Following his conviction on eight counts of fraud, forgery, false accounting and fraudulent trading Ulf Magnus Peterson, the former head of Weavering Macro Income Fund Limited, has been sentenced to 13 years in prison.

The fund subsequently collapsed in March 2009, leading to net losses for investors of approximately US$536 million.

A hearing has been scheduled to determine whether to disqualify Mr Peterson as a company director.

This is one of the first hedge fund prosecutions of its kind by the Serious Fraud Office to arise out of the 2008 financial crisis.

A copy of the press release is available. http://bit.ly/1BzV7Qg

Mark Carney says eurozone is caught in a debt trap and should ease hardline budget cuts just days after the Syriza election directly challenged policy.

The Bank of England governor, Mark Carney, has launched a strong attack on austerity in the eurozone as he warned that he single-currency area was caught in a debt trap that could cost it a second lost decade.

Speaking in Dublin, Carney said the eurozone needed to ease its hardline budgetary policies and make rapid progress towards a fiscal union that would transfer resources from rich to poor countries.

“It is difficult to avoid the conclusion that, if the eurozone were a country, fiscal policy would be substantially more supportive,” the governor said. “However, it is tighter than in the UK, even though Europe still lacks other effective risk-sharing mechanisms and is relatively inflexible.”

Carney’s remarks come just three days after the election of the Syriza-led government in Greece presented a direct challenge to the austerity policies championed in the eurozone by Germany’s Angela Merkel.

While not mentioning any eurozone country by name, Carney made it clear that he thought the failure to complete the process of integration coupled with over-restrictive fiscal policies risked driving the 18-nation single currency area deeper into a debt trap.

“Since the financial crisis all major advanced economies have been in a debt trap where low growth deepens the burden of debt, prompting the private sector to cut spending further. Persistent economic weakness damages the extent to which economies can recover. Skills and capital atrophy. Workers become discouraged and leave the labour force. Prospects decline and the noose tightens.

“As difficult as it has been, some countries, including the US and the UK, are now escaping this trap. Others in the euro area are sinking deeper.”

Since the start of the eurozone crisis more than five years ago, Europe’s policy makers have been calling for the creation of a banking union and a fiscal union to stand alongside the monetary union that created the single currency. There have also been calls, from the European commission, the European Central Bank and individual governments for economic reforms to make the eurozone more competitive.

Carney noted: “As of this evening, progress on structural reforms in the euro area remains uneven. Cross border risk sharing through the financial system has slid backwards. Europe’s leaders do not currently foresee fiscal union as part of monetary union. Such timidity has costs.”

The governor added that there are four features of Britain’s economic model that showed how to escape a debt trap: an integrated financial system that channelled savings into investment; fiscal policy that moved money around the UK and was flexible enough to allow budget deficits to rise during downturns; the economy was open and flexible; and the monetary policy operated by Threadneedle Street was credible.

He contrasted the UK with the eurozone, where output unadjusted for inflation has increased by 5% in almost seven years and inflation excluding fuel and food prices has been below 1% for over a year. “This is potentially dangerous. Low nominal growth is intensifying the euro area’s debt burden. The fear of stagnation is holding back spending and investment.”

Carney has been vocal in his support for the European Central Bank’s decision to start buying government and commercial debt in its own version of the quantitative easing programmes, but said the Frankfurt-based central bank was unable alone to eliminate the threat of a prolonged stagnation. “These exist primarily because, in most respects, the current construction of the euro area is unfinished.”

The governor expressed scepticism about whether improving competitiveness through driving down costs – a process known as internal devaluation – would work. “Internal devaluations simply reallocate demand within the currency union. They do not boost aggregate demand in the euro area as a whole. Put another way, since competitiveness is relative, a solution for some cannot be a solution for all.”

Carney said the eurozone’s unemployment rate of 11.5% was more than double that of the UK, but its fiscal deficit – the gap between tax revenues and spending – was only half the size of the UK’s. The eurozone, he said, should be using a “constructive” fiscal policy to support demand and mitigate the “tail risks of stagnation”.

He added: “Europe needs a comprehensive, coherent plan to anchor expectations, build confidence and escape its debt trap.”

http://bit.ly/1He7ibx

The ultimate owners of companies will have to be listed in central registers in EU countries, open both to the authorities and to people with a “legitimate interest”, such as journalists, under a Parliament/Council deal endorsed by the Economic and Monetary Affairs and Civil Liberties committees on Tuesday.

British prosecutors are investigating whether subsidiaries of Alstom, the French power and transport company at the centre of an international corruption inquiry, committed offences in Hungary, a London court heard on Wednesday.

The Serious Fraud Office (SFO) has already charged two UK-based Alstom subsidiaries and four former employees with corruption, alleging they disguised bribes as consultant fees to win lucrative contracts in India, Poland, Tunisia and Lithuania.

Judge Nicholas Loraine-Smith told Southwark Crown Court during a pre-trial hearing that the SFO investigation could include a third phase in Hungary. However, he noted that element of the inquiry was uncertain as charges had yet to be filed.

The SFO, which charged Alstom Network UK last September over alleged bribery in India, Poland and Tunisia and charged Alstom Power Ltd in December over alleged bribery in Lithuania, said only that its investigation was continuing.

“We are aware of the SFO’s investigations,” said a spokeswoman for Alstom SA, declining to comment further on an ongoing investigation.

The British prosecution follows a string of investigations launched from the United States to Brazil and Switzerland into Alstom and its subsidiaries’ dealings in countries stretching from Poland to India, Indonesia, China, Saudi Arabia, Egypt and the Bahamas since at least 2000.

The French parent, Alstom SA, in December agreed to pay a record $772.3 million fine after pleading guilty to violating the U.S. Foreign Corrupt Practices Act.

But in Britain, the Alstom subsidiaries are seeking to have the charges against them dismissed, partly for technical legal reasons and because one suspect remains in Switzerland and has not volunteered to come to London for interviews.

If the dismissal applications fail, the first trial has been scheduled for May 2016 and is expected to last between six and eight weeks.

Alstom, which has seen power equipment orders sink since the credit crisis, is selling most of its energy arm to U.S. giant General Electric to raise cash. It plans to expand its rail business, cut debt and buy back stock.

http://reut.rs/1CBAeWq

The UK’s City watchdog has issued new finalised guidance on what it considers to constitute the provision of regulated retail investment advice and personal recommendations.

The Financial Conduct Authority (FCA) finalised guidance (47-page / 741KB PDF) updates and finalises the FCA’s position on retail investment advice as previously set out in the July 2014 guidance consultation, and it includes a range of examples designed to help businesses understand its approach.

• http://bit.ly/1JsiCMU

Clarity on the regulator’s interpretation is important because the provision of retail investment advice, particularly where it constitutes a “personal recommendation”, is a heavily regulated activity.

Businesses operating in the retail investment advice market have been calling for further guidance from the FCA amidst uncertainty over whether certain practices in the industry fall subject to the rules.

KEY OBSERVATIONS

1. the FCA’s latest interpretation of what is and is not regulated advice is based largely on pre-existing guidance.

2. the existing guidance had generally been interpreted in a cautious way by businesses operating in the retail investment advice market when launching new services.

3. firms may have wanted the FCA to “go further in its interpretation” of the retail investment advice rules in its finalised guidance, “especially in the context of innovative online propositions

4. The cautious approach has not realistically come as a surprise and ultimately the regulator has not changed its position to any substantial degree,

5. The FCA has also made it clear in its responses to feedback that it is not intending to provide any further interpretation on the difference between providing information and regulated advice.

6. The good news is that the FCA has listened to feedback that it should provide more guidance on the difference between merely providing information and regulated advice,

7. The examples provided originally were a useful way to communicate the FCA’s views and now contain more information on the FCA’s interpretation.

8. The FCA regards the flexibility between the EU MiFID rules and those in the Regulated Activities Order as enough for firms to create different propositions and it has not looked to allow for any flexibility outside the regulated space.

9. Firms will need to assess their own advised, and non-advised, propositions against this finalised position

‘DECISION TREES’

1. One issue that the new FCA guidance paper addresses is the use of ‘decision trees’ by financial services companies.

2. Decision trees are used by some firms operating in the retail advice market as a way of gathering information from prospective investors to help deliver advice.

3. However, the FCA said that the use of decision trees does not, per se, constitute the provision of regulated advice and said there are factors which will sway whether their use by businesses is within the scope of the regulatory regime.

THE FCA SAID.

1. “The key considerations are: whether the decision tree process is limited to assisting a person to make his own choice of product; and whether the decision tree process is likely to be perceived by the customer as assisting them to make their own choice of product, taking into account the features that the customer regards as important,”

2. “For it not to constitute a personal recommendation, the decision tree and, where relevant, the person asking the question it contains, would need to avoid making any judgement or assessment that would result in a single product or a list of products being identified as suitable for a customer, whether as a result of information that the customer provides or otherwise.”

3. “However, it is entirely reasonable for a decision tree to provide a range of options for the customer to consider, though firms would need to guard against presenting these options as suitable for the customer,”

The latest issue of the Financial Ombudsman Service newsletter considers among other things:

• the sale of travel insurance, in particular winter sports and the manner in which these products were sold to consumers;
• the Ombudsman news snapshot of the work undertaken by the FOS during the third quarter of the 2014/2015 financial year; and
• a consideration of the obligation on a business to adapt their services to meet the needs of individual customers.

A copy of the newsletter is available.

In recent times, there has been a marked increase in the use of co-ordinated economic sanctions by the European Union, the United Nations and individual states against rogue states and organisations and, on a targeted basis, against specific individuals and entities related to those rogue states and organisations.

The number of countries which are the subject of the EU’s targeted economic sanctions continues to grow, with over thirty countries now affected.

This is having material consequences far outside of those states and organisations.

Given Jersey’s role as an international finance centre, it is inevitable that international sanctions are and will continue to impact upon Jersey’s financial services sector.

The EU’s response to the Ukraine crisis has been to pass legislation imposing financial sanctions on named individuals and businesses they believe to be responsible for the on-going situation in Ukraine (the “EU Ukraine Regulations”).

These provide for restrictive measures directed against certain persons, entities and bodies which were perceived to be undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.

The EU Ukraine Regulations laid the groundwork for further targeted sanctions against Russian individuals and businesses (the “EU Russian Regulations”).

Both the EU Ukraine Regulations and the EU Russian Regulations followed the sanctions regimes already imposed against Syria, Libya, Egypt and Tunisia in the aftermath of the Arab Spring and the more long standing sanctions regimes imposed against Iran and North Korea, amongst others.

In Jersey,

1. the EU Ukraine Regulations have been implemented by means of the EU Legislation (Sanctions – Ukraine) (Jersey) Order 2014 on 3 December 2014 as subsequently amended and similarly,
2. the EU Russian Regulations by way of the EU Legislation (Sanctions – Russia) (Jersey) Order 2014 on 12 December, 2014.

Whether or not events in Ukraine prompt a further round of sanctions remains to be seen. However, what is more certain is that this is a rapidly expanding practice area which is here to stay.

Do trustees need to be concerned?

1. With regard to the EU Ukraine Regulations, which are consistent with other EU regulations implementing international sanctions as applied in Jersey, the essential question is whether,

2. on or after the coming into force of the legislation, any assets of a trust can be said to be “funds” or “economic resources” which are “belonging to, or owned, held or controlled by” a designated person.  If they can, they must be “frozen” and no person may “deal with” the assets.

3. Whether trust assets constitute a fund or economic resource of a designated person is not necessarily a straight forward question for a trustee.

4. Indeed, a settlor or third party reserved with a power to direct a trustee to pay trust assets to himself or to another person, or to direct the sale and investment of trust assets, may well fall within the meaning of “controlled”.

5. The reference to funds and economic funds simply being “held” shows that there is no need for the designated person to actually have any beneficial interest in the assets or title to the assets.

Trust issues by their nature are rarely the same and will require careful analysis on a case by case basis. Given the complexity of these issues and the severe penalty for breach, trustees should take legal advice as early as possible with a view to avoiding any breach.

Read more http://bit.ly/1yx7KH6

Politically exposed persons, who are treated as high-risk customers under anti-money laundering and counter-terrorism financing law, may continue to pose a high risk even after they cease holding a public position.

The anti-money laundering and counter-terrorism financing regulator Austrac has issued a draft guidance note spelling out its definition of a politically exposed person, with a focus on the treatment of people who no longer hold prominent positions.

Austrac is holding consultations on the guidance note over the next couple of weeks.

A PEP is an individual with a prominent public role in a government body or international organisation. Immediate family members and close associates of the PEP are also PEPs.

PEPs have the opportunity to use their position for the purpose of committing money laundering and terrorist financing offences. Because of this risk additional AML/CTF due diligence and monitoring rules apply to them.

The guide lists many of the types of people who can be counted as PEPs – from prime ministers and foreign heads of state all the way down to heads of stated-owned enterprises.

The AML/CTF law says that once a person no longer holds a prominent public position they are no longer considered a PEP. However, the guidance note says that a bank or other reporting entity should continue to apply a risk-based approach to determine whether a customer who is no longer a PEP should continue to be treated as a high-risk customer.

“Higher risk PEPs are more likely to continue to pose ML/TF risk after they cease holding a public position,” according to the guide

http://bit.ly/1y59oAO