FCA

Speech by Tracey McDermott on FCA’s Approach to Enforcement

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On July 2, the FSA published a speech by Tracey McDermott, acting director of the FSA’s Enforcement and Financial Crime Division. The speech focused on credible deterrence and the approach that the Financial Conduct Authority (FCA) will take to enforcement. Speech.

Ms. McDermott commented on the FCA that:

  • thematic and firm-specific supervisors will work in a more integrated way;
  • the focus will increasingly be on senior management who fail to recognise and manage risks and fail to control the way products are sold; and
  • it will have a low tolerance for repeat offenders.

The FSA also published a speech by Martin Wheatley, chief executive designate of the FCA. His speech emphasised that the FCA will continue the FSA’s policy of credible deterrence. Speech.

Memoranda of Understanding Between FSCS, PRA and FCA Published

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On June 26, the FSA published a draft memorandum of understanding (“MoU”) between the Financial Services Compensation Scheme (“FSCS”) and the new Prudential Regulation Authority (“PRA”) and a second MoU between the FSCS and the new Financial Conduct Authority (“FCA”). MoU between FSCS and PRA. MoU between FSCS and FCA.

In particular the MoUs cover:

  • The roles of the FSCS, PRA and FCA;
  • Information sharing between the FSCS and the new regulators and confidentiality issues;
  • Policy making;
  • Funding the FSCS;
  • Co-ordination between the PRA and FCA on the oversight of the FSCS; and
  • Reporting obligations on the FSCS to the new regulators.

Treasury Committee Publishes Report on the Financial Services Bill

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On 8 June, the Treasury Select Committee published a report setting out its main concerns on the Financial Services Bill. Report.

In particular, it called for amendments to the Bill which would:

  • Oblige the Court of the Bank of England to undertake retrospective reviews of the Bank of England’s performance;
  • Give a general power to the Chancellor of the Exchequer to direct the bank of England when public funds are at risk;
  • Make competition an objective of the Prudential Regulation Authority;
  • Ensure Parliament, through the Treasury Committee, may request retrospective reviews of the work of the Financial Conduct Authority’s (“FCA”).

It also considered whether the Treasury Committee should have a role in the appointment and dismissal of the Governor of the Bank of England and whether there is a way of requiring the FCA to publish board minutes. It welcomed the House of Lords to re-examine these issues. The second reading of the Bill in the House of Lords will take place on 11 June 2012.

FSA Business Plan

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On 22 March 2012, the FSA published its Business Plan for 2012/13.  It sets out the key priorities and identifies implications for the FSA’s budget.  The plan covers:

• delivering the regulatory reform programme (including the introduction of a twin-peaks model operating within the FSA from 2 April 2012 – the objectives to be closely aligned with those of the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”));
• influencing the international & European policy agendas;
• delivering financial stability (including the implementation of CRD IV and Solvency II in the UK);
• delivering market confidence (including work on the EU markets legislative proposals and strengthening the FSA’s client assets regime);
• delivering consumer protection and combating financial crime;

The FSA will hand over responsibility for prudential regulation to the PRA and conduct regulation to the FCA in the first half of 2013.

Government Sues Allied Home Mortgage For Fraud Under the False Claims Act

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On November 1, 2011, the United States filed suit in the Southern District of New York against Allied Home Mortgage, a mortgage lending company, for allegedly defrauding the government into insuring its now-defaulted loans. The complaint alleges that Allied and CEO Jim Hodge violated the False Claims Act (“FCA”) by making misrepresentations to the Department of Housing and Urban Development to ensure the company could continue originating mortgages insured by the Federal Housing Administration (“FHA”). The complaint alleges that Allied submitted loans to the FHA originated out of “shadow branches” it did not disclose to the government and then illegally routed those mortgages through HUD-certified mortgage branches to avoid detection by the government. The government also contends that Allied failed to implement sufficient quality control measures to ensure underwriting standards were being met. The government seeks a permanent injunction and treble damages. Complaint.

Joint Proposed Rule on Swap Margin and Capital Requirements

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On April 12, the FDIC, Fed, FCA, FHFA, and OCC issued a notice of proposed rulemaking establishing margin and capital requirements for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants pursuant to Sections 731 and 764 of the Dodd-Frank Act. The proposal adopts a risk-based approach in establishing the minimum amount of margin a covered swap entity must collect from a counterparty and the frequency with which it must calculate and collect such margin. On April 12, the CFTC held an open meeting to discuss and approve a similar proposed rule. The Commissioners observed that significant inconsistencies between the CFTC rule and the rule proposed by the aforementioned agencies would need to be reconciled in future rulemaking actions. FDIC Release. Proposed Rule. CFTC Hearing Link.