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Financial services investigations and enforcement monthly round up - August 2019

A round-up of recent enforcement actions and investigations in the financial services sector.

A round-up of recent enforcement actions and investigations in the financial services sector.

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FCA told to record calls with firms

  • In a report published on 6 August 2019, the Complaints Commissioner raised concerns that the FCA kept no record of "important" conversations, which can ultimately lead to decisions about a company's activities and supervisory action.
  • The financial watchdog made these comments in response to a complaint made by a director of a firm, who claimed the regulator's supervision team treated him unfairly. Despite the Complaints Commissioner findings that the complaints team's response was reasonable, they recommended that the FCA should take steps to record calls.

FCA publishes first supervisory notice

  • On 9 August 2019, the FCA published its first supervisory notice raising concerns that customers of SVS Securities PLC (SVS) had been charged high fees, some amounting to 20% of the total investment. SVS entered administration at the beginning of August after the FCA identified "serious concerns" about the way the business was operating.
  • The regulator carried out urgent supervisory work following a tip-off about the assets that SVS was investing client money. The FCA said that it was concerned SVS was conducting business that creates an ongoing risk to consumers.
  • Following the report, the FCA instructed the wealth manager to cease all regulated activities and on 5 August 2019, SVS entered into special administration.
  • The appointed Special Administrators will carry out an assessment of the client money and assets held by SVS to confirm whether this is recoverable by customers. The FCA has advised customers to proceed with caution if they are approached by  claims management company, to assist in the return of their assets. The FCA warned that CMCs will likely seek a fee which reduces the customers overall return.

FCA staff will not be forced to help with Connaught review

  • Employees at the FCA will not be forced to meet with the leader of an independent review into the regulator's handling of the Connaught fund collapse.
  • The Connaught fund was an unregulated collective investment scheme which provided short term bridging finance. The fund went into liquidation in December 2012 and investors lost £118million.
  • The FCA commissioned Raj Parker, Barrister to lead an independent review into its own actions in dealing with the Connaught funds, specifically looking at the proportionality, appropriateness and effectiveness of the FCA's regulation.
  • Although the FCA has said it will endeavour to secure the attendance of current and former employees, staff will not be obliged to meet with Mr Parker as part of the investigation. The same applies to the independent investigation into the FCA's handling of the collapse of London Capital & Finance, as the leader of the review is unable to force employees to meet with her.

SFO publishes new guidance on what to expect if self-reporting

  • On 6 August 2019, the SFO published updated guidance for corporates and legal advisers on what to expect if self-reporting fraud or corruption.
  • Much of the guidance follows the SFO's current approach and confirms that cooperation will be a relevant factor in the SFO's decision on charging organisations.
  • The new guidance offers more flexibility on when to report, referring to "reporting within a reasonable time of the suspicions coming to light". It also asks organisations to consult in a timely way with the SFO before interviewing potential witnesses.  
  • The clear message from the guidance is that organisations need to have clear reason for any internal investigation, and consider the SFO's requirements before starting. 

Swedish regulator delays publication of money laundering report on Swedbank

  • The Swedish Financial Supervisory Authority (FSA) has delayed the publication of an anti-money laundering report in the Baltics to the start of next year, pushing the deadline of October 2019 back by a few months.
  • In April 2019, Swedbank, Sweden's oldest retail bank admitted to failings in its money laundering processes. The most recent allegations are that it processed gross transactions of up to £18billion a year from high risk, Russian non-residents through Estonia from 2010-1016.
  • The latest allegations in the Swedbank money laundering scandal caused the bank to lose more than a third of its market value.

The Swedish regulator has said the delay in the report has been caused by a considerable amount of material in the investigations. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2019. Specific advice should be sought for specific cases. For more information see our terms and conditions.

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