Legal News

In this issue Beyond Brexit UK, EU and international regulators and bodies Accountability, culture and social governance Prudential requirements Operational resilience Financial crime and sanctions Complaints, compensation and claims management Investigations, enforcement and discipline Regulation of capital markets Dispute resolution for financial services lawyers Regulation of derivatives Sustainable finance and ESG Banks and mutuals Investment funds and asset management UK Mi FID II Consumer credit, mortgage and home finance Regulation of insurance Payment services and systems Fintech and cryptoassets Regulation of AI in FS Financial Services Enforcement Database Intraday news alerts Lex Talk®Financial Services: a Lexis®Nexis community Daily and weekly news alerts New and updated content Dates for your diary Beyond...

When mini-bond investments fail—fraudulent trading and other claims ( London Capital & Finance v Thomson) London Capital & Finance plc (in administration) and others v Thomson and others [2024] EWHC 2894 ( Ch) What are the practical implications of this case? The clearest takeaway is that probity is paramount. In short, the defendants were undone by deceit and avarice. To expand, the court accepted a contention from the Claimants that LCF functioned, in effect, as a Ponzi scheme—defined as an arrangement whereby interest and other amounts owed to earlier investors are discharged using proceeds from later investment. The apparent purpose was to advantage four specific individuals by raising funds to be used for their benefit, or for companies in which they had an interest. The claims against two of those people, who were directors of recipient companies, were resolved. The remaining two were,...

Darren Wang Yip Lui and four companies settled with Skatteforvaltningen (known as Skat) A confidential deal has been reached by Darren Wang Yip Lui and four companies with Skatteforvaltningen, as recorded in a High Court order dated 17 October 2024 that has only recently been disclosed. The resolution emerges midway through a sprawling High Court trial that began in April 2024. Lui and the businesses are among dozens of defendants pursued by Skat over a cum-ex trading arrangement that extracted billions via fraudulent claims for dividend tax refunds from the country’s treasury. Skat did not immediately reply to requests for comment on 2 December 2024. Lawyers for Lui and the companies stated they were unable to comment on the settlement owing to confidentiality duties. Lui and the companies have denied taking part in any fraudulent conduct. Cum-ex trading was devised to exploit gaps in...

The UK government has pledged to reset the financial services relationship with the EU Addressing audiences from the City in London, the Treasury’s economic secretary, Tulip Siddiq, publicly stressed that the UK should nurture strong ties with its nearest trading partner. Her comments coincide with finance minister Rachel Reeves’s planned participation in a meeting of EU finance ministers in December 2024. Siddiq previously met former EU financial services commissioner Mairead Mc Guinness earlier in 2024 and is due to meet the newly appointed commissioner, Maria Luís, as well......

The FCA has moved to refute criticism that its plan to publicise more about its investigatory activity conflicts with its aim to embed UK growth and competitiveness factors into its routine operations. In an updated consultation, the FCA argued that greater openness may actually bolster growth and competitiveness if it lightens the load of financial crime and helps smaller firms build knowledge. It said this remains aligned with its growth and competitiveness objective for the UK economy. The FCA set out concessions made to the financial services industry in response to what it called ‘significant concerns’ over its so‑called ‘name and shame’ plan. First set out in February 2024, the proposal to disclose the identities of firms placed under investigation, where doing so serves the public interest, has been roundly criticised by industry, the previous government and groups of...

The EU’s General Court held that the European Commission’s updated cartel penalty on HSBC was not out of time, as the bloc’s competition watchdog had filed an appeal that paused the limitation period. In December 2016, the Commission imposed a €33.6m fine on HSBC after concluding it had joined a cartel to influence a benchmark interest rate. The authority stated that several banks (including Crédit Agricole and JPMorgan Chase & Co) shared commercially sensitive data in breach of antitrust rules, following a five-year probe into aspects of the European Interbank Offered Rate, or Euribor. In September 2019, the General Court set aside HSBC’s fine because the Commission’s reasoning was insufficient, and the Commission appealed that judgment to the General Court. The Commission later recalculated the penalty to €31.7m in June 2021 and the following month ( July 2021) withdrew its appeal. HSBC...

Key trends and opportunities Financial institutions are increasingly deploying AI to streamline processes, improve customer experiences and reduce risk. Current uses span the areas below. Customer service chatbots AI-driven chatbots and virtual assistants provide instant, 24/7 answers to customer questions, use algorithms to assemble tailored client portfolios, and route complaints to the most suitable support teams. Financial crime prevention An early field of adoption sees machine learning applied to tasks from blocking suspicious payments and fraud through to supporting initial and ongoing customer due diligence—know your customer. Personalisation As data collection deepens and models grow more sophisticated, a major anticipated shift is greater product personalisation. Institutions already trial personalised financial guidance (robo-advice), yet AI could transform this—shaping offerings around a consumer’s life stage, spending patterns and future objectives. Looking forward, AI could construct personalised investment portfolios from real-time market data, individual risk profiles and long-term financial...

Judge Thomas Leech stated he was unconvinced that investors who based their decisions solely on Barclays’ share price or its listed status had any realistic chance of persuading the Court of Appeal that their claims might prevail at all. He added that his October 2024 ruling, which reduced the claim’s value by more than half, had been reached after careful legal consideration. “ I should have the courage of my convictions, and if I am satisfied the claims ought to have been struck out, it is not open to me to grant permission to appeal,” Judge Leech remarked. Hundreds of institutional investors, including the Allianz Global Investors Fund, are pursuing Barclays following a complaint by the New York attorney general concerning the bank’s LX Liquidity Cross trading platform, which erased billions of pounds in market value......

In this issue: UK, EU and international regulators and bodies Accountability, culture and social governance Prudential rules Risk oversight and controls Financial crime and sanctions Complaints, redress and claims handling Investigations, enforcement and discipline Capital markets oversight Derivatives regulation Banks and mutuals Investment funds and asset management EU Mi FID II Insurance regulation Payment services and systems Fintech and cryptoassets AI regulation in financial services Financial Services Enforcement Database Intraday news alerts Daily and weekly news alerts New and updated content Dates for your diary UK, EU and international regulators and bodies MPs raise deep-rooted problems at FCA in critical report Law360, London: A forthcoming report from a cross-party group of MPs is set to underscore shortcomings in how the Financial Conduct Authority ( FCA)...

OFSI investigations into Russia sanctions breaches Giles Thomson, director of the Office of Financial Sanctions Implementation, told MPs on the Treasury Committee that probes into suspected Russia sanctions violations are now at ‘mature’ stages. These cases, he said, will demonstrate the regulator’s readiness to pursue the most ‘egregious’ rule-breaking. ‘ You should expect to see further numbers of cases of both wider range and higher value in the coming months,’ he added, aiming to show the growing breadth and depth of its work. Thomson would not disclose how many of OFSI’s 400 live matters might be made public. Most, he said, relate to low-value, minor breaches that end with no further action or a warning letter. Only a ‘single-figure percentage’ surpasses the misconduct threshold that justifies public identification or financial penalties. He acknowledged that enforcement has, to date, issued only one £15,000 fine for breaches of the...

Under the reforms, the watchdog will release to defence teams any material bearing on its inquiry, rather than limiting disclosure to papers that help or weaken its position. Such extra papers could enable defendants to see the FCA’s case in the round, allowing their white‑collar solicitors to shape a stronger defence, said Tom Bushnell of Hickman & Rose. In document‑laden cases (and where memories have dimmed) the ability to assemble all pertinent material can be decisive, helping the subject of enforcement to grasp what occurred and deliver a coherent reply to the claims, Bushnell said. At times, pivotal records or communications can be properly grasped only with context supplied by other material. Previously, the FCA was obliged to disclose the documents it relied upon in regulatory enforcement, as well as any potentially exculpatory evidence. The agency now proposes to give defence lawyers...

As the financial sector awaits the FCA’s policy statement on non-financial misconduct—intended to finalise the rule changes consulted on in September 2023—the regulator, in October 2024, released the findings of its survey on non-financial misconduct. In short, the FCA expects: senior leadership and boards of directors to discuss, challenge and properly oversee non-financial misconduct firms to maintain robust systems and controls that identify and address workplace issues, and firms to take immediate steps to ensure they have effective policies and practices in place The results In February 2024, the FCA issued a compulsory information request to more than 1,000 regulated wholesale financial services firms concerning non-financial misconduct. The FCA requested data and information from 2021 to 2023 on: the number of non-financial misconduct incidents logged by type or category, and how those incidents were detected the number of non-financial misconduct incidents recorded by incident type or category and the...

Conservative MP Bob Blackman, co-chair of the all-party parliamentary group ( APPG) on investment fraud and fairer financial services, stated that the document draws on evidence from over 170 individuals, among them serving and former FCA staff. Scheduled for publication on 26 November 2024, the report sets out the regulator’s shortcomings in detail as described within. Across 380 pages it will highlight concerns about competence and accountability, and claim bad faith within the FCA as alleged by numerous witnesses and contributors. Blackman also argued that systemic failings flagged in earlier reviews remain unaddressed by the authority. He pointed to botched case handling, including the collapse of major firms such as the Woodford investment fund, London Capital & Finance Plc ( LCF), the British Steel Pension Scheme, and Philips Trust Corp. The MP maintained there are still 'deep-rooted cultural problems' inside the FCA. He added that, 'if...

High Court Judge, Michael Soole High Court Judge Michael Soole rejected all grounds advanced by CCP Graduate School Ltd to revisit the dismissal of its claim against Nat West for not preventing a 2016 authorised push payment fraud or retrieving the money. He concluded the earlier order striking out the case was obviously right. The company, which previously ran a further education school in north-west London, had asked Judge Soole to permit a challenge to the March 2024 ruling that the claims were out of time. Judge Soole decided the firm’s sole director, Dan Pathirana, had put forward no arguments with a ‘reasonable chance of success’ at the brief hearing on 22 November 2024, stating the prior decision was ‘plainly......

UK developments HMT seeks views on a UK Green Taxonomy. HM Treasury ( HMT) has opened a consultation inviting feedback on the value case for creating a UK Green Taxonomy within the UK’s broader sustainable finance framework. Submissions are requested by 6 February 2025. The deadline is 6 February 2025. See: LNB News 15/11/2024 63. Sources: Open consultation: UK Green Taxonomy and Consultation. HMT issues consultation response and draft rules for ESG ratings providers. HMT has set out its response to its consultation on the future regulatory regime for Environmental, Social, and Governance ( ESG) ratings providers, outlining the intended perimeter of the new framework together with accompanying draft legislation. Views on the draft regulation are invited by 14 January 2025. The closing date is 14 January 2025. See: LNB News 15/11/2024 51. Sources: Consultation outcome: Future regulatory regime for...

In this issue: UK, EU and international regulators and bodies Regulated activities Authorisation, approval and supervision Prudential requirements Operational resilience Financial crime and sanctions Complaints, compensation and claims management Investigations, enforcement and discipline Regulation of capital markets Packaged Retail and Insurance-based Investment Products ( PRIIPs) Regulation of derivatives Sustainable finance and ESG Banks and mutuals Investment funds and asset management UK Mi FID II Consumer credit, mortgage and home finance Regulation of insurance Payment services and systems Regulation of AI in FS Financial Services Enforcement Database Daily and weekly news alerts Intraday news alerts New and updated content Dates for your diary UK, EU and international regulators and bodies Chancellor delivers first Mansion House speech Rachel Reeves, the chancellor of the...

All eyes on the SFO after LC& F Ponzi scheme ruling On 14 November 2024, High Court Judge Robert Miles delivered a judgment concluding that former executives of the mini-bonds issuer deceived investors, spotlighting behaviour sure to interest the anti-fraud prosecuting agency. Running in parallel with those civil claims, the SFO has probed figures linked to the company since its 2019 collapse. Five people have been arrested, yet no charges have followed. While the court proceedings have provided a granular examination of the episodes in question, lawyers warn that how far the agency can leverage the findings remains uncertain. In this piece, Law360 surveys the key lessons from the 341-page ruling—and what they may signal for the SFO's inquiry. A Ponzi scheme London Capital & Finance plc, propelled by glossy promotions and assurances of steady, bank-beating yields, drew in over 11,600 backers—the biggest...

What does the government guidance tells us about what reasonable procedures businesses are expected to take to avoid committing the new failure to prevent fraud offence? Government guidance explains the steps expected of businesses to avoid liability for the new failure to prevent fraud offence. Relevant organisations can rely on a defence to FTPF where they have reasonable procedures to prevent fraud (in this context, fraud intended to benefit the organisation), or if they can show it was not reasonable to expect any prevention measures at all. The Guidance to organisations on the offence of failure to prevent fraud (the Guidance) outlines, in broad terms, the procedures companies may adopt to deter associated persons from committing fraud offences. It states that a company’s FTPF framework should be shaped by six principles: top level commitment risk assessment ...

In its latest primary market bulletin on 15 November 2024, the FCA said companies may hold calls with smaller shareholders to provide a valuable chance to engage with managers, but cautioned that this carries a risk of revealing insider information. Such details are confidential or price-sensitive. The FCA highlighted that these risks can arise where a company has not issued an announcement through a regulated information service ( RIS), such as the London Stock Exchange’s regulatory news service. This covers announcements a company makes outside the regular reporting requirements set by its disclosure guidance and transparency rules, known as DTR......

Britain’s payments watchdog seems to have been given a fresh competitiveness brief, despite it not having gone through the usual parliamentary scrutiny. In a 14 November 2024 letter to the PSR, Finance Minister Rachel Reeves attacked clutter and duplication across payments oversight. She further indicated she expects the PSR to take into account the government’s plan to foster growth and international competitiveness. Unlike the Financial Conduct Authority ( FCA), the PSR lacks a defined aim to further UK growth and international competitiveness. The FCA’s competitiveness aim is secondary, sitting beneath its primary goals of safeguarding consumers and ensuring market integrity. Although this steer is not as clear-cut as the FCA’s statutory duty to enable the UK’s international competitiveness and growth over the medium to long term, it nonetheless seems to shift the PSR’s parameters. This arrives after months of discontent from fintechs about fraud...