Having been convicted on 9 January 2015 following a trial, Alex Hope was today sentenced at Southwark Crown Court to a total of 7 years’ imprisonment for defrauding investors of significant sums and operating a collective investment scheme without authorisation.

Hope’s co-defendant, Raj Von Badlo, who had earlier pleaded guilty, was sentenced to a total of 2 years’ imprisonment for recklessly making false representations to investors and promoting a collective investment scheme without authorisation.

In sentencing Hope, HHJ Taylor remarked on the sophistication of the scheme which involved the falsification of documents and the management of his persona.  The impact on investors was significant.  HHJ Taylor said that Hope had “shown no acceptance of [his] own dishonesty.”

The Judge also stated in sentencing Von Badlo that the risk of the scheme must have been clear to him.

In total, over 100 investors entrusted Hope with over £5.5 million. The scheme was closed down by the FCA in April 2012.  As a result of the work of the FCA, approximately half of the amount taken from investors was identified and frozen. Consideration of confiscation and other financial orders will take place at a later date.

Commenting on the case, Georgina Philippou, acting director of enforcement and market oversight, said:

“Alex Hope presented himself as a trader with a flair for trading on the foreign exchange markets when in reality he spent a good deal of his investors’ money on himself.

“With the assistance of Raj Von Badlo, Alex Hope enticed dozens to invest considerable sums in his fraudulent scheme.

“This case shows that the FCA will vigorously protect consumers from those who break the law and do whatever it can to get their money back to them.”

Despite telling his investors that he would trade their money successfully on the foreign exchange markets, only 12% of the total money that investors gave Hope was ever traded and when he did trade, he lost almost all of the money in his trading accounts.

Hope exaggerated his trading abilities and the returns he was making.  He used doctored copies of statements from his trading account to mislead investors. As a result of this deception, he continued to attract investors, with new money coming in used to pay those who wished to withdraw their funds.

Raj Von Badlo (also known as Raj Shastri) promoted Hope’s scheme to a large group of investors.  Over 75 investors gave £4.29 million to Hope as a result of Von Badlo’s actions.

Hope used over £2 million of investors’ money to fund his lifestyle. He spent over £1 million in a casino, over £200,000 on designer watches and shoes, £60,000 on foreign travel, and over £600,000 in bars and nightclubs in London, Miami and New York.

In April 2012, following information that suggested Hope was operating an unauthorised investment scheme, the Financial Services Authority (FSA), the FCA’s predecessor, obtained a restraint order against Hope’s assets, arrested Hope and searched his house in a joint operation with City of London Police.

In May 2012, Von Badlo’s house was searched and he was arrested.

Von Badlo pleaded guilty to the offences for which he was sentenced on 22 July 2014.

Hope pleaded guilty to operating a collective investment scheme without authorisation on 23 April 2014 and was convicted of fraud by a jury on 9 January 2015.

Notes to editors

1. Hope was sentenced to 7 years for fraud and 16 months imprisonment for the section 19 offence, both to run concurrently.
2. Von Badlo was sentenced to 2 years for recklessly making false or misleading statements and 12 months imprisonment for communicating an invitation or inducement to engage in regulated activity, both to run concurrently.
3. All remaining counts on the indictment were ordered to lie on the file.
4. All sentences were passed on 30 January 2015.
5. The sentence imposed in relation to Hope equals the longest imposed as a result of any FCA or FSA prosecution.
6. In these proceedings, the FCA was represented by Sarah Clarke of Serjeant’s Inn Chambers and Tom Baker of QEB Hollis Whiteman.
7. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
8. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.

http://bit.ly/1Ko7yTo

The European Insurance and Occupational Pensions Authority (EIOPA) has published technical advice (EIOPA-15/135) on conflicts of interest in direct and intermediated sales of insurance-based products to the European Commission, following an earlier consultation

The technical advice concerns possible delegated acts under Article 13c (3) of the Insurance Mediation Directive (amended by Article 91 of the amended Markets in Financial Instruments Directive.

The technical advice sets out a summary of the comments received in the consultation and the main conclusions EIOPA has drawn in light of the feedback. The advice is intended to assist the Commission on possible future implementing legislation.

The technical advice covers:

• Identification of conflicts of interest: EIOPA recommends requiring insurance intermediaries and insurers to assess all cases where they have an interest related to distribution which is distinct from the customer’s interest and which has the potential to influence the outcome of the services to the detriment of the customer;
• Conflicts of interest policy: EIOPA recommends requiring insurance intermediaries and insurers to establish and set out in writing an effective conflicts of interest policy. At the same time, EIOPA acknowledges the importance of proportionality, especially with regard to the impact new organisational requirements may have for small and midsize intermediaries; and
• Inducements and remuneration: EIOPA notes that conflicts of interests can arise from third party payments (inducements) and internal payments (remuneration). EIOPA is of the opinion that this issue should be addressed. An accompanying letter from Gabriel Bernardino, EIOPA Chairman, to Jonathan Faull, European Commission Director General for Internal Market and Services, states that analysis relating to national approaches to the mitigation of remuneration conflicts of interest is underway already.

Copies of the:

technical advice; 

letter; 

press release 

The FCA has published a policy statement (PS15/3) which confirms the FCA’s final rules requiring firms which provide personal or stakeholder pension schemes to employers to set up and maintain independent governance committees (IGCs), following an earlier consultation.

The role of IGCs will be to represent the interests of scheme members in assessing the value for money of pension schemes and to challenge providers to make changes where necessary.

From 6 April 2015, firms operating workplace personal pension schemes will be required to establish an IGC with at least five members. The rules outline the minimum standards for the terms of reference for an IGC, the scope of the IGC and which type of firms will need to set one up. Firms that have IGCs in place already will need to ensure that they meet the rules from this date. Firms with smaller and less complex workplace personal pension schemes will be able to establish a governance advisory arrangement as an alternative to an IGC.

Copies of the

policy statement,

handbook instrument: Personal pension schemes (independent governance committees) instrument 2015 (FCA2015/2),

policy statement webpage

press release

Linked to an announcement of settlements with a number of firms the European Commission has fined ICAP, a UK based inter-dealer broker, €14.9 million for participating in cartels in relation to Yen interest rate derivatives. The Commission found that ICAP acted as a communications channel between two traders, using its contacts at Japanese Yen London interbank offer rate (JPY LIBOR) panel banks and circulated misleading information about JPY LIBOR rates.

The European Commission has fined the UK based broker ICAP € 14 960 000 for having breached EU antitrust rules by facilitating several cartels in the sector of Yen interest rate derivatives (YIRD). In December 2013, the Commission already imposed fines on a number of major banks that decided to settle the case with the Commission.

Commissioner Margrethe Vestager in charge of competition policy said: “Today’s decision to fine the broker ICAP sends a strong signal that assisting companies in their cartel activities has severe consequences. It marks the successful completion of our antitrust investigation in the Yen interest rate derivatives sector – but not the end to our efforts to fight anticompetitive practices in financial markets.”

The Commission imposed fines totalling € 669 719 000 on the banks UBS, RBS, Deutsche Bank, Citigroup, JPMorgan and on the broker RP Martin in December 2013. These companies had admitted their involvement in one or more cartels in the YIRD sector, which allowed the Commission to settle the case with them.

In the YIRD sector, the Commission uncovered seven distinct bilateral infringements lasting between 1 and 10 months in the period 2007 to 2010. The anticompetitive conduct concerned discussions between traders of the participating banks on certain JPY LIBOR submissions. The traders involved also exchanged, on occasions, commercially sensitive information relating either to trading positions or to future JPY LIBOR submissions.

ICAP chose not to settle the case. Proceedings against it therefore continued under the normal procedure. The Commission’s investigation uncovered that ICAP facilitated six of the seven cartels in the YIRD sector through various actions that contributed to the anticompetitive objectives pursued by the cartelists, and in particular, by:

• disseminating misleading information to certain JPY LIBOR panel banks, which were veiled as ‘predictions’ or ‘expectations’ of where the JPY LIBOR rates would be set. This misleading information was aimed at influencing certain panel banks that did not participate in these infringements to submit JPY LIBOR rates in line with the adjusted ‘predictions’ or ‘expectations’ (UBS/RBS 2007, UBS/RBS 2008, UBS/DB 2008-09, Citi/DB 2010 and Citi/UBS 2010 infringements);
• using its contacts with several JPY LIBOR panel banks that did not participate in the infringements, with the aim of influencing their JPY LIBOR submissions (UBS/RBS 2007, Citi/DB 2010 and Citi/UBS 2010 infringements); and
• serving as a communications channel between a trader of Citigroup and a trader of RBS and thereby enabling the anticompetitive practices between them (Citi/RBS 2010 infringement).

The fines imposed on ICAP are as follows:

Fines

Following its earlier practice with respect to fines for facilitators as well as the EU Court’s case law on this point, the Commission set the fines as a lump sum by using its discretion in accordance with point 37 of the Commission’s 2006 Guidelines on fines (also see Press release and Memo). The fines reflect the gravity, duration and nature of ICAP’s involvement as a facilitator as well as the need to ensure that the fine has a sufficiently deterrent effect.

Background on the products concerned

Interest rate derivatives (e.g. forward rate agreements, swaps, futures, options) are financial products which are used by banks or companies for managing the risk of interest rate fluctuations. These products are traded worldwide and play a key role in the global economy. They derive their value from the level of a benchmark interest rate, such as the London interbank offered rate (LIBOR) – which is used for various currencies including the Japanese Yen (JPY). This benchmark reflects an average of the quotes submitted daily by a number of banks who are members of a panel. It is intended to reflect the cost of interbank lending in Japanese Yen and serves as a basis for various financial derivatives. The level of the benchmark rate may affect either the cash flows that a bank receives from a counterparty, or the cash flow it needs to pay to the counterparty under interest rate derivatives contracts (for more details see also Memo).

Action for damages

Any person or firm affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court of Justice of the European Union and the Antitrust Regulation (Council Regulation 1/2003) both confirm that in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal. Even though the Commission has fined the companies concerned, damages can be awarded without these being reduced on account of the Commission fine.

The Antitrust Damages Directive, which the Member States have to implement in their legal systems by 27 December 2016, makes it easier for victims of anti-competitive practices to obtain compensation. More information on antitrust damages actions, including a practical guide on how to quantify antitrust harm, is available in the Commission’s Policy Brief and on the Commission’s website.

…as they relate to all regulated financial services.

The Commissions banking business themed visit summary findings issued in August 2014 are a pertinent read for other regulated financial service businesses.  Sadly a fact over looked by much of the industry.

In regard to Sanctions the particular deficiencies identified are probably endemic in all regulated businesses’ the a greater or lesser degree – these deficiencies being

In- effective governance and oversight by senior managers,

1. staff training,

2. customer screening,

3. fuzzy matches and

4. Potential target name matches.

As you can see all of these matters are just as important to trust company, investment and fund businesses. There are valuable lessons to be learned.

Other matters highlighted included

1. Poor practice highlighted senior management placing blind reliance on systems and not being able to effectively overseeing the monitoring arrangements.
2. There were instances when the BRA lacked sufficient detail adequately considering sanctions risks or sufficient workings of screening and monitoring arrangements.
3. There was a lack of specialist training and guidance provided to staff required to investigate potential financial sanctions target name matches.
4. Reliance on commercially available screening without a proper understanding of its coverage and failing to adequately consider associated parties and
5. Poor practice highlighted that no rationale was recorded when discounting name matches or regular sampling.

For more information click here = http://bit.ly/1C05ECd

The Jersey Financial Services Commission (JFSC) and the South African financial services regulator, the Financial Services Board of the Republic of South Africa (FSB), have signed a Memorandum of Understanding (MoU).

The MoU provides a framework for the JFSC and the FSB to exchange confidential regulatory information and co-operate with each other regarding the supervision and regulation of firms under their respective authority. The MoU supersedes and updates a previous MoU that the two regulators signed in May 2000.

John Harris, the Director General of the JFSC, commented:

“I am delighted to sign this Memorandum of Understanding with the Financial Services Board. With the provision of cross-border financial services between Jersey and South Africa expected to increase in the coming years, it is important that the JFSC and the FSB are in a position to co-operate closely.  This Memorandum will assist in that regard as it provides a formal framework for the exchange of regulatory information and mutual assistance for the purpose of ensuring compliance by financial service businesses with both jurisdictions’ regulatory requirements.”

A copy of the MoU can be downloaded from the JFSC’s Website:

http://www.jerseyfsc.org/the_commission/international_co-operation/list-of-memoranda.asp

The JFSC has MoUs (either on a bilateral or multilateral basis) with regulators in over 90 countries.

http://bit.ly/1D4p9gN

On Thursday 26^th Feb 2015 at the  Hotel De France, Jersey, the JFSC are hosting a  Free workshop to present its Business Plan  

The Chairman and the Directors of the Commission will explore their major priorities for the year ahead which include:

• Jersey’s MONEYVAL review and response
• Commission change programme and what it means for industry
• Funds regime review (post McKinsey)
• Supervisory review
• Introduction of a civil financial penalties regime
• Basel III implementation
• Freedom of Information
• Registers for Industry and Government
• MIFID2/MIFIR
• Commission funding review

Please be advised that registration and breakfast will commence at 08:00.

The programme start time will be at 08:30, with the event finishing after a short Q & A session at approximately 09:45.

To register to attend please click here. http://bit.ly/1vvEiHe

A third UK regional daily newspaper has adopted a metered paywall. In future, the Jersey Evening Post will allow users to read 10 online articles for free each month and then demand a charge for further views.

Its readers will be able to take advantage of an introductory subscription offer of 99p per month with the price rising to £4.99 per month thereafter.

Editor Andy Sibcy points out that some content, such as weather and travel information, “will always be free”.

The Channel Islands paper has revamped its website ahead of charging people for access. Founded in 1890, it’s also about to celebrate its 125th anniversary

The JEP’s metered paywall launch follows those at The Herald in Glasgow and the Press & Journal in Aberdeen.

Metered, or “soft” paywalls, have become increasingly common at newspapers in the United States, and later this month the Irish Times is also planning to adopt one too.