In the United Kingdom the Supreme Court upheld the ruling that Article 50 can only be triggered with the consent of Parliament. The Government’s response was a three line bill which passed its first reading, supported by a white paper, which critics said added little information. The rush to complete derivatives trading documentation in time for the European Union’s deadline of March 1st increased, with signals from the European Commission that there would be no movement of the deadline. The executive order of President Trump preventing nationals from 7 countries entering the United States caused chaos and received strong criticism from business leaders, before being overturned in a federal court. Here are the main stories in finance and regulation from the last two weeks.


   Ireland

The Central Bank published a policy statement on the European Banking Authority’s guidelines on sound remuneration policies. The guidelines apply to credit institutions and investment firms. The regulator is to follow the thresholds set down by the European Commission in CRD IV and will adhere to the principle of proportionality, namely that remuneration is appropriate to an institution’s size, internal organisation and the nature, scope and complexity of their activities.

Crowdfunded proceedings on the UK’s Brexit decision were launched in the High Court in Dublin. The strategy is understood to have the matter referred to the European Court of Justice for determination on a number of questions around Article 50, including whether the notification also applies to the UK leaving the European single market. Those bringing the proceedings include a number of UK politicians.


   Europe

Swiss regulator FINMA ordered Coutts bank to pay back profits of SFr6.5m made from transactions of funds from 1MDB, the Malaysian state investment fund which has been the subject of global investigations. The bank was accused of ignoring internal warnings over payments connected with fraudulent activity. $2.4bn was transferred through Coutts’ accounts in Switzerland. The regulator is also reported to be considering taking individual proceedings against bank employees.      

The European Union’s Article 29 Working Party published a General Data Protection Regulation action plan for 2017. The group - made up of EU Data Protection Authorities - has outlined the key deliverables and objectives for 2017 ahead of 2018 implementation of the new regulation.


   United Kingdom

The Financial Services Compensation Scheme declared 31 firms in default of their obligations, meaning that they are unable to pay claims for compensation. Customers are entitled to compensation of up to £50,000 from firms in default. A firm can be declared to be in default if it has received a least one compensation claim and is unable to pay.

A former banker with HBOS was sentenced to 11 years in prison after a trial at Southwark Crown Court. Lynden Scourfield was a lead director of the bank’s impaired-assets division who formed a corrupt relationship with David Mills, a business consultant. Mr. Scourfield required bank clients to work with Mr. Mills’ consultancy if they wanted finance; the consultancy raised huge fees and even took over some businesses. The pair, along with four associates, enjoyed a lavish lifestyle. The bank was forced to write off £245m in loans, and faces legal claims from their business clients.

The London Metal Exchange lost its chief executive and chief operating officer, following concerns raised by the Financial Conduct Authority that it was not properly monitoring for suspicious transactions. Garry Jones, the former chief executive, stepped down in January following disagreements with brokers over fees and Stuart Sloan, the COO, also stepped down. The criticism from the FCA was reported to have been a factor in their departures. The reporting problems arose when the exchange was forced out of its London home due to structural issues with the building and had to work out of its back-up site, with some monitoring staff working from home.

Bank of England governor Mark Carney warned of a likely increase in regulation for Fintech firms, given the systemic risks which they pose to the banking sector and the wider economy. He conceded that peer to peer lending, or crowdfunding, did not pose material systemic risks, but pointed to potential concerns that robo-advice could have too high a correlation with high-frequency traders, which might lead to ‘flash crash’ situations.

The Department of Business, Energy and Industrial Strategy called for evidence for its review of limited partnership law. The call followed media reporting that limited partnerships are popular vehicles for criminal activity. This may result in a change to the legislation to provide for increased transparency and annual reporting. Earlier in January the Treasury also laid a legislative reform order before parliament to amend the 1907 Limited Partnerships Act to adopt a new private fund limited partnership category.


   International

Donald Trump signed an executive order for a review of the Dodd Frank legislation in the United States. He also ordered a review of a new fiduciary obligation on investment advisers which was due to come into operation in April. Changes to the Dodd-Frank legislation are a matter for Congress and will need the support of an estimated eight Democrats, who are opposed to any repeal. One estimate thought that it would take at least two years before any change started to happen.

Deutsche Bank’s woes continued as it agreed to pay US and UK authorities a combined $630m to settle investigations into transfers out of Russia which were ‘highly suggestive of financial crime’. However, the US Department of Justice also have a criminal investigation into the matter in progress. Meanwhile British bank RBS set aside $3.8bn to cover an expected penalty from US authorities for the mis-selling of mortgage securities. The bank will also pay $85m to settle charges with the Commodity Futures Trading Commission relating to manipulation of the interest rate swaps market.

Topics covered by Better Regulation include
  • AIFMD
  • BRRD
  • Banking Structural Reform
  • Basel
  • Benchmarks Regulation
  • Brexit
  • Capital Markets Union
  • Capital Requirements Legislation
  • Central Securities Depositories Regulation
  • Credit Rating Agencies Regulation
  • Deposit Guarantee Schemes Directive
  • Dodd-Frank
  • EMIR
  • GDPR
  • Solvency II
  • Insurance Distribution Directive
  • Interchange Fees Regulation
  • Market Abuse/Insider Dealing
  • Markets in Financial Instruments Legislation
  • Money Laundering Directives
  • Money Market Funds Regulation
  • Mortgage Credit Directive
  • Payment Services Directive
  • PRIIPs Regulation
  • Prospectus Directive
  • Ring-fencing
  • Securities Financing Transactions Regulation
  • Securitisation Regulation
  • Senior Insurance Managers Regime
  • Senior Managers Regime
  • Undertakings for Collective Investment in Transferable Securities Directive