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FCA month in review, July 2024

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GRIP Montage: FCA

Martin Cloake

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Roundup of regulator’s work includes news of consultation on new listings regime and capital markets rules, plus some crypto firsts.

The UK General election meant July began quietly as far as FCA activity went, but as the month drew to a close, there was an uptick. Here’s a run through notable activity over the last four weeks.

Enforcement

A date for the trial of nine ‘finfluencers’ connected with the @holly_ftxtrend Instagram account was announced. The nine will appear at London’s Southwark Crown Court on July 11, 2024. The case is of interest not simply because of the presence of reality TV stars from shows including Love Island, but also because it could see the first action in the UK taken against celebrities for unauthorized financial promotions.

Donre Advisory, a firm that advised on investments including defined benefit pension transfers, has entered creditors’ voluntary liquidation. Clients included the Express Newspapers group.

Sean Bucknall and Andrew Hosking of Quantuma Advisory Limited (Quantuma) have been appointed as joint liquidators. 

London Court Limited, which acted as bond administrator and ISA manager for bonds via the My Investment Hub platform, has entered creditors’ voluntary liquidation. Rehan Ahmed and Tauseef Rashid of Quantuma Advisory Limited (Quantuma) have been appointed as joint liquidators.

The regulator reported that over £106m ($136.5m) in redress has now been offered to 1,870 people who were formally members of the British Steel Pensions Scheme (BSPS).

As has been extensively reported, BSPS is a long-running scandal which has seen the FCA take action against 15 firms and individuals since 2023. Sanctions and payouts issued total £8.87m ($11m), and the FCA itself has faced criticism for how it has handled investigations into the affair.

Plans to return money and assets to clients of WealthTek have been approved in the High Court of Justice. The regulator ordered WealthTek to cease operations in May 2023 after “serious regulatory and operational issues” were identified.

In what the FCA is calling the first enforcement action against a firm enabling cryptoasset trading, the regulator has levied a fine of £3,503,406 ($4,511,318) on CB Payments Ltd (CBPL) for “repeatedly breaching a requirement that prevented the firm from offering services to high-risk customers.”

CPBL is part of the Coinbase Group, which operates one of the major cryptoasset trading platforms. Despite not being registered to carry out crypto activities in the UK, the FCA says CPBL “onboarded or provided e-money services to” a total of 13,416 high risk customers. Some 31% of those customers deposited approximately $24.9m, and those funds were then used to execute multiple cryptoasset transactions tottalling around $226m.

The FCA says “The breaches were the result of CBPL’s lack of due skill, care and diligence in the design, testing, implementation and monitoring of the controls put in place to ensure that the VREQ [voluntary requirement] was effective.”

Therese Chambers, joint executive Director of Enforcement and Market Oversight at the FCA said: “The money laundering risks associated with crypto are obvious and firms must take them seriously. Firms like CBPL that enable crypto trading need to have strong financial crime controls. CBPL’s controls had significant weaknesses and the FCA told it so, which is why the requirements were needed. CPBL, however, repeatedly breached those requirements.”

Rules and consultations

Members of the regulator’s UK Secondary Markets Advisory Committee have been appointed for the period June 2024 to June 2026. The Committee supports work across securities, futures, swaps, and options markets. 

Committee members are:

  • Arran Rowsell, head of strategy at BGC.
  • Carla Grundy, EMEA head of trading venues and market infrastructure at TP ICAP Group Services.
  • Kate Finlayson, manging director at JP Morgan.
  • Elisa Menardo, deputy head, governmental affairs, EMEA at UBS.
  • Eleanor Beasley, managing director at Goldman Sachs. 
  • Chris Dickens, head of non-financial risk, markets and securities services at HSBC Bank.
  • Hans Buehler, co-CEO at XTX Markets.
  • Virginie Saade, head of government and regulatory policy, EMEA at Citadel.
  • Peter Whitaker, head of Europe/Asia market structure at Jane Street.
  • Jessica Morrison, head of market structure and quantitative analysis at London Stock Exchange Group.
  • Nick Dutton, chief regulatory officer at CBOE Europe.
  • Gary Chia-Hsing Li, head of regulatory affairs, EMEA & APAC at MarketAxess.
  • Jennifer Keser, managing director, head of regulation and market structure at Tradeweb.
  • Kristina Combe, chief regulatory and compliance officer at LME Group.
  • Laurence Walton, head of regulation and compliance at ICE Futures Europe.
  • Daniel Mayston, head of electronic trading and market structure at BlackRock.
  • Edward Wicks, global head of trading at Legal & General Investment Management.
  • Frances Ritter, Equity Index Group portfolio manager and trader at Vanguard Asset Management.
  • Kirston Winters, chief risk officer at OSTTRA.
  • Judy Barrage, head of regulation and trade controls – trading and supply – at Shell International Trading and Shipping Company.
  • Tom Lee, head of trading at Hargreaves Lansdown.
  • Maria Salamanca Meija, executive director, EMEA head of market structure at Morgan Stanley.
  • Anne Plested, head of regulation change at ION Markets.
  • Rebecca Healey, managing partner – capital markets consultant at Redlap Consulting.
  • Rosie Murphy Williams, chief oversight officer, EMEA/global controls at The Bank of New York Mellon.

The Committee will be chaired by Mel Gunewardena (senior advisor to FCA chief executive Nikhil Rathi), working closely with Jon Relleen (FCA director of infrastructure and exchanges). The FCA Trading Policy team will act as secretariat.

A reminder that one, three and six-month synthetic US dollar LIBOR settings are expected to stop at the end of September 2024 was issued.

In what is being billed as an effort to boost growth and innovation on UK stock markets, new rules were published to simplify the UK listings regime. The move is the biggest change to the regime in over 30 years. New UK Chancellor Rachel Reeves called the new rules “a significant first step towards reinvigorating our capital markets.”

Views on the benefits and risks of digital wallets are being sought by the FCA and the Payments Systems Regulator (PSR). Use of digital wallets has grown rapidly, and regulators are keen to understand the impact this has on both consumers and businesses.

David Geale, PSR managing director said: “Collaboration between regulators and working with industry is crucial to ensure we’re on the front foot to support innovation and competition, making sure everyone benefits from access, protection and choice in payments.”

Nikhil Rathi, the FCA’s Chief Executive, said: “We want to make sure we can maximise the opportunities and benefits for consumers and businesses while protecting against any risks this technology may present.”

An update will be provided by Q1 2025.

Plans to protect access to cash for consumers and small businesses have been confirmed by the FCA.

From September 18, under new rules, banks and building societies will need to:

  • assess cash access and understand if additional services are needed, when changes are being made to local services;  
  • respond to local residents, community organisations and representative groups, who will be able to request an assessment of whether there are gaps in local cash access;
  • deliver reasonable additional cash services, where significant gaps are found;
  • keep facilities, including bank branches and ATMs, open until any additional cash services identified are available.

The FCA’s executive director of consumers and competition, Sheldon Mills, said: “Three million people continue to rely on cash … And many small businesses still need somewhere to safely deposit their takings each day.

“That’s why we’ve acted quickly in response to new powers given to us by Parliament to ensure reasonable access to cash withdrawal and deposits is maintained.’”

A package of measures aimed at strengthening the UK’s capital markets has been unveiled. At their center is a proposal to establish a new Public Offers and Admissions to Trading Regime (POATRs), replacing the existing UK Prospectus Regulation.

The FCA explains that: “Together with other existing disclosure obligations, these proposals will make sure investors get the information they need while significantly reducing the costs associated with further capital raises for companies.”

Among other proposals are:

  • the introduction of public offer platforms to offer alternative routes for companies to raise capital outside public markets; and
  • rules giving asset managers greater freedom I how they pay for investment research.

Sarah Pritchard, executive director of markets and international at the FCA said: “The package we have set out today, alongside our recent reforms to the listing rules, will help to strengthen the UK’s position in wholesale markets. We know we need to strike the right balance between protection for investors and allowing capital markets to thrive.”

Comments should be sent to the FCA by October 18, 2024.

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