The Court looks again at the rights of third parties identified in FCA notices

In the recent case of FCA -v- Grout [2018] EWCA Civ 71, the Court of Appeal confirmed the restrictive approach to third party rights pursuant to FCA notices previously laid down by the Supreme Court in Macris -v- FCA [2017] UKSC 19. We previously reported on the Macris decision on its way to the Supreme Court and following the judgment.

Continue Reading

Singularis Holdings Limited – beware of Quincecare

Over 25 years ago, the case of Barclays Bank Plc v Quincecare [1992] 4 All ER 363 established that a bank owes a duty of care to both its customer and third parties to protect against fraud. In summary, a bank will be liable if it has reasonable grounds for believing that a payment it makes will be defrauding the customer.

The case of Singularis Holdings Limited v Daiwa Capital Markets Europe Ltd [2017] EWHC 257 (Ch) was significant, as it was the first instance in which a bank was found to have breached a “Quincecare duty”. The recent appeal of Mrs Justice Rose’s judgment in this case was unsuccessful in the Court of Appeal. An brief analysis of the judgment, as well as the associated implications for financial institutions, is detailed below.

Continue Reading

Mastercard, the next instalment. The retailer strikes back

The previous four episodes of the Mastercard saga (as detailed in our previous blog posts) focussed on a number of legal battles between Mastercard and both consumers and retailers.

These disputes have centred on Mastercard’s alleged “uncompetitive” interchange fees and restrictive rules on cross-border acquiring. The latest claim by retailers follows a class action brought on behalf of consumers under the Consumer Rights Act 2015 in relation to the same charges.

Continue Reading

The FCA speaks on building cyber resilience

The FCA’s Business Plan for 2017/18 identified cyber risk as a cross sector priority for the FCA.  In keeping with the FCA’s drive to encourage firms to acknowledge, confront and manage cyber risk,  at the PIMFA Financial Crime Conference  on 25 January 2018, Robin Jones (Head of Technology, Resilience & Cyber, FCA) delivered a warning that along with the benefits of technological innovation come threats of increasingly sophisticated cyber-attacks. The most common are data thefts and attacks on company systems.

Continue Reading

FCA fines a online broker over £1 million for market abuse control failures

On 25 January 2018, the FCA  fined Interactive Brokers (UK) Limited (“IBUK“) just over £1 million for “serious and systemic weaknesses” arising out of poor market abuse controls and failing to report suspicious client transactions during February 2014 to February 2015 (“Relevant Period“).

Continue Reading

The watchdog sniffs out CFDs

The Financial Conduct Authority (“FCA”) has recently turned its attention to firms who may mis-sell contracts for difference (“CFDs”) to customers. The FCA says that it has  a “serious concern” about the market.

On 12 January 2018, following a 12 month review of the CFD market,  the FCA issued an ominous warning in the form of a “Dear CEO” letter addressed to to providers and distributors of CFD products consumers which was headed “resolving failings which may cause significant harm“.

Continue Reading

Look Back In Anger: FCA Enforcement in 2017

During 2017, the FCA imposed fines for misconduct on regulated businesses and individuals totalling over £229,500, 000.

Whilst 2017 did not see a return to the number or size of fines imposed by the FCA in  2014/2015 (when billions of pounds of fines were imposed following interbank rate and FX related misconduct), the year did see a tenfold increase in FCA fines from 2016 (total fines of just over £22 million). And the FCA has said that the era of big fines is not at an end and that if it sees conduct worthy of a big fine then it will vigorously pursue offenders.

Continue Reading

Financial Ombudsman Service overruled by Court JR

In recent judicial review (“JR“) proceedings, R (on the application of Kelly ) (Claimants) v Financial Ombudsman Service & Shawbrook Bank (Interested Party) (2017), the High Court quashed a Financial Ombudsman Service (“FOS”) decision to dismiss a husband and wife’s complaint involving a lender and the interested party bank (“IPB”).  The Court decided that the FOS had misunderstood the nature of the complaint and therefore had acted irrationally.

Continue Reading

Audit watchdog increases size of enforcement unit

It was reported last week that the Financial Reporting Council (the “FRC”), which oversees the UK’s accounting industry, has more than tripled the size of its enforcement team over the past five years. The FRC’s principle role is to regulate auditors, accountants and actuaries with its work aimed at investors and others who rely on company reports, audits and risk management. The FRC has faced public criticism recently over the failure to prosecute auditors for giving clean audits to financial institutions in the months before they were engulfed by the financial crisis. In response it has sought enhanced powers and lower thresholds for bringing prosecutions in future cases.

As part of its enforcement role, the FRC operates independent disciplinary arrangements for accountants and actuaries and oversees the regulatory activities of the accountancy and actuarial professional bodies. In terms of accountants, the FRC investigates where either (i) it considers a matter raises or appears to raise important issues affecting the public interest or (ii) it considers that the matter needs to be investigated to determine whether one or more of its members or member firms may have committed misconduct. That investigation may then give rise to a formal complaint. In the event of an adverse finding on a formal complaint there are a range of sanctions available to the FRC including:

  • Reprimand or severe reprimand
  • Condition – a member could be ordered to comply with any direction considered to be appropriate in the Tribunal’s absolute discretion
  • Exclusion as a member for a specified period
  • Fine
  • Repayment of client’s fees
  • Order withdrawing practising certificate

The FRC’s enforcement unit now employs 30 staff (there were fewer than 10 in 2012) as part of its decision to build an internal forensic accounting unit rather than instructing external advisers. The team also includes significant numbers of lawyers whose role is to prosecute tribunal cases. The increased headcount and specialist nature of the team now in place should enable the FRC to move more quickly in instigating and resolving investigations. The expectation must be that given the increased level of internal resources, the number of investigations and thereafter formal complaints will mirror the trend in FCA investigations and escalate over the coming months and years.

Identifying individuals in FCA regulatory notices – Macris applied

Back in March 2017, the Supreme Court handed down its decision in Financial Conduct Authority v Macris [2017] UKSC 19. We have previously reported on that decision on its way to the Supreme Court and following the judgment.

In brief, Section 393 of the Financial Services and Markets Act 2000 (“FSMA”) provides individuals identified in an FCA notice with third party rights to be provided with a copy of the notice and an opportunity to make representations regarding the notice. Much then turns on whether an individual has been identified in the notice or not.

  1. Lord Sumption found that a person would be identified in a section 393 FSMA notice where “he is identifiable by name or by a synonym for him, such as his office or job title”. Where a synonym was used it must be clear from the notice that the synonym only related to one individual, and the individual must be identifiable from the notice itself or from publicly available information. Extrinsic information can only be used to help with interpreting the language used in the notice rather than supplementing it, i.e. it can only be used to the extent it is necessary to understand what the notice means.
  2. Lord Neuberger (agreeing with Lord Sumption) looked to the wording of section 393 FMSA itself, finding that the language used “appears to stipulate that the person must be identified in the notice, not that he must be identifiable as a result of the notice”. In that regard the notice must be “equivalent to naming him”.

In Cooper v Financial Conduct Authority [2017] UKUT 0428 (TCC) the Upper Tribunal has had its first opportunity to apply the Macris decision, and in doing so found that Mr Cooper had not been identified. A two-stage approach to the question was used, considering each of the two tests identified above. Continue Reading