Compliance Updater - January 2024
A summary of key compliance stories from around the globe in January.
- BNP Paribas agrees settlement over Swiss franc loans.
- Australia’s ASIC cracking down on greenwashing.
- Spanish regulator launches disciplinary proceedings over mis-sold risky derivatives.
- PRA fines former director of Gupta’s Wyelands Bank.
- UK car loan companies could face £1bn in payouts.
- Morgan Stanley agrees $249m settlement over block trading misconduct.
- FCA about to gather detail on non-financial misconduct.
- Employment tribunal rules against FCA senior manager plea to work from home.
- Joe Lewis changes his plea to guilty of insider trading.
- Mone’s assets frozen by UK court as NCA investigates PPE fraud.
- £57m fine for HSBC over errors in compensation scheme eligibility.
BNP Paribas agreed to pay up to €600m to settle a dispute with French customers alleging they were misled into taking out risky mortgages in Swiss francs. The deal covers some 4,400 customers who were hit when the Swiss franc started to strengthen against the euro in 2010. The French customers claimed they were not sufficiently warned of the currency risks in their loans. The agreement follows a separate criminal case that found BNP Paribas guilty of deceptive commercial practices and ordered to pay €200m in damages.
Australia’s Securities and Investments Commission (ASIC) is taking action against funds marketing investments as “net zero” or “carbon neutral” and failing to live up to those claims. It has already taken three funds to court – Mercer Superannuation, Vanguard Investments Australia, and Active Super. Mercer has agreed a penalty of A$11.3m ($6m) after it marketed its Sustainable Plus fund as excluding fossil fuel companies but invested in carbon intensive stocks including Glencore and BHP.
The Spanish National Securities Market Commission launched disciplinary proceedings against Deutsche Bank alleging that it mis-sold derivatives to SMEs. The bank is alleged to have marketed high risk foreign exchange derivatives as cheap and low risk currency hedges, without highlighting the downside risks.
The UK’s Prudential Regulation Authority (PRA) fined the former CEO of Sanjeev Gupta’s Wyelands Bank almost £120,000 for breaching regulations. In the run up to the bank’s implosion in 2020, Iain Mark Hunter “failed both to act with due skill, care and diligence, and to take reasonable steps to ensure Wyelands had adequate systems and controls in relation to the large exposure regime and PRA record keeping requirements”. Wyelands gathered deposits and channelled the money into Gupta’s GFG Alliance steel conglomerate.
The UK Financial Conduct Authority (FCA) is investigating interest rate-linked deals by several car dealers, where potentially unfair levels of interest were charged on car loans prior to the FCA banning discretionary commission agreements. Some commentators believe the levels of claim could rival those of the payment protection insurance scandal of the 1990s and see £1bn or more in payouts.
After an admission from a former employee to leaking confidential information, Morgan Stanley agreed to settle with the US Securities and Exchange Commission (SEC) over block trading misconduct. The settlement sees Morgan Stanley pay $249m and enter into a three-year non-prosecution deal. The misconduct involved Morgan Stanley staff leaking confidential information to buyside clients in advance of block trades.
Sarah Pritchard, an executive director at the UK’s FCA, faced questions from a Treasury select committee surrounding “sexism in the City” after the revelations relating to Crispin Odey at Odey Asset Management. She said that the FCA will be gathering data on the number of complaints of non-financial misconduct at authorised firms, alongside the firms’ methods of detection and resolution. The regulator hopes to complete its analysis by the summer of 2024.
Elizabeth Wilson, a senior manager at the UK’s FCA on a salary of around £140k, bought a case to tribunal after her bosses rejected her request to work from home permanently, despite glowing performance reviews to date. The Employment Tribunal concluded that the FCA was within its rights to deny the wish to work from home full-time. The judge highlighted how the office was a better environment for both “rapid discussion” and “non-verbal communication”.
Joe Lewis, the billionaire whose family trust owns Tottenham Hotspur football club, altered his “not guilty” plea to three charges of insider trading to “guilty”. Lewis is facing three criminal counts in a Manhattan court surrounding giving confidential information about public companies to friends, private pilots and romantic partners and lending hundreds of thousands of dollars to enable their trades.
Around £75m of assets linked to Baroness Michelle Mone have been frozen or restrained as she and her husband face allegations of fraud. The National Crime Agency is investigating conduct surrounding £200m of PPE contracts undertaken by PPE Medpro Ltd, a company owned by a consortium including Baroness Mone and her husband.
The UK’s PRA, part of the Bank of England, fined HSBC £57.4m for failing to protect billions of deposits in a compliance breach that lasted seven years. HSBC failed to correctly identify customer deposits eligible for protection under the UK’s Financial Services Compensation Scheme between 2015 and 2022. For soundness and stability, the regulator requires banks to have systems and controls to identify those customers that would be eligible for up to £85,000 in compensation in the event of bank failure. An internal investigation showed that HSBC had wrongly classed £4.5bn of deposits for 242 clients as ineligible for FSCS protection and had incorrectly excluded another £2bn of deposits from 120 customers from its regulatory reports.