In the United Kingdom the House of Commons approved the bill triggering the Article 50 notification and passed it to the House of Lords. At the same time a new poll suggested growing public unease about a hard BREXIT and Tony Blair returned to the political fray with a call for a further referendum. In Ireland Taoiseach Enda Kenny faced mounting pressure to name the date of his resignation. KBC Bank provided welcome news that it was not planning to pull out of the Irish market. In America Donald Trump lost his national security adviser Michael Flynn, following disclosure that he discussed the lifting of sanctions with Russia before the election. Here are the main stories from finance and regulation for the last two weeks.
The Irish Stock Exchange issued a warning on investor share scams where boiler rooms offer to purchase shares from investors at a higher than market price. Investors are asked to make a deposit or security payment in order to secure the deal; after making the payment the investor will hear nothing more. The fraudsters use high pressure tactics to conclude the deal quickly, persuading the investor to avoid losing the opportunity to secure such a price.
The Central Bank’s themed inspection on fitness and probity in credit unions concluded that there were deficiencies in a number of areas, but good practices were also identified. An ‘unacceptably large’ number of unions were found to have adopted a minimalist approach to compliance. There was evidence of a lack of succession planning and documentation of due diligence records to support compliance. The Central Bank also published Authorisation Requirements and Standards for firms applying for authorisation as retail credit firms. It further released a response to its Discussion Paper on the Payment of Commission to Intermediaries.
The Central Bank entered into a settlement agreement with Kinsale Capital Management Limited, an investment firm, over breaches of the client categorisation requirements under the MiFID regulations. The firm was found to have failed to carry out adequate assessments of certain professional clients and to have provided investment services to retail clients in breach of the terms of its authorisation. The Central Bank levied a fine of €275,000 and reprimanded the firm.
The European Securities and Markets Authority published its Supervisory Convergence Work Programme which set out its priorities of MiFID II implementation, improving the quality of data collected by national competent authorities, investor protection in the context of cross-border services, and convergence in the supervision of EU central clearing counterparties. It also published its 2017 risk assessment work programme, which will focus on completing technical infrastructure for data collected under AIFMD, MiFID and EMIR, enhancing its risk monitoring capacity, in-depth research on liquidity, fund research and the impact of innovation and enhancement of stress tests. The Authority further published its 2017 plan for credit rating agencies, trade repositories and third country central counterparties.
The European Securities and Markets Authority published its final opinion on UCITS share classes. ESMA acknowledges that different share classes have special characteristics which can vary on matters such as dividends, fees, minimum investment amounts or tax treatments under national law. However, the opinion also deals with ‘derivative overlays’ at share class level, and concluded that for UCITS funds, the only such overlay available should be for the purpose of currency hedging. This would potentially impact on UCITS funds which currently use derivative overlays for purposes such as interest rate hedging.
The Financial Conduct Authority issued a Discussion Paper on the effectiveness of primary capital markets in meeting the needs of investors and issuers. The issues considered include whether the current distinction between standard and premium listing remains appropriate, whether primary markets provide an effective engine for growth and whether there is a role for a UK primary debt multilateral trading facility. The paper partners with a new Consultation Paper on the Review of the Effectiveness of Primary Markets: Enhancements to the Listing Regime.
The corruption investigation engulfing engine maker Rolls-Royce spread when the Serious Fraud Office interviewed former chief executive Sir John Rose and other senior executives under caution. The investigation has covered the falsifying of accounts to remove illegal use of middlemen, attempting to thwart investigations and paying bribes to win deals in Indonesia, Thailand, China and Russia. Sir John denied any wrongdoing and was not charged. The company was previously fined £497m for criminal conduct.
The Prudential Regulation Authority fined Japan’s Bank of Tokyo Mitsubishi bank and MUFG Securities £226.8m for failing to be fair and open with the regulator. The pair failed to inform the PRA in 2014 that they faced a $315m fine from US authorities relating to sanctions breaches; they had ordered auditors PwC to soften a report about transactions with Iran, Sudan and Myanmar. The PRA found out about the fine when it was announced by New York’s Department of Financial Services.
The Commodity Futures and Trading Commission issued a ‘no action’ letter in respect of non-compliance with the March 1st deadline for compliance with the Uncleared Margin Regulations for financial derivatives under EMIR. The letter effectively gives CFTC-regulated firms a further six months to put in place regulation-compliant documentation, a project which the derivatives industry has been struggling to complete on time. The action followed an open letter from the International Swaps and Derivatives Association to the world’s financial regulators for more time to implement.
South Africa’s competition watchdog accused 17 international banks of conspiring to fix the price of the South African rand. The allegation goes back to 2007, and the institutions are expected to be tried before the Competition Tribunal. The investigation was welcomed by President Jacob Zuma, who has seen the value of the currency fall by fifty per cent against the dollar over the last five years.