final notice

FSA Fines Broker for Improper Disclosure

On July 9, the FSA issued a final notice, stating that it has imposed a fine of £160,000 (reduced to £30,000 due to his financial circumstances) on Jay Alan Rutland for engaging in the market abuse offence of improper disclosure under section 118(3) of the Financial Services and Markets Act 2000. He had also encouraging others to engage in similar behaviour. Final Notice.

Mr. Rutland was a senior broker at Pacific Continental Securities (UK) Limited. On four occasions, he drafted and supplied sales scripts to brokers to use when selling shares which contained diluted risk warnings and risk factors. He also improperly disclosed inside information to his colleagues. He did not obtain approval from the compliance department and was aware that he should not circulate scripts which had not been approved.

FSA Issues Final Notice to Former UBS Advisers Following Upper Tribunal Decision

On June 28, the FSA published final notices (dated 27 June 2012) it has issued to Laila Karan and Sachin Surendra Karpe, former UBS client advisers, relating to breaches concerning an unauthorised trading scheme. Final Notice for Laila Karan. Final Notice for Sachin Surendra Karpe.

The final notices impose a financial penalty of £1,250,000 on Mr. Karpe, and £75,000 on Mrs. Karan. Both individuals have been banned from carrying on any function relating to regulated activities carried on by any authorised or exempt persons, or exempt professional firm.

FSA Censures Kaupthing for Liquidity Monitoring Failures

On June 26, the FSA reported that it had issued a Final Notice (dated 18 June 2012) against Kaupthing Singer and Friedlander Limited (KSFL), the UK based subsidiary of the Icelandic banking group Kaupthing Bank Hf (KBHf). Final Notice.

The FSA found that KSFL breached Principle 2 of the FSA’s Principles because it failed to consider promptly and properly whether liquidity stresses in KBHf would have a detrimental effect on its own liquidity position. KSFL did not give proper consideration to, or properly monitor, a special financing arrangement with its parent company in Iceland. In addition, when it started to have concerns about this liquidity arrangement, it failed to discuss these concerns with the FSA in a timely manner.

The FSA has published this notice to ensure that other regulated firms understand the importance of complying with the FSA’s liquidity guidelines and that where compliance is dependent on liquidity arrangements with a parent company, the ability to exercise these arrangements is rigorously tested rather than assumed.

FSA Fines Barclays £59.5 Million for Manipulation of LIBOR

On 27 June 2012, the FSA published the final notice issued to Barclays Bank plc, detailing a £59.5 million fine for misconduct relating to its submission of rates that formed part of the London Interbank Offered Rate (“LIBOR”) and the Euro Interbank Offered Rate (“EURIBOR”). This is the largest ever fine that the FSA has imposed. Final Notice.

In particular, Barclays breached the following Principles:

  • Principle 5 (market conduct) – Barclays was found to have breach Principle 5 by making US dollar LIBOR and EURIBOR submissions that took into account requests made by interest rate derivatives traders.
  • Principle 3 (management and control) – Barclays did not have adequate risk management systems or effective controls in place relating to its LIBOR and EURIBOR submission process.
  • Principle 2 (skill, care and diligence) – Barclays failed to conduct its business with due skill, care and diligence when considering issues raised internally relating to its LIBOR submissions.

In addition to the fine by the FSA, the U.S. Commodity Futures Trading Commission fined Barclays $200 million, and Barclays agreed to pay a penalty of $160 million as part of an agreement with the U.S. Department of Justice.

The Barclays settlement is the first settlement announced in connection with the LIBOR probe, with regulators investigating more than 20 banks.

FSA Issues Final Notices to an Investment Banker and His Wife for Insider Dealing

On 31 May 2012, the FSA issued Christian Littlewood and his wife, Angie, with final notices prohibiting them from performing any function in relation to any regulated activity. Between 1998 and 2008, Mr. Littlewood was employed by the investment bank Dresdner Kleinwort Wasserstein Ltd. As a result of his employment he had access to inside information relating to securities. Mr. and Mrs. Littlewood used the inside information obtained through his employment to facilitate the placing of trades in eight separate stocks just prior to announcements to the market. As a result of these trades, Mr. and Mrs. Littlewood, together with a third party friend of Mrs. Littlewood (Mr. Sa’aid), made profits of around £590,000.

The FSA’s action follows the conviction of Mr. and Mrs. Littlewood for criminal offences of insider dealing in February 2011. Final Notice for Christian Littlewood. Final Notice for Angie Littlewood.