Theresa May’s future was again in the headlines as reports circulated that a sufficient number of Conservative MPs were willing to support a leadership ballot, resulting in a further fall in the value of Sterling. The Northern Ireland Secretary imposed a budget on Northern Ireland prompting Sein Fein to halt talks with the DUP on power sharing, whilst Gerry Adams announced his resignation from the leadership of the party. The army took control in Zimbabwe in a reported attempt to stop the succession of Robert Mugabe’s wife Grace to the presidency. In Saudi Arabia, an anti-corruption drive by Crown Prince Mohammed bin Salman saw powerful citizens arrested and detained in the luxury Ritz hotel, with reports that their freedom was promised in exchange for significant transfers of their wealth to the country’s coffers. Below we present the news in finance and regulation for the last two weeks.
The Central Bank issued Consultation Paper 114 on Non-Life Insurance Amendments to the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007 and Consultation Paper 115 on Authorisation and Supervision of Branches of Third-Country Insurance Undertakings. Paper 114 deals with recommendations from the Action Plan contained in the Government’s Cost of Insurance Working Group Report on the Cost of Motor Insurance, with a response date for 9th February 2018. Paper 115 deals with issues arising from minimum criteria of Solvency II, with a response date for 5 February 2018.
The government published the Criminal Justice (Corruption Offences) Bill which aims to consolidate and modernise the law on white collar crime. The bill covers active and passive bribery, trading in influence, corruption in office, bribery to facilitate an offence, creating and using a false document and intimidation. It creates a criminal liability for corporate entities, but adds a defence of taking all reasonable steps to avoid the commission of an offence. Sentences include a maximum of 10 years in prison.
The European Commission proposed an EU framework for crowd and peer to peer finance, an initiative under the Capital Market Union. It set out four policy options ranging from no EU involvement, leaving the matter to member states, to a cross border EU regulatory framework. The European Securities and Markets Authorities issued a warning over initial coin offerings, which it described as ‘very risky and highly speculative.’ It issued guidance on using offerings as a fund-raising tool, noting the high instances of fraud, failure and links to financial crime such as money laundering.
In MiFID news, proposals by the European Council suggested that the EU might back away from the regulatory requirement for buy-side clients to post-margin on foreign exchange forward contracts, leaving the obligation applying to inter-dealers only. The UK’s Financial Conduct Authority said that content produced by sales traders who take orders on trades and advise clients by highlighting trends and “market colour” would also count as investment research under the directive. The International Swaps and Derivatives Association wrote to the European Securities and Markets Authority setting out the outstanding uncertainties in the MiFIR post-trade transparency framework, including the obligation relating to trading on a trading venue.
In Brexit news the author of Article 50 Lord Kerr stated that Article 50 was not irrevocable, and that Britain could change its mind up until the moment of exit. The EU set a deadline of two weeks for Britain to confirm its position on the three outstanding issues if it wanted to move to talks on future relations; the government in Dublin confirmed that it would not support moving forward if Brexit meant that there would be a hard border with Northern Ireland. Theresa May deflected one potential party revolt by conceding to a final parliamentary vote on the terms of Brexit but then ran head on into another over the inclusion of the date of exit in the withdrawal legislation.
The Financial Conduct Authority issued consumer warnings on the risks of investing in cryptocurrency contracts for difference and the risks of investing in binary options. Both products were described as extremely high risk and speculative investments. The FCA noted cryptocurrencies were being increasingly offered to consumers and gave notice that the regulation of binary options was being moved under its responsibility from the Gambling Commission. Binary options have also been the basis of scams marketed on social media.
The Pensions Regulator named 169 employers which it had taken to court to recover unpaid fines arising from non-compliance with pension enrolment obligations. The obligations arose from the introduction of compulsory pension enrolment in 2012, requiring the payment by the employer of at least 1% of salary. The publication of names was a new direction for the regulator and included small organisations such as a churches and a working men’s club. The regulator also secured its first criminal conviction against a bus company and its managing director for failing to comply with pensions law.
The Financial Conduct Authority banned Tom Hayes from the financial services industry, having determined that he was not a fit and proper person due to his involvement in Yen LIBOR manipulation, where he was convicted of conspiracy to defraud. Mr. Hayes has appealed the decision to the Upper Tribunal and also referred his criminal case to the Criminal Cases Review Commission. Meanwhile TP ICAP, the world’s largest broker, won a partial victory in the European courts against European Commission allegations that it colluded with banks to manipulate Yen benchmark rates at which those banks lent to one another.
China confirmed that it will ease ownership limits on financial services groups, impacting banking, securities, futures, asset management and insurance. Initially the cap on foreign ownership will be raised from 49% to 51%, and will then be removed entirely three years after the first changes take effect. However, there was no confirmed timeline on when the first step would be taken.
The world’s largest sovereign wealth fund called for banks to do more to restore investor confidence in foreign exchange markets. Norges Bank Investment Management criticised the practice known as ‘last look’ whereby traders can reject a customer order at the last moment. It also highlighted a lack of risk controls in banks using algorithms for trade execution and a lack of price transparency.