This article summarizes two recent enforcement actions imposed by the FCA.
FCA Publishes Decision Notice Against a Former CEO for Market Misconduct
The FCA has published a Decision Notice in respect of the former CEO of a financial spread trading company, fining the individual £658,900 for market abuse and banning him from performing any roles linked to regulated activity.
In August 2007, the individual was involved in drafting admission documentation ahead of the trading company’s holding company being floated on the Alternative Investment Market of the London Stock Exchange. The FCA has concluded that these documents contained misleading information and omitted key information required for investors to make an informed decision about the company. In particular, the documentation did not mention that some of the holding company executives had made significant loans to the holding company and its subsidiaries, which was never disclosed in the annual company accounts. Until 2009, the annual accounts also did not mention an internal hedging strategy by which certain of the holding company’s subsidiaries hedged considerable trading exposures internally with company executives. The FCA also considers that between January 2010 and March 2012:
- large spread bets were placed on the shares of the holding company using the trading accounts of the trading company’s clients, on terms which made statements in the holding company’s annual accounts as to its credit policy false and misleading; and
- large spread bets were carried out on two client accounts by the ex-CEO without the knowledge of the clients. In the view of the FCA, this gave appearance of greater demand for the holding company’s shares than there was
The individual is the third and last executive of the trading company against whom the FCA has taken action following its collapse in March 2012.
The ex-CEO has referred the Decision Notice to the Upper Tribunal (“the Tribunal”), where the individual, as well as the FCA, will each present their cases. Accordingly, the proposed action outlined in the decision notice will have no effect pending the determination of the case by the Tribunal.
Read the full notice here.
High Court Orders Illegal Pension Introducers to Pay Restitution to Consumers
In a case brought by the FCA, the High Court ordered two companies and their directors to pay restitution to members of the public who were induced to transfer their existing pensions into new self-invested personal pensions (SIPPs).
In its judgement, the court found that the companies had engaged in the regulated activities of arranging and advising on investments, made unapproved financial promotions through their websites, promotional material and, in telephone calls to consumers, made false or misleading statements.
In addition to the restitution payments, the three individuals and one of the companies (the other being in liquidation) have been banned from engaging in regulated activities in the UK without authorization, making financial promotions and making false or misleading statements about regulated investments.
In its press release about the order, Mark Steward, the FCA's Executive Director of Enforcement and Market Oversight said: "The FCA will make wrongdoers financially accountable to consumers whom, as the Court recognizes in this decision, '…include elderly and vulnerable citizens who have paid their due share of income tax, made sacrifices, and taken prudential decisions for their future retirement over the course of an honest working life.”
Subject to any appeals against the judgment, the FCA will take steps to recover monies from the defendants in order that these can be returned to investors.
The press release can be read in full here.
Compliance and Regulatory Consulting
Local and global compliance expertise for the financial services industry.
Expert compliance support for a variety of firms including hedge funds, private equity firms, wealth managers, corporate finance and broker dealers.
FCA Authorization Application for Financial Services
Comprehensive FCA Authorization support.
Comprehensive compliance and regulatory support for FCA authorized firms.
Senior Managers and Certification Regime (SM&CR) Consulting and Implementation Support
A comprehensive range of support and solutions to all firms and individuals subject to SM&CR.
Comprehensive compliance and regulatory support for EU firms.