The U.K. Financial Conduct Authority pursued less than half as many investigations to the disciplinary phase last year as the agency focused on larger cases, a regulatory study found.

The FCA sent 21 cases to the Regulatory Decisions Committee, which has to approve whether an FCA investigation can proceed to a disciplinary action, through November, down from 56 in 2013, Bovill Ltd. said.

• “The FCA is focusing the majority of its resources on high profile, but very time-consuming and labor-intensive cases, such as forex and Libor manipulation,” said Rebecca Thorpe, head of projects at Bovill.
• This “takes away resources from other essential FCA work.”

The FCA fined five banks 1.1 billion pounds ($1.7 billion) in November for trying to manipulate the foreign-exchange market, part of a global investigation that has been the focus of authorities worldwide for the past 18 months. The regulator is also still probing the rigging of the London interbank offered rate. It’s fined seven firms 532 million pounds since 2012 as part of the Libor case.

Bovill obtained the data through a freedom-of-information request.

The regulator also saw a decrease in insider-trading arrests in 2014. In the nine months through September, no arrests had been made in connection with insider dealing, according to information from a FOIA request by Bloomberg last year. That’s down from 15 in the same period in 2013.

‘Bigger Fish’

• “We don’t set ourselves targets,” the FCA said in an e-mailed statement on the Bovill study. “When we take action against firms or individuals it is because we have found evidence of a significant failure of conduct, and will decide on a proportionate response.”

The number of final notices — issued when all appeal avenues have been exhausted — has also fallen in the last three years, according to Bovill. There were 161 in 2012, and 113 in 2014, the firm said.

• “It’s important that the FCA doesn’t fail to pursue serious misconduct because it has bigger fish to fry,” said Barney Reynolds, a regulatory lawyer at Shearman & Sterling LLP in London.
• Still, it is better to pursue “large cases that will act as a market-wide deterrent, than hundreds of smaller cases many of which are hardly noticed.”

http://bloom.bg/1AOjzQq

Jersey has captured beneficial ownership information on a corporate registry since 1999 and this information is available to law enforcement agencies.

Its Financial Services Commission (JFSC) regularly undertakes rigorous on-site examinations of businesses to assess compliance. Given there is ready access and availability of beneficial ownership information to foreign fiscal and investigative authorities, the industry does not believe there is further benefit in pursuing a public register.

Furthermore, Jersey’s ability to capture ownership information of companies is far ahead of those available in other onshore and offshore jurisdictions including the UK, which is so far alone in calling for a public registry.

Indeed at the last meeting of G20 nations, one of the key findings on beneficial ownership was an endorsement of the current Financial Action Task Force (FATF) approach which is to ensure that the true owners of value are known, that this information is readily available and that it can be exchanged between governments without undue difficulty.

We believe this is the prudent approach as a public registry will be of dubious value, will be bypassed by criminals and those who misuse companies to launder money and for tax evasion purposes, while data will be unreliable.

Jersey adheres to current international standards and is already a global leader in capturing and exchanging such information through agreements between regulators and fiscal authorities.

http://bit.ly/1KAeYTP

Former Prime Minister of Mauritius Navin Ramgoolam is set to be released on bail Saturday evening following a decision of court after a bail motion was heard on the same day.

The magistrate of the Bail and Remand Court in the capital Port- Louis gave a ruling granting bail to Ramgoolam for a surety of some 5000 euros.

His close friends are claiming that Ramgoolam is suffering from a political vendetta but police authorities in Mauritius insisted they had been enquiring and had never took any instructions from the government.

The original article can be found at http://bit.ly/1xXA6dD

The FCA has banned and fined two former senior executives of Martin Brokers (Martins) a total of £315,000 for compliance and cultural failings which facilitated the firm’s misconduct in respect of the London Interbank Offered Rate (LIBOR).

• David Caplin, Martins’ former chief executive, was fined £630,000 in 2014 for attempted manipulation of LIBOR
• Jeremy Kraft, Martins’ former compliance officer, was fined Mr Kraft £105,000 and banned him from holding a significant influence function at an FCA authorised firm

The FCA found that

• David Caplin, Martins’ former chief executive, breached Statement of Principle 7 by failing to take reasonable steps to ensure compliance with the regulatory regime.
  1. In particular, Mr Caplin failed to
     1. ensure effective oversight of the firm’s compliance function,
     2. monitor broker conduct and
     3. Address’ lack of controls to prevent brokers making or receiving corrupt inducements.
     4. Implement the recommendations of an external compliance consultancy firm properly which identified compliance deficiencies at the firm.
  2. As a result of these failings, the FCA has fined Mr Caplin £210,000 and banned him from holding a significant influence function at an FCA authorised firm.
• Jeremy Kraft, Martins’ former compliance officer, breached
  1. Principle 6 for failing to act with due skill, care and diligence in overseeing the compliance division.
  2. Principle 7 by failing to take reasonable steps to ensure compliance with the regulatory regime.
  3. In particular, Mr Kraft
     1. Failed to carry out his responsibilities in respect of compliance matters diligently;
     2. failed to challenge David Caplin on compliance issues;
     3. delegated matters to unqualified members of staff; and
     4. Failed to follow the advice of an external compliance consultancy firm to address shortcomings in Martins’ compliance.
  4. As a consequence, the FCA has fined Mr Kraft £105,000 and banned him from holding a significant influence function at an FCA authorised firm.

The FCA found that both executives’ failings facilitated Martins’ misconduct in relation to LIBOR.

Mr Caplin and Mr Kraft agreed to settle at an early stage of the investigation and qualified for a 30 per cent discount.

Copies of the final notices with regard to

Mr Caplinhttp://bit.ly/16EYomr

Mr Kraft; http://bit.ly/16Fa0pz

press release : http://bit.ly/1ASqfHT

HSBC’s Swiss banking arm helped wealthy customers dodge taxes and conceal millions of dollars of assets, doling out bundles of untraceable cash and advising clients on how to circumvent domestic tax authorities, according to a huge cache of leaked secret bank account files.

The files – obtained through an international collaboration of news outlets, including the Guardian, the French daily Le Monde, BBC Panorama and the Washington-based International Consortium of Investigative Journalists – reveal that HSBC’s Swiss private bank:

Routinely allowed clients to withdraw bricks of cash, often in foreign currencies of little use in Switzerland.

The original article can be found at http://bit.ly/1zM7Tun

Whilst there are some jurisdictions that perform better than others, the overall picture that comes from the industry regarding the regulatory environment is not encouraging.

The survey asked respondents questions regarding financial stability, market confidence, financial crime, consumer protection, regulatory compliance, predictability, customer service, and openness to foreign businesses. Nearly 90% of respondents agreed that regulations will become more onerous and a similar percentage agreed that regulations will become more costly. However, only 17% of respondents agreed that regulations will become more effective.

“Too big to fail is also too big to regulate. Several years into a series of crises the financial services community and its regulators have created a tangled web of large oligopolies being directed through legal and compliance systems, certainly not competitive businesses. As repeated failures show, nobody is any safer, and as this report shows, nobody feels any safer either. More regulation is just adding simultaneously to complexity and fragility.” said Professor Michael Mainelli, Executive Chairman of Z/Yen.

The full report can be found at http://bit.ly/1AMYpRP

For more information please contact mark_yeandle@zyen.com.

On 30 January 2015 the Guernsey Financial Services Commission (“the Commission”) decided:

1. to impose a financial penalty of £28,000 under Section 11D of the Financial Services Commission Law on Woodlock and;

2. to make this public statement under Section 11C of the Financial Services Commission Law.

The Commission considered it reasonable and necessary to make these decisions having concluded that Woodlock failed to fulfil the minimum criteria for licensing set out in Schedule 4 to the Protection of Investors Law by not complying at all times with The Licensees (Conduct of Business) Rules, 2009, issued under the Protection of Investors Law.

The background to these decisions is that;

Woodlock was visited by the Conduct Unit in October 2013, as part of a thematic review of advice given by insurance and investment intermediaries.

The visit identified a number of concerns with regard to treatment of clients, including the obtaining of adequate information from clients, risk warnings to clients, the suitability of advice and record keeping.

The concerns arising from the visit were referred to the Enforcement Division.

As a result of its enquiries, the Commission found that:

1. Woodlock failed to evidence that its advisers obtained sufficient knowledge of the clients and did not document the information in a readily accessible manner;

2. Client files did not contain sufficient information regarding the client’s financial circumstances to evidence that the advice given was suitable for the client;

3. As a result of the above, it was not possible to assess whether the products recommended were suitable having regard to the facts disclosed by the client;

4. In addition, the Commission had previously raised concerns with Woodlock over the lack of client information on file and the suitability of the products recommended but Woodlock failed to prevent such issues from recurring;

5. In written advice Woodlock informed clients that it had compared the whole of the marketplace using a research tool prior to making a recommendation.  However, only a pre-selected range of products was considered.  In addition, a risk profiling tool used as one part of the assessment of clients’ attitude to risk was not used specifically in the way it was represented to clients;

6. Woodlock did not keep and properly maintain records relating to its controlled investment business;

7. Woodlock failed to retain responsibility for the compliance function which it outsourced to a third party.

Mitigating Factors

1. At all material times, the directors of Woodlock were co-operative with the Commission and assisted with its enquiries.

2. In reaching its decision, the Commission has taken into account that Woodlock put in place a remediation plan to address the issues raised.  As a result of the remediation work, Woodlock implemented a new risk profiling system to assist in assessing clients’ attitude to risk, made improvements to the form of recording information obtained from clients on file and made changes to the way in which information regarding product research was presented to clients.

3. In addition, the directors of Woodlock have undertaken to arrange, in principle, for the transfer of its clients to another licensee, thereby maintaining the interests of the clients, having decided to voluntarily surrender its licences under the Protection of Investors and Insurance Managers and Insurance Intermediaries Laws.  The financial advisers of Woodlock have arranged to continue to act under the management of another licensee.

4. Woodlock agreed to settle at an early stage of the process and this has been taken into account by applying a discount in setting the financial penalty.

Notice for clients

1. In the event that any clients of Woodlock may be concerned about their investments, they should seek advice from a financial adviser before making a decision to sell as early encashment might not be the optimal investment choice for some investments.  For the avoidance of doubt, the Commission’s investigation did not cover mortgage advice which is not a regulated activity.

http://bit.ly/1zAzEar

Recently, the SEC filed an Enforcement Action against a former Wells Fargo Advisors Compliance Officer.

According to the SEC, the Compliance Officer, Judy K. Wolf, was responsible for performing trading surveillance reviews to identify potential insider trading activity.

Wolf ‘s September 2010 surveillance review of a particular employee’s trading found no issues.

Apparently, in December 2012, after the SEC charged Wells Fargo Advisors with insider trading, Wolf revised her September 2010 surveillance review.

The SEC’s Enforcement Action sets forth that by altering the document, Wolf made it appear that she performed a more thorough review in 2010 than she actually had.

Daniel Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit declared: “regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.”

Don’t Forge Documents You Give to SEC Investigators

You’re bound to make a mistake. Don’t make the mistake even worse by faking a document you submit to the Securities and Exchange Commission in order to cover your original mistake.

Back in 2012, the SEC brought charges against Waldyr Da Silva Prado Neto, a citizen of Brazil who was working for Wells Fargo in Miami. He was accused of illegally trading in the stock of Burger King after he learned of an impending private equity transaction.

Wells Fargo admitted to compliance weaknesses and paid a $5 million fine in connection with that supervision failure. In connection with that failure’s administrative order, the SEC expressed its displeasure with a delay in production of the documents and the state of the documents.

When the documents were produced, the firm failed to produce an accurate record of the review as it existed at the time of the staff’s request. Instead, the firm produced a document that had been altered by an employee after the Commission staff issued its follow up request. When questions arose surrounding the altered document, Wells Fargo Advisors placed the employee on administrative leave and eventually terminated this employee.

That failure probably resulted in the SEC enforcement action and a bigger fine for Wells Fargo.

The SEC brought charges against Judy K. Wolf, the ex-Wells Fargo employee, for faking the document.

The SEC alleges that Wolf was responsible for reviewing  Waldyr Da Silva Prado Neto trading records in 2010 in connection with the Burger King trades. She reviewed the trading records and closed her review with no findings. The SEC alleges that Wolf altered her review report in 2012 after the insider trading charges were filed. She made it look like her review was more thorough than it actually was.

The Order notes some of the red flags according to the Wells Fargo “look back” policy:

• Prado and his customers represented the top four positions in Burger King securities firm-wide;
• Prado and his customers bought Burger King securities within 10 days before the acquisition announcement, including on the same days;
• The profits by Prado and his customers each exceeded the $5,000 threshold specified in the look back review procedures;

What did her in was an additional note in the log:

“09/02/10 opened 24% higher@ $23.35 vs. previous close of $18.86. Rumours of acquisition by a private equity group had been circulating for several weeks prior to the announcement. The
stock price was up 15% on 9/1/12, the day prior to the announcement.”

Wolf made a typo on the announcement date.

According to the order, she argued that it was merely a contemporaneous type, but admitted in later testimony that she had made that additional log note after the SEC investigation. Wells Fargo was able to produce earlier copies of the log that did not have those two sentences.

Wolf tried covering her mistake, but it blew up into a bigger problem. Wells Fargo fired her and the SEC brought charges against her personally.

Read more

http://bit.ly/1CKAx2Q