Financial Regulatory Forum

Exclusive jurisdiction clauses fall in the face of FINRA proceedings

By Christopher Elias (UK)

LONDON, July 5 (Business Law Currents) – The English courts recently decided that an exclusive jurisdiction clause between Citigroup’s English subsidiary and two corporate vehicles of family trusts belonging to a Saudi Arabian family did not prohibit the Saudi investors from bringing FINRA arbitration proceedings against Citigroup’s U.S. arm.

In Citigroup Global Markets Ltd v Amatra Leveraged Feeder Holdings Ltd, the court was tasked with deciding whether FINRA’s regulatory regime or an English exclusive jurisdiction clause should prevail. The court concluded that Citigroup’s U.S. subsidiary should not be prevented from facing proceedings in the U.S. as the benefit of the exclusive jurisdiction clause applied solely to Citigroup’s English subsidiary. (more…)

Barclays’ governance, compliance weaknesses exposed in U.S. regulator’s findings

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 3 (Thomson Reuters Accelus) - A U.S. regulator’s case against Barclays revealed significant failures with the bank’s internal controls as well as failures with its corporate governance.

Barclays agreed last week to pay $453 million to U.S. and British authorities to settle allegations that it rigged key interbank lending rates, called the London Inter-bank Offering Rate (Libor) and a separate Euribor rate, by manipulating its reported rates in submissions to the British Bankers Association, which calculated the benchmark figures. (more…)

Barclays may have “early bird discount” in Libor cases

By Stuart Gittleman

NEW YORK/LONDON, June 28 (Thomson Reuters Accelus) - The $453 million settlement Wednesday between Barclays and UK and U.S. officials over the manipulation of a global interest-rate setting formula may be the first in a series of big-money settlements, and those who strike a deal later may face steeper terms.

“I think additional settlements with the other [banks potentially involved in the conduct] are likely,” said Peter Henning, a former U.S. federal prosecutor and enforcement lawyer with the Securities and Exchange Commission who teaches law at Wayne State University in Detroit. (more…)

HSBC victory in Shah claim a relief to bank money-laundering monitors

By Martin Coyle

LONDON/NEW YORK, May 17 (Thomson Reuters Accelus) – Counter-money laundering officials have welcomed a London High Court decision that saw wealthy Zimbabwean businessman Jayesh Shah fail in his $300 million claim against HSBC Private Bank. Yesterday’s judgment is a relief to financial businesses  who feared the impact of a Shah victory on overhauling their processes for suspicious activity reporting.

The case focused on HSBC’s decision to block four transactions totalling more than $38 million between September 2006 and February 2007. The bank suspected Shah of money laundering and sought consent from the Serious Organised Crime Agency (SOCA), the UK’s financial intelligence unit, to proceed with the transfers. Shah claimed that the delay in carrying out his requests in part led to the Reserve Bank of Zimbabwe freezing his investments in Zimbabwe and caused him significant losses. SOCA later gave consent to the transactions as legitimate. Shah had ‘parked’ the majority of the money in his HSBC account following an attempted fraud on his Credit Agricole account in July 2006. (more…)

Firms urged to spend more, complain less to meet compliance challenge

By Rachel Wolcott

LONDON/NEW YORK, May 16 (Thomson Reuters Accelus) – Talk to any compliance officer these days and the chances are they will tell a story about too many new rules from too many jurisdictions that are too complicated and labour-intensive and expensive to implement. Each time another missive hits their desks from the Financial Services Authority (FSA), or one of the many other global, European Union or U.S. regulators, bankers, their compliance officers or risk managers, wonder quite how they will be able to manage the implementation process and also, perhaps more importantly how much it will all cost.

At the Cass-Capco Institute Paper Series on Risk conference held last month in London, a senior compliance official from a global systemically important financial (G-SIFI) institution said: “We are deluged with regulations that we don’t know will work, then we have to implement them. People are getting lost in a mire of complexity.”  (more…)

Time to merge risk management and compliance?

By Rachel Wolcott

LONDON/NEW YORK, April 5 (Thomson Reuters Accelus) – Regulators’ rising interest in risk management combined with a long trail of big fines for compliance failures has some consultants and industry leaders wondering whether it is time for the two disciplines to come closer together if not merge completely.

More than ever there are areas of overlap between risk and compliance. Risk management is now hardwired into more rules and regulations since the beginning of the financial crisis. In the UK, for example, the Financial Services Authority (FSA) hasincreased its fines for risk management failures . The U.S.’s Securities and Exchange Commission (SEC) has also indicated that it intends to take risk management as well as other governance and compliance issues even more seriously than in the past. (more…)

Cole’s FSA departure leaves a lasting legacy but no surprise, says industry

By Martin Coyle

LONDON/NEW YORK, Feb. 16 (Thomson Reuters Accelus) - City lawyers have praised Margaret Cole’s legacy following her decision to depart the Financial Services Authority and have said her successor faces a tough job continuing her good work as head of enforcement. Observers also noted that Cole’s failure to secure the top job at the new Financial Conduct Authority meant that her departure was inevitable. Cole, managing director and board member, announced her exit from the regulator yesterday after seven years. Cole, who joined the regulator as director of enforcement in 2005 from U.S. law firm White & Case, is widely credited with pushing forward the FSA’s recent tough approach to combating financial crime and market abuse. The importance of her departure was perhaps reflected as the news was briefly ‘trending’ on Twitter yesterday. (more…)

UK insider trading fine against Einhorn a non-starter in U.S., experts say

By Stuart Gittleman

NEW YORK, Jan. 27 (Thomson Reuters Accelus) - The circumstances that led to UK trading-abuse penalties against U.S. fund manager Greenlight Capital and its portfolio manager David Einhorn probably would not have led to a similar case in the United States, securities lawyers told Thomson Reuters.

The UK Financial Services Authority (FSA) this week fined Greenlight Capital, a U.S. fund manager, and David Einhorn, its portfolio manager, for selling shares after receiving a tip that the issuer was planning an offering that would dilute the fund’s position.  (more…)

Einhorn/Greenlight Capital fine highlights duty for investors to seek absolute clarity over inside information

By Martin Coyle and Alex Robson

LONDON/NEW YORK, (Thomson Reuters Accelus) – A decision by the UK Financial Services Authority (FSA) to fine hedge fund manager David Einhorn and his Greenlight Capital fund 7.3 million pounds ($11.5 million) has highlighted the need for professional investors to ascertain clearly what constitutes inside information, securities lawyers said. The FSA said that it fined Einhorn 3.64 million pounds and Greenlight Capital 3.65 million pounds for using inside information that he obtained from a broker before selling shares in a UK public company in 2009. Einhorn’s is the biggest scalp by far of the FSA’s renewed determination to punish market manipulation as part of its “credible deterrence” policy.

The regulator said that Einhorn learned from a telephone conversation with the broker that British pub company Punch Taverns was on the verge of a significant equity fundraising, prompting the New York-based financier to sell down his holdings before an anticipated fall in the shares. (more…)

Dead man walking: The FSA’s aggressive stance with financial services firms

Pedestrians through Canary Wharf business districtBy Christopher Elias

LONDON, Sept. 20 (Business Law Currents) – If the death sentence of the UK’s Financial Services Authority (FSA) was to earn a last request then it may well have been to introduce a new era of aggressive enforcement as it prepares to hand over power to the Financial Conduct Authority (FCA).

It may have slept through the worst financial crisis in living memory and be about to be put to death but this seems to have only invigorated the FSA in its enforcement actions, as it introduces increasingly tough measures on financial firms. Dead man walking? Perhaps. But beware of those boots, as the FSA toughens up its enforcement actions. (more…)

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