its new powers (see section 391(1)(c) FSMA).  The FCA’s new approach will apply in respect of warning notices issued on or after the date of the Policy Statement.

Before these powers came into force in April 2013, the regulator had only been able to publish information about decision or final notices.  There had been considerable opposition to the introduction of these powers, on the basis that such publication could inflict irreparable reputational damage, even though a warning notice is little more than an indication of what the regulator is minded to do before considering full written and oral representations from the person concerned.  The government nonetheless chose to give the regulators these powers, and the FCA had initially consulted on their proposed use in March.  Continue reading

FCA bans and fines two in relation to Unregulated Collective Investment Schemes sales failures

On 16 August 2013, the FCA announced that it had banned and fined two individuals for providing insufficient oversight of activities carried out by their respective firms regarding the promotion of three Unregulated Collective Investment Schemes (“UCISs”). John Leslie of Leslie & Nuding and Jeffrey Bennett of Burlington Associates Limited (“Burlington”) were each fined £28,000 and banned from performing any significant influence function in relation to any FCA-regulated firm. This is the latest in a string of FCA enforcement action relating to Collective Investment Schemes. Continue reading

FCA rejects calls for increased transparency on s.166 reviews

The FCA responded this week to industry feedback requesting greater transparency in relation to its use of section 166 ‘skilled person’ reviews.

As part of its Feedback Statement (FS13/1) to its earlier Discussion Paper on Transparency (DP13/1), the FCA summarised responses from regulated firms and consumer organisations amongst others.  They had suggested that the regulator publish more information on its process for deciding when and in what circumstances it would decide to commission a section 166 review; the evidence used in making these decisions; and an indication of the outcomes of s.166 reviews.  The FCA rejected these requests stating that although it could provide conceivably some additional guidance, such guidance would be too general to be useful due to the requirements of confidentiality for individual cases under s.348 FSMA.  The FCA would not be drawn into further explanation but pointed to the information it already publishes about the cost and number of s166 reviews and to the Handbook, which sets out the factors FCA supervisors consider when deciding to use this tool.  Continue reading

UK: FCA provisional decision to fine and ban former NED of financial firm for failing to disclose conflicts of interest

The FCA has published a notice of its decision to fine a former non-executive director (NED) of two mutual societies £154,800, and to ban her from performing any role in regulated financial services.   The FCA considers that she breached the requirement to act with integrity by recklessly, and in breach of her fiduciary position as a NED, failing to recognise and disclose conflicts of interest.   The findings are contested, and have been referred to the Upper Tribunal (the Tribunal), but an application for orders to prevent publication of the Decision Notice and of particulars of the reference in the Tribunal’s register was unsuccessful.

Boards of financial firms should take note that the case squarely raises conflicts identification and management and basic corporate governance as priority issues:

“The position of NEDs is critical to the effective functioning of a board and to maintaining the confidence of customers. Because of the nature of their role, NEDs are more likely to have a portfolio of appointments and are likely to find themselves having to manage conflicts of interest more frequently than their fellow directors. NEDs need to manage scrupulously their conflicts of interest and to observe basic corporate governance principles.” Continue reading

UK: Equities trader receives 2 year sentence for disclosing inside information

Paul Milsom, a senior equities trader, has been sentenced to two years’ imprisonment for improper disclosure of inside information about forthcoming transactions between October 2008 and March 2010, and ordered to pay compensation of £245,657.  This is the first sentence to be imposed in relation to Operation Tabernula, a long-running and complex investigation, conducted jointly by the FSA and the Serious Organised Crime Agency, into an insider dealing ring said to have involved front running of, and spread betting on, trading activity in a significant number of different stocks between 2006 and 2010, on the basis of inside information provided by city professionals. Continue reading

UK: Regulatory Reform – rolling out the building blocks for legal cutover on 1 April 2013

Statutory instruments to fill in the regulatory framework – following the enactment of the Financial Services Act 2012 (the 2012 Act), which amends the Financial Services and Markets Act 2000 (FSMA) – are now being rolled out.  They deal with the panoply of issues required for the smooth transition of regulation from the Financial Services Authority (UK) to the Prudential Regulation Authority (PRA) and the Financial Conduct Authority to take full effect on 1 April 2013 (legal cutover date).   For ease of reference, we have set out links to the Orders and Regulations made to date, together with a brief summary of their effect.  We will keep this page updated in the run-up to 1 April 2013.

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Temporary Product Intervention Rules: inadequate safeguards

The FSA is consulting (as it is required to do under the Act) on the new power given to the FCA under the Financial Services Act 2012 to issue temporary product intervention rules without the chore of a consultation (CP12/35).

Such rules cannot be in force for more than 12 months – but that alone is far from an adequate safeguard when the rules we are talking about include banning a product from sale.

So, what more is needed to allay concerns that it will be used inappropriately? Continue reading

DPAs for the FCA? A New Year’s enforcement treat

As New Year’s resolutions go, “read Schedule 16 to the Crime and Courts Bill” may not have been top of anyone’s list.  Buried, however, in the Bill’s provisions on deferred prosecution agreements (“DPAs”) are some interesting pointers to the future use of DPAs and their potential availability to prosecutors other than the Serious Fraud Office (“SFO”) and Crown Prosecution Service (“CPS”).  In particular, the offences listed as being capable of resolution using a DPA suggest that, contrary to earlier indications, DPAs may comprise an additional tool in the armouries of the Financial Conduct Authority (“FCA”), and HRMC, in 2014/15.  In this post we briefly explain the relevant provisions.

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Suitability and systems: UK FSA fines wealth management firm as further thematic review work continues

Following on from its initial thematic work on wealth management firms, the FSA has fined Savoy Investment Management Limited (Savoy) £412,000 for failures to take reasonable care to ensure the suitability of the investment portfolios of its wealth management clients between April 2010 and 31 January 2012, in breach of Principles 3 and 9 and the rules set out in COBS 9.2.1R, 9.2.2R and 9.2.3R. Continue reading

Dear CEO: please confirm your asset management firm has identified and mitigated the risk of conflicts of interest between it and its customers

Conflicts of interest between asset managers and their customers: Identifying and mitigating the risks is a ‘Dear CEO’ publication in which the FSA summarises the output of a thematic review undertaken between June 2011 and February 2012.  The review was initiated after reports from supervisors suggested that the standards and practices of asset managers had suffered some relaxation from what FSA considers to be well-established market norms.  Continue reading