FSA has fined the firm £113,300 for failing to PPI complaints fairly. During BBA’s unsuccessful High Court challenge of FSA measures published in August 2010 designed to ensure all PPI complainants are treated fairly, the firm incorrectly put on hold PPI complaints that were capable of being progressed. Although no financial loss was suffered, the firm’s actions meant that a significant number of customers had the resolution of their valid complaints delayed for "no good reason". It is noted that in order to address the delay in the resolution of complaints, interest was paid to consumers in a manner which the firm considered to be in line with FSA guidance. The Final Notice also reports that “there is no evidence that the breach indicates a widespread problem or weakness” at the firm and sets out in some detail how FSA arrived at a decision as to the amount the firm was fined.

The inpidual is a sole practitioner IFA who operated through the firm. FSA had rejected the firm’s application for authorisation and the inpidual’s application for approval on the grounds of the latter’s lack of honesty and integrity. The Decision notes that, prior to the applications with which this reference is concerned, the firm had been an appointed representative of Sesame Limited, meaning that the firm had not been required to be authorised and that the inpidual had been able to carry out his controlled functions. Sesame had terminated this arrangement when an investigation had indicated that the firm and the inpidual had been permitting an unqualified “introducer” to give advice to clients (the inpidual denied that this had taken place to Sesame, but later told the RDC that the information that he had provided to Sesame in that respect had been untrue). The inpidual later applied for FSA authorisation via a consultancy firm and did not disclose that he had been subject to the Sesame investigation. The Tribunal agreed with FSA’s Decision Notices, adding “the demands of CF1, CF10 and CF11 functions are significantly different from those of a CF30 function. In view of the apparently adequate standards of Mr Cordle’s technical competence and advice in the fields of mortgage and life protection, an application on his part for approval to carry out CF30 functions alone might, on the limited information available to us, have succeeded. But that was not the subject matter of the Decision referred to us".

FSA has publicly censured the firm for misconduct, including using pressure-selling tactics with customers to invest in the shares of small companies, resulting in client losses of at least £2m. FSA would have fined it £1.5m had the firm not been in liquidation. The firm misrepresented, for instance, the financial performance of stocks both orally and in writing. Brokers ignored requests for further information and protests that clients had no funds to invest. In at least one case a broker claimed that the recommendation was based on inside information. Between 1 April 2008 and 4 November 2009, the firm advised approximately 340 clients to buy about £4m - clients would have lost 72% of the amount they had invested in eight of the top ten stocks (based on financial volume) sold by the firm if they had held those small-cap stocks until 12 October 2011. The firm also provided FSA with false dates for internal committee meetings and deliberately withheld a recording of a non-compliant advised sales call requested by FSA and the firm also knowingly employed someone in a senior position who was not FSA-approved and who was linked to pressure-selling tactics. FSA has published a Decision Notice dated 11 October 2012 with regard to Sam Kenny, its former CEO, which notes that it intends to fine him £450,000 and to issue him with a prohibition order – this matter has been referred to the Upper Tribunal. FSA states that, subject to the Tribunal’s decision, FSA has found that that he personally pressurised, or misrepresented material facts to clients and in his role as CEO trained and encouraged his staff to pressure clients. FSA has published a Final Notice which issues a prohibition order against the firm’s former compliance officer, Carl Davey, and would have fined him £175,000 if it were not for the serious financial hardship that such a fine would cause him. FSA reports that he was also involved in the deliberate withholding of the non-compliant advised sales call and that despite his efforts to improve the firm’s systems and controls, the monitoring of advised calls by the firm’s brokers was inadequate and brokers were regularly making misrepresentations about stocks to clients.

FSA has fined UBS AG £160m for misconduct relating to LIBOR. This is the largest fine ever imposed by the FSA. FSA notes that between 1 January 2005 to 31 December 2010 the misconduct included the following:: UBS’s traders routinely making requests to the inpiduals at UBS responsible for determining its LIBOR and EURIBOR submissions to adjust their submissions to benefit the traders’ trading positions; giving the roles of determining its LIBOR and EURIBOR submissions to traders whose positions made a profit or loss depending on the LIBOR / EURIBOR fixes; colluding with interdealer brokers in co-ordinated attempts to influence JPY LIBOR submissions made by other panel banks, adding that corrupt brokerage payments were made to reward brokers for their efforts to manipulate the LIBOR submissions of panel banks; colluding with inpiduals at other panel banks to get them to make JPY LIBOR submissions that benefited UBS’s trading positions; adopting LIBOR submissions directives whose primary purpose was to protect the bank’s reputation by avoiding negative media attention about its submissions and speculation about its creditworthiness. FSA notes that at least 45 inpiduals including traders, managers and senior managers were involved in, or aware of, the practice of attempting to influence submission and adds that it continues to pursue a number of other significant cross-border investigations in relation to LIBOR and EURIBOR. UBS did not qualify for the full 30% discount available for early settlement due to the fact that settlement was reached in the second phase of the discount scheme. UBS thus received a reduced discount of 20%. In its press release, FSA thanks CFTC, DoJ, FBI, FINMA and SEC for their co-operation.

By a Decision Notice dated 19 July 2011, the Authority informed the inpidual of its decision to issue a prohibition order on the basis of fitness and properness. This followed an investigation into his exercise of significant influence at General Finance Centre Limited between 31 October 2004 and 19 December 2008. FSA alleged that he had failed to appreciate his responsibility to protect against mortgage fraud and consequently failed to take adequate steps to ensure that the firm had adequate systems to prevent mortgage fraud and also failed to ensure that the firm’s customers were treated fairly in respect of fees. The inpidual challenged the prohibition order, saying that adequate systems and controls were established and maintained at the firm; the possibility that systems and controls might, in some instances, have not prevented potentially fraudulent mortgage applications being made does not support or justify FSA’s findings; and in any event, the prohibition order was disproportionate. The Upper Tribunal dismissed the reference, noting “it has not been necessary for us to rely upon final notices issued in other cases. We were referred to a number of examples, said by [FSA] to be consistent with the approach of [FSA] in this case but said by [the inpidual’s QC] to be very different. Whilst it is no doubt tempting to search for comparators and indeed for differences in other cases where similar sanctions have been made or contemplated, each case must be determined according to its own facts and circumstances. We have not derived any assistance from a consideration of cases determined on different facts”

On the morning of 16 December 2012, FSA published Decision Notices in respect of the firm and its former CEO and former senior partner/compliance officer at the firm, saying that the inpiduals referred the matters to the Upper Tribunal. The Decision Notices set out that FSA has decided to prohibit Robin Farrell and Robert Addison from performing any role in regulated financial services, to fine them £650,000 and £200,000 respectively and issue a public censure against the firm – it is noted that FSA would have fined the firm £9m for its misconduct, were it not for the firm’s financial position. The firm was the investment manager of the CF Arch cru Funds and FSA alleges that it was reckless as to the risk that conflicts of interest would not be managed fairly, noting that in one transaction the firm received a fee of £3m from Guernsey cells it set up which the firm did not disclose to the independent directors of the cells or record in any contemporaneous transaction documentation. In addition, FSA alleges that the firm pursued an investment strategy which resulted in significant liquidity risks for the funds. Further, FSA believes that the firm and Robin Farrell failed to ensure that the funds aimed to provide a prudent spread of risk by adopting an investment strategy of allocating a majority of the funds’ assets in the Guernsey cells for which there was a limited secondary market; the liquidity risks increased when the firm increased the funds’ investments in the Guernsey cells’ shares at a time of market turbulence and illiquidity, rather than retaining cash in the funds. In the circumstances, investors were exposed to the risk that the funds would not be able to liquidate their investments to meet redemption requests from investors. The funds were ultimately suspended in March 2009 as a result of liquidity concerns. FSA says that the firm and Robert Addison adopted an informal, ad hoc approach to compliance monitoring with insufficient recording of the monitoring that was undertaken. The press release notes that the inpiduals applied unsuccessfully to the Tribunal for an order preventing FSA from publishing the Decision Notices. In the afternoon, the Upper Tribunal published its Decision (final link below) in respect of the publication of the Decision Notices. It concludes “I should however, express my concern that it is important that adequate steps are taken when publicising the Decision Notices to ensure that it is clear that the decisions are provisional in the light of the fact that they are being challenged in the Upper Tribunal. I am concerned that some of the benefits expressed by the FSA to flow from the fact of publication, such as the need to establish a deterrent effect could be said to be predicated on the basis that the findings are a fait accompli. Mr Hunter [FSA’s QC] referred to the fact that when a decision notice is published which is being challenged in the Upper Tribunal a legend to that effect is added to the notice. In my view the publicity material should go further than that. In particular any press release issued by the FSA should state prominently at its beginning that the Applicants have referred the matter to the Upper Tribunal where each will present their case and the Tribunal will then determine the appropriate action to take, which may be to uphold, vary or cancel the FSA’s decision. … Likewise in referring to the findings made, rather than give any suggestion of finality they should be prefaced with a statement to the effect that they reflect the FSA’s belief as to what occurred and how the behaviour concerned is to be characterised. The dismissal of the Applications is therefore conditional upon compliance with these principles and both parties have liberty to apply for further directions if, which I hope not to be the case, there is any doubt on what is expected”.

FSA reports that Thomas Ammann, the former Mizuho International plc banker, has been sentenced to 2 years and 8 months imprisonment for two counts of insider dealing and two counts of encouraging insider dealing – it is noted that he would have been sentenced to 4 years had it not been for an early guilty plea. The firm had been advising Canon on an acquisition to which the inpidual had inside information. Rather than dealing in his own name, he persuaded two women to buy shares prior to the acquisition being announced and shared their profits. Last month, a jury found that the women were not jointly involved with him and his insider trading. Confiscation and cost orders will be dealt with at a later date. The press release also notes that FSA makes no criticism of Mizuho International plc and thanks the Cyprus Securities and Exchange Commission, the Public Prosecutors Office in Frankfurt and the police and prosecution authority in Hessen, Germany, for their assistance.

This press release refers to the Christopher Ollerenshaw and Thomas Reeh Upper Tribunal Decision which appeared recently, but advises that FSA’s Final Notices in respect of the inpiduals will appear “shortly” (the firm itself, which went into liquidation in 2008, has been censured). The matter will be reported on fully then.

In this statement, FSA notes that it is taking action in relation to issues in respect of HSBC’s compliance with anti-money laundering rules and US sanctions requirements, having worked closely with the relevant US authorities (this action is separate to, but coordinated with the actions taken by them). FSA has made a number of requirements of HSBC Holdings plc which are designed to ensure that all parts of the HSBC Group are in compliance with the relevant legal and regulatory requirements across the Group to prevent similar failings occurring in the future. The FSA requires HSBC Holdings to: establish a committee of the HSBC Board with a mandate to oversee matters relating to anti-money laundering, sanctions, terrorist financing and proliferation financing; review relevant Group policies and procedures to ensure that all parts of the HSBC Group are subject to standards equivalent to those required under UK requirements; appoint a Group MLRO who will be an FSA approved person, with responsibility for ensuring that systems and controls are in place across the Group, to ensure the Group is in compliance with all relevant legal and regulatory requirements; and employ an independent monitor to oversee the Group’s compliance with UK anti-money laundering, sanctions, terrorist financing and proliferation financing requirements and to provide independent reporting to the HSBC Board committee and regulators. Through its supervision, FSA will take steps to ensure that HSBC complies with these measures. These measures are in addition to the requirements of the Cease and Desist order issued by the Federal Reserve Board and the Deferred Prosecution Agreement issued by the DoJ on 11 December 2012.

FSA has fined the firm £1.225m for failing to treat customers fairly in the sale of mortgages and arrears handling from October 2004 to the end of 2009. Its CEO, Henry Moser, has been fined £70,000 and agreed to step down from his role within three to six months. Andrew Lawton, the firm’s compliance director, has been fined £13,500 and banned from holding a significant influence function. FSA has also required the firm to carry out a redress exercise that could see approximately £2m paid to around 2,000 affected customers. FSA reports that the firm operated in “niche markets, including lending to customers with poor credit histories”, failed to treat some of its customers fairly when they fell into arrears, was unable to always demonstrate that mortgages it sold were affordable, and did not always communicate regularly or fully with its customers. It also overcharged some customers in arrears and applied arrears charges inconsistently and unfairly. Customers were also sometimes notified of charges after they had been incurred. FSA found that when the firm transferred customers in arrears to Monarch Recoveries for debt recovery, they were charged £150 despite it being an in-house company.