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.

This joint report outlines resolution strategies for large and complex firms. The approach outlined in the paper is based on legal powers provided by the legislative reforms enacted since the crisis, as well as – in the case of the UK – the proposed EU draft Recovery and Resolution Directive. It is designed to ensure that sound business, including operating companies (domestic and foreign) can be kept open and operating, limiting the effect on financial stability through contagion effects and cross-border complications. It notes: “under the strategies currently being developed by the U.S. and the U.K., the resolution authority could intervene at the top of the group. Culpable senior management of the parent and operating businesses would be removed, and losses would be apportioned to shareholders and unsecured creditors. In all likelihood, shareholders would lose all value and unsecured creditors should thus expect that their claims would be written down to reflect any losses that shareholders did not cover. Under both the U.S. and U.K. approaches, legal safeguards ensure that creditors recover no less than they would under insolvency … The FDIC and the Bank of England have developed resolution strategies that take control of the failed company at the top of the group, impose losses on shareholders and unsecured creditors—not on taxpayers—and remove top management and hold them accountable for their actions. These strategies provide an efficient path for returning the systemically important parts of the G-SIFI to the private sector by exchanging or converting a sufficient amount of creditor claims from the failed company into capital in the newly resolved entities. Because the resolution action is taken at the top of the group and by the home authorities, continuity of all critical services would be maintained and subsidiaries (foreign and domestic) would remain open and operating with access to sufficient liquidity”.

This has now been published in the Official Journal.

The latest edition of the Bulletin introduces the new UKLA Knowledge Base to market participants and explains how it will work and includes an outline of the feedback received from respondents to its consultation on the initial content of the Knowledge Base and provides its response to this. FSA has separately published a summary of feedback, a summary of actions taken and a marked-up text showing amendments made.

On the following webpages, FSA explains the procedures and timings for firms with respect to data collection on complaints notifications and professional standards data for retail investment advisers.

PCBS has published the uncorrected evidence from the hearings given on 3 December 2012 attended separately by Sir James Crosby and Andy Hornby, former HBOS execs..

The reference in this case is from a Decision Notice issued by FSA in July 2010 in which the inpidual was informed that it had decided to impose a financial penalty of £150,000 for breaches of Principles 1 and 4 of the Authority’s Statements of Principle and Code of Conduct for Approved Persons and a prohibition order. The inpidual raised the fact of the appointment in February of Judge Timothy Herrington as a judge of the Upper Tribunal and gave the Tribunal notice that he would object to Judge Herrington being a member of the tribunal in this case, on the ground that Judge Herrington had been chairman of the RDC that had made the decision in his case. It was noted that Judge Herrington had not been listed to sit on the tribunal hearing this case. As a matter of policy decided by the President, Mr Justice Warren, Judge Herrington has not been involved in any financial services case before this Tribunal where the reference concerns a case with which Judge Herrington had any involvement at all during his tenure as chairman of the RDC, or where the decision was made (whether or not by him) at any time during that tenure. Accordingly, in the circumstances of this case, Judge Herrington could not have been listed to hear this reference. In his letter, however, the inpidual made the point that he was also concerned at the influence Judge Herrington might have on other Upper Tribunal judges. He followed this with a letter dated 21 November 2012, in which he made an application that the Upper Tribunal “recuses itself from hearing my case and seeks directions from it’s (sic) Senior Court to permit a completely impartial Judge to hear my case.” The Tribunal draws attention to the inpidual’s submission that FSA had installed an “insider into the Upper Tribunal offices who can speak to any of the Upper Tribunal judges in the Tax and Chancery Chamber whenever he wishes. The Decision says that “there is absolutely no basis or foundation for this allegation. A fair-minded and informed observer would reject any such notion”. The application also suggested that other judges would also be “careless of the judicial oath and the overriding requirement to be independent and to reach a decision, with other specialist members of the tribunal, objectively and based on reasoned argument untainted by professional contact with any others, including his fellow judges”. The Decision goes on to discuss several cases and concludes that “the fair-minded observer would conclude, as we have done, putting ourselves in the shoes of such an observer, that there was no real possibility that this Tribunal is biased”. The application is dismissed.

Text of the above, given at the City and Financial Market Abuse Conference, follows. Topics include: credible deterrence (acting against perpetuators and the wider regulatory regime); thematic work undertaken by the Market Division and culture change. He concludes: “FCA will also turn its focus more towards wholesale conduct than regulators in the past previously have … What may start with institutional relationships, often affects retail consumers. Wholesale market participants must be seen to abide by high standards of market conduct in order for investors generally to have confidence in the markets and London to be seen as a safe place to do business. That is why we are prepared to impose record fines on firms that fail to control their traders resulting in the manipulation of the LIBOR benchmark. Or when a firm’s controls fail allowing a relatively junior trader such as Kweku Adeboli to be able to take risk positions so great that they threaten to cause systemic risk to a global firm and indeed the financial system as a whole”.

The Government is to sign a tax information sharing agreement with the Isle of Man which will provide HMRC with a range of additional information about potentially taxable income in Manx bank accounts. Under the enhanced information exchange agreement, the UK and Isle of Man will automatically exchange a wide range of information on tax residents, on a reciprocal basis. To minimise burdens on financial institutions the agreement will follow, as closely as practicable, the UK-US Agreement to Improve International Tax Compliance and to Implement FATCA. The agreement will be concluded to the same timetable as the agreement currently being negotiated between the Isle of Man and the United States. It is noted that details of the necessary operational and implementation requirements are still being discussed and will be announced in due course.

These Regulations make provision in relation to insurance companies to remove unnecessary administrative compliance burdens and avoid a double charge to tax in respect of investments held by insurance companies in controlled foreign companies. (Date in force: 31/12/12)