Castle and Crystal Credit Union has been placed into administration, with James Sleight and Peter Hart of PKF Littlejohn Advisory appointed administrators.
In case now widely dubbed the ‘fat-finger trading case’, Citigroup Global Markets Limited was fined £27,766,200 ($35,322,216) for failures in trading systems and controls. The incident led to $1.41 billion of equities being sold in European markets when they should not have been. It was caused by a trader making an inputting error. We covered the story last week.
HSBC has been fined £6.2m ($7.9m) for failures in the way it treated customers in arrears or financial difficulty. The FCA found that between June 2017 and October 2018, HSBC failed to properly consider people’s circumstances when they had missed payments.
This was, the regulator said, due to: “deficiencies in HSBC’s policies and procedures and the training of their staff, as well as inadequate measures to identify and address instances of unfair customer treatment.’
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight said: “People must be able to trust their lenders to treat them fairly when in financial difficulty. By failing to do so, HSBC put 1.5 million people at risk of greater financial harm.
“It deserves credit for identifying the issue and putting it right. The cost it has incurred in doing so, however, should be a warning to all lenders that they need to understand their customers’ circumstances so as not to make a bad situation worse.”
Decision notices against two individuals for acting without integrity in relation to pensions business have been issued.
Stephen Joseph Burdett and James Paul Goodchild have been banned from working in regulated financial services for recklessly exposing pension holders to unsuitable investments.
Both individuals have referred the Decision Notices to the Upper Tribunal. Any findings in the Decision Notices are therefore provisional and reflect the FCA’s belief as to what occurred and how it considers their behaviour should be characterised. However, as is noted on Burdett’s Decision Notice, there are certain allegations and findings that are no longer being pursued by the FCA before the Tribunal.
The FCA alleges that Burdett’s actions led to 232 personal pension funds worth over £10m ($12.72m) being switched into high-risk investment portfolios created and managed by Mr Goodchild at Westbury, with 39% of overall holdings linked to a single offshore property developer.
Burdett gained £150,000 from his misconduct and Goodchild also obtained significant financial benefit. To date, the Financial Services Compensation Scheme (FSCS) has paid out over £1.4m to victims.
A number of firms have been allowed to recommence sales of Guaranteed Asset Protection (GAP) insurance after FCA action to improve fair value. The regulator says that “To restart sales, firms need to demonstrate that their GAP products provide fair value to customers, in line with FCA rules.”
Data gathered by the FCA had showed that in 2022 only 6% of the amount customers paid in premiums for GAP insurance was paid out in the claims, with some firms paying out as much as 70% of the value of insurance premiums in commission to parties involved in selling GAP insurance.
Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said: “We took action when our data showed that customers were not getting a fair deal.
“I’m pleased that, following constructive engagement with industry, a significant proportion of the market is now able to restart sales.
Speeches and media
In another move to explain the thinking behind the regulator’s market reforms, Sarah Pritchard, Executive Director, Markets and Executive Director, International spoke at the City & Financial Global City Week event in London.
She said that “an efficient and effective capital market underpins the success of the financial sector which is a mainstay of the UK economy” and said that “The FCA is committed to making sure that regulation – and the way we operate as regulators – supports the UK’s position in global wholesale markets as well as facilitating the UK’s economic growth and international competitiveness.”
Pritchard emphasized her belief that “we start from a strong place”, but there was scope for further efficiency and reform. “The reforms,” she said, “include the most significant changes to our listings regime in 40 years, with proposals that would do away with the current separate categories of premium and standard listings for commercial companies in favour of a single category, which will operate with more of a disclosure based philosophy instead of ex-ante controls.”
She also spoke about support for the Edinburgh Reforms, and for “transparency through disclosure of relevant, prompt and quality information to investors.” On this point, she recognized the misgivings that were being expressed, and assured the audience that “We recognise that this is a sensitive and emotive issue so we will take time to consider the feedback, engage further with industry and explore thoroughly the concerns and evidence shared with us, with an aim of reaching a broad consensus.”
Chief executive Nikhil Rathi spoke at the Association of Corporate Treasurers Annual Conference about ‘the need to engage with corporate treasurers to shape our markets.’
He said corporate treasurers were “a bellwether for what is really going on in the economy and the direct impact of regulation”, going on: “You are often first to spot a looming storm and to devise a plan for how to hoist the mast or batten down the hatches so that your firms survive and thrive.”
The main theme of his speech was, once again, to explain the thinking behind proposed reforms. “The FCA’s wide ranging package of reforms is aimed at reducing burdens and barriers to raising finance as well as supporting the risk appetite in the economy that enables firms to secure the capital they need for investment,” he said.
He made particular refence to the fcatv that the FCA “recently formally adopted a secondary objective to facilitate growth and international competitiveness of the UK economy over the medium to long-term.” He pinted out that business investment was down to 17% of GDP from 200 onwards. It had been over 23% in the 1980s.
“While much of this is beyond our control as regulators,” he said, “supporting efforts to turn this round is at the core of the competitiveness objective.” He picked out work on the Long Term Asset Fund regime, work with the Treasury and market participants on PISCES, and the overhaul of capital markets as examples of work being pursued to this end. He also referenced shortening the settlement cycle to T+1 from T+2 as a key move to encourage technology investment and bring the UK into line with the US and India.
On new powers the regulator has gained since the UK left the EU, Rathi said that “we will never deviate for the sake of being different and always take a pragmatic approach.”
FCA chair Ashley Alder outlined the regulator’s agenda for the asset management sector in a speech to the Bloomberg Buy-Side Forum.
He spoke of developing a smarter regulatory framework in which “We want to set clear and coherent requirements proportionate to the risks posed by specific business models, recognising that institutional investors have different abilities to manage those risks for themselves.”
On Non Bank Financial Intermediaries, Alder said that “regulators need to think about what tools and data they need to oversee these activities more effectively, as well as the private markets in which many of them participate.”
Touching on ESG requirements, he said that the FCA was striving to “create international operability” when it introduced new rules.
He concluded by saying: “At every point in our decision-making process, we consider the options that could advance our primary operational objectives and weigh up which of them could advance growth and competitiveness.
“You can’t grow sustainably without stable markets, and effective competition which raises quality, drives down prices and prompts innovation. Better outcomes for all consumers are good for growth.”