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 financial.services@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:
20 June: Three sentenced for insider dealing. James Sanders, his wife Miranda Sanders and James Swallow have been sentenced for insider dealing. Custodial sentences of four years, ten months and ten months were awarded respectively and James Sanders was additionally disqualified from acting as a Director for five years. The judge remarked that the Defendants had engaged in systematic, "deliberate and calculated acts of dishonesty" and had failed in their duties to their companies. The significance of this case lies in the success of the international parallel investigation by the US Securities and Exchange Commission (SEC) and US Department of Justice (DoJ), together with the Federal Bureau of Investigation (FBI).
http://www.fsa.gov.uk/library/ communication/pr/2012/067.shtml
19 June: FSA publishes annual report for 2011/12. The FSA has published its annual report for 2011/12 which outlines how it has performed against its Business Plan for the same period. This is likely to be the last annual report from the FSA before the FCA and PRA assume their regulatory functions.
http://www.fsa.gov.uk/library/ communication/pr/2012/066.shtml
Speeches:
No new developments this week.
Bulletins and newsletters:
No new developments this week
Final notices:
18 June: Easypayment Limited. The FSA has issued a final notice, dated 18 June 2012, cancelling the registration granted to Easypayment Limited as a small payment institution under the Payment Services Regulations 2009. Easypayment Limited failed to pay fees and levies owed to the FSA in the amount of £559.60, thereby demonstrating an unwillingness to deal with the FSA in an open and cooperative manner.
http://www.fsa.gov.uk/static/pubs/final/easypayment.pdf
18 June: Eagle Exchange Limited. The FSA has issued a final notice, dated 18 June 2012, cancelling the registration granted to Eagle Exchange Limited as a small payment institution under the Payment Services Regulations 2009. Eagle Exchange Limited failed to pay fees and levies owed to the FSA in the amount of £559.60, thereby demonstrating an unwillingness to deal with the FSA in an open and cooperative manner.
http://www.fsa.gov.uk/static/pubs/final/eagle-exchange.pdf
18 June: David Crew trading as David Crew Associates. The FSA has issued a final notice, dated 18 June 2012, cancelling the Part IV permission granted to David Crew, trading as David Crew Associates. Mr Crew failed to pay fees and levies owed to the FSA in the amount of £1,431.09, leading the FSA to believe that Mr Crew is not conducting his business soundly and prudently, and is not a fit and proper person for the purposes of the relevant Threshold Conditions required for Part IV permission to be granted.
http://www.fsa.gov.uk/static/pubs/final/david-crew.pdf
18 June: Terrence John Harrop. The FSA has issued a final notice, dated 18 June 2012, withdrawing Mr Harrop's approval to perform a controlled function at Principal Mortgage Services Limited ("PMSL") (at which he had been the Chief Executive and majority shareholder) and prohibiting Mr Harrop from performing any function in relation to regulated activity. This decision was made because in the process of making recommendations to consumers concerning an unregulated product which was very profitable to the small mortgage intermediary, the firm was also recommending a regulated interest only mortgage in conjunction, and did so without paying due regard to the interests or suitability of the products for consumers. In addition, the marketing materials used were, at times, misleading, and Mr Harrop himself failed to pay back a directors loan from the company which caused detriment to his consumers, and he failed to ensure that consumer money was adequately protected.
http://www.fsa.gov.uk/static/pubs/final/terence-harrop.pdf
18 June: Principal Mortgage Services Limited. The FSA has issued a final notice, dated 18 June 2012, publicly censuring Principal Mortgage Services Limited ("PMSL") and cancelling its Part IV permission for its failure to meet Threshold Conditions 4 & 5. Had PMSL not currently been insolvent, the FSA would also have imposed a £70,000 financial penalty on the firm. The FSA has held that PMSL:
- Failed to consider whether taking out interest only mortgages in conjunction with PMSL's own unregulated product (which would allow customers to pay off the capital of the mortgage) was the most appropriate and suitable product for consumers
- Failed to explain that the same result could have been achieved for consumers through their own lenders without incurring the additional charges imposed by PMSL
- Failed to communicate to its customers in a manner that was clear, fair and not misleading
http://www.fsa.gov.uk/static/pubs/final/pmsl.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:
22 June: Prospectus Directive Amending Directive Instrument 2012. The FSA has published the final instrument to implement the Directive amending the Prospectus Directive and Transparency Directive (2010/73/ EU). Changes include an amendment to the definition of a person discharging managerial responsibilities and an amendment to the notes to PR 3.4.2R to refer to section 87Q(5) of the Financial Services and Markets Act 2000 (FSMA). The instrument will come into force on 1 July 2012.
http://media.fsahandbook.info/Legislation/2012/2012_29.pdf
20 June: Unregulated collective investment schemes webpage. The FSA has published a new webpage on unregulated collective investment schemes. The page particularly emphasises the FSA's concerns about the selling of UCIS and the action that it is taking to ensure that consumers remain protected. New UCIS rules will be consulted on later in 2012.
http://www.fsa.gov.uk/smallfirms/your_firm_type/ financial/investment/ucis.shtml
19 June: FSA Annual Report 2011/12. The report compares the FSA's performance against the key objectives it set out in its Business Plan last year. Below is an indication of how the FSA deems it has performed against its five key objectives:
- In executing the Government's regulatory reform programme, the FSA has completed the high level design work for the PRA and FCA, has internally established a twin peaks model and remains on track for creation of the two new authorities from early 2013
- In executing a credible deterrence and enforcement approach throughout 2011/12, the FSA has seen five significant criminal cases come to court in 2011/12, has had 16 defendants on trial on charges of insider dealing or misleading the market, and imposed its largest ever fine for market abuse ($9.6 million)
- In delivering the FSA's financial stability objective, it has supported the interim Financial Policy Committee, ensured that financial institutions have increased their capital and liquidity reserves whilst also ensuring that the banks have recovery and resolution plans in place, and continues to influence international policy
- In delivering efficient and fair markets that remain attractive and sustainable, the FSA has maintained high quality open markets with a reduction in the level of abnormal price movements prior to company announcements, has continued to reform OTC derivatives, and has implemented the European regulatory regime for Credit Rating Agencies
- In continuing to make progress in developing a new consumer protection strategy, the FSA has progressed work on the Retail Distribution Review and the Mortgage Market Review among others, has secured redress for consumers in areas such as PPI mis-selling, structured products and UCIS, and secured greater protection of client money
The FSA has also simultaneously published its Enforcement Annual Performance Account which provides information on how effective the FSA considers its enforcement function has been.
http://www.fsa.gov.uk/library/corporate/annual/ar11-12. shtml
http://www.fsa.gov.uk/static/pubs/annual/ar11-12/ enforcement-report.pdf
18 June: Solvency II - monitoring the ongoing appropriateness of internal models. The FSA has published a letter, dated 13 June 2012, from Julian Adams (Director of Insurance at the FSA) to firms involved in the FSA's internal model approval process. Adams sets out the FSA's intention to continue to monitor internal models to prevent the deterioration of solvency standards and outlines the expectations that the FSA has of firms in this regard.
http://www.fsa.gov.uk/static/pubs/international/sol-ii-internal-model-letter-june-2012.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):
No new developments this week.
London Stock Exchange (LSE):
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.
