FSA

FSA fines Ian Hannam Chairman of Capital Markets at JP Morgan Cazenove for Market Abuse

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On 3 April 2012 the FSA published a Decision Notice stating that the FSA had decided to fine Ian Hannam £450,000 for two instances of market abuse (improper disclosure). In the FSA’s opinion, Hannam disclosed inside information in two emails sent in September and October 2008 to a prospective client considering buying a stake in Heritage Oil Plc (Heritage), an existing J P Morgan client for which Hannam was the lead adviser. The September email contained information about a potential offer for Heritage and the October email contained information about a new oil find by Heritage.

The Decision Notice states that the FSA accepts that Hannam did not set out to commit market abuse but considers that Hannam’s failings were serious in view of his experience and senior position within J P Morgan. Mr. Hannam has resigned his position as Chairman of J P Morgan in order to appeal the matter to the Upper Tribunal.

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.

U.K. Regulator Fines Former Merrill Lynch Broker £350,000 for Market Abuse

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On 15 February, the U.K. regulator, the Financial Services Authority (FSA), fined Mr. Andrew Osborne, a former Managing Director at Merrill Lynch, £350,000 for engaging in market abuse by improperly disclosing inside information to Greenlight Capital Inc. that Punch Tavern Plc, for whom he was acting, was in the advanced stages of an equity fundraising. The FSA considered that Mr. Osborne had failed in his duties not to disclose inside information and to consider the risk of market abuse, duties of which Mr. Osborne as an approved person with considerable experience was fully aware. The decision comes on the back of the FSA’s decisions on 25 January to fine Mr. David Einhorn and Greenlight Capital Inc. in relation to the same matter. Final Notice of Andrew Osborne.

FSA Fines David Einhorn and Greenlight Capital £7.2 Million for Market Abuse Activity

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On January 25, the U.K. Financial Services Authority (FSA) decided to fine David Einhorn and his hedge fund Greenlight Capital Inc £7.2 million for engaging in market abuse in relation to an equity fund raising by Punch Taverns Plc raising in 2009. Mr. Einhorn learnt of the proposed fund raising after which he instructed that his fund’s holding in the firm be sold. While the FSA accepted that Mr. Einhorn did not believe the information to be inside information, the FSA considered that his belief was unreasonable and that his failure to identify the information as such was a serious breach of the standard of market conduct expected from someone with his professional experience and of his industry standing. Press Release. Decision Notice for David Einhorn. Decision Notice for Greenlight Capital Inc.

FSA Issues £14,000 Fine and Ban Against Hedge Fund Compliance Officer

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On 18 November, 2011, the Financial Services Authority fined Dr Sandradee Joseph, a former Compliance Officer at hedge fund company Dynamic Decisions Capital Management, £14,000 for failing to exercise due skill, care and diligence in managing the business of the firm for which she was responsible in her CF10 controlled function (Principle 6 of the FSA’s Statement of Principles for Approved Persons). The FSA also banned Dr Joseph from performing any significant influence function in regulated financial services, considering that she did not meet FSA’s fit and proper test. FSA Press Release. Final Notice to Dr Sandradee Joseph.

FSA Releases Proposed Guidance And Warns Against Retail Sales of ‘Toxic’ Death Bonds

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On 28 November, 2011, the Financial Services Authority released proposed guidance on traded life policy investments (TLPIs) and at the same time issued a strong warning that TLPIs are not to be marketed to UK retail investors. The FSA points to serious problems with how the TLPIs are designed, marketed and sold, considering them to be “toxic products” unlikely to be suitable for the majority of retail investors. The FSA has stated that it ultimately aims to ban TLPIs from the UK retail market. FSA Press Release. Guidance Consultation.

FSA Consultation Paper on Recovery and Resolution Plans

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On August 9, the FSA published a Consultation Paper and Discussion Paper regarding the implementation of Recovery and Resolution Plans by systemically important banks and large investment firms in the UK. The goal of the paper is to present proposals on what is expected of a firm in planning for stress events that would require it to take action to recover or, if necessary, wind-down in an orderly manner without putting UK taxpayers at risk of loss. FSA Release. FSA Consultation Paper and Discussion Paper.

FSA Proposed Guidance on Liquidity Swaps

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On July 21, the FSA issued proposed guidance on liquidity swaps, requiring firms participating in such transactions to inform the FSA before execution under PRIN 11. The proposed guidance also provides the basis of the FSA’s Pillar 2 assessment of liquidity swap transactions, including: (i) assessing the risk management systems of the firms engaging in the transaction; (ii) the exit strategy of a firm in the event of a counterparty default; and (iii) the level of asset encumbrance resulting from the liquidity swap. Comments must be submitted by September 21. FSA Release. FSA Proposed Guidance.