This webpage contains a list of ‘developments’ relating to the subject-matter of Conduct and Pay in the Financial Services Industry. It lists those developments without commentary, so as to keep the job of updating this page manageable. The page is designed to give the reader some comfort that they are aware of the key changes that have occurred after the point at which the text of the book was finalised (1 August 2016) and the last update of this page, which was on 1 October 2017.
The ‘updates’ are listed by chapter. You may also wish to check the FCA and PRA’s webpages on individual accountability: PRA, FCA SMCR, FCA SIMR, FCA approved persons and remuneration.
Chapter 1 – Introduction
Chapter 2 – the Conduct Regime
Chapter 3 – Fitness and Propriety
Chapter 4 – the Approved Persons Regime
Chapter 5 – the Certification Regime
Chapter 6 – the Senior Managers Regime
Chapter 7 – Notifications
Chapter 8 – Whistleblowing and References
Chapter 9 – Misconduct
Chapter 10 – Sanctions
Chapter 11 – Enforcement Procedure
Chapter 12 – Bonuses: the General Law
Chapter 13 – The Remuneration Codes
Chapter 14 – Malus and Clawback: Further Discussion
Chapter 1 – Introduction
On 31 August 2016, we noted that it was “too early to say” what kind of Brexit would transpire. In June 2017, after the general election, it seems that continues to be the case.
Chapter 2 – the Conduct Regime
Privilege
Astex Therapeutics Ltd v Astrazeneca AB (2016) [2016] EWHC 2759 (Ch).
RBS Rights Issue Litigation [2016] EWHC 3161 (Ch).
Serious Fraud Office v Eurasian Natural Resources Corp Limited [2017] EWHC 1017 (QB).
Chapter 3 – Fitness and Propriety
The Banking Standards Board on 28 February 2017 published a ‘Statement of Good Practice 1’ entitled “Certification Regime: Fitness and Propriety Assessment Principles” and a document providing supporting guidance entitled “Certification Regime: Fitness and Propriety Definitions, Sources of information and Assessment Record Template”.
On 28 October 2016, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) published draft guidelines entitled ‘Guidelines on the Assessment of the Suitability of the Members of Management Body and Key Function Holders (the Guidelines)’, aimed at harmonising fitness and propriety assessments across the EU.
The European Central Bank has on 15 May 2017 published a guide to fit and proper assessments of members of the management bodies of significant credit institutions which are directly regulated by the ECB under the Single Supervisory Mechanism (which does not apply to the UK, and so this is of comparative interest only).
On 9 May 2017, the FCA published a policy statement (PS17/11) updating the Training and Competence Sourcebook as regards qualification requirements for certain roles, following the responses to CP16/24.
Chapter 4 – the Approved Persons Regime
Koksal t/a Arcis Management Consultancy v Financial Conduct Authority [2016] UKUT 0478 (TCC) – burden of proof.
Anthony Badaloo v Financial Conduct Authority [2017] UKUT 0158 (TCC).
Following a direction made by the FCA a new version of Long Form A is available, entitled Long Form A – UK and Overseas Firms (not Incoming EEA) for MIFID authorisation applications and available at SUP 10A Annex 4.
Chapter 5 – the Certification Regime
The Banking Standards Board on 28 February 2017 published a ‘Statement of Good Practice 1’ entitled “Certification Regime: Fitness and Propriety Assessment Principles” and a document providing supporting guidance entitled “Certification Regime: Fitness and Propriety Definitions, Sources of information and Assessment Record Template”.
Chapter 6 – the Senior Managers Regime
On 12 May 2017, the PRA published PS12/17 “Strengthening individual accountability in banking and insurance: amendments and optimisations”, which follows CP/2416.
On 2 May 2017, the FCA published PS17/9 “Guidance on the duty of responsibility: final amendments (including feedback on CP16/26) to the Decision Procedure and Penalties Manual”, following CP16/26.
On 13 June 2017, the PRA published CP8/17 “Strengthening accountability in banking and insurance: optimisations to the SIMR, and changes to SMR forms”.
On 28 October 2016, the European Banking Authority published a consultation paper entitled “Draft Guidelines on internal governance” (EBA/CP/2016/16).
Chapter 7 – Notifications
Erratum: the second bullet of paragraph 7.9 refers to ‘prosecutions and convictions’, which should read ‘prosecutions and convictions under FSMA or the Consumer Credit Act’: see the rule referred to in the footnote, SUP 15.3.11R(1)(c).
With effect from 30 September 2016, the FCA has made alterations to SUP 15.11.13R to SUP 15.11.17R concerning the submission of ‘Form H’ (see SUP 15 Annex 7R), which is addressed in paragraphs 7.56 to 7.58 in the book: see the Supervision Manual (Reporting No 2) Instrument 2016. Its effect was that the reporting window for Form H notifications opened on 1 September 2016 and closed on 31 October 2016 for breaches where disciplinary action was taken or commenced during the timeframe from 7 March 2016 to 31 August 2016.
Subject access requests
Dawson-Damer v Taylor Wessing LLP [2017] EWCA Civ 74.
Ittihadieh v 5-11 Cheyne Gardens RTM Co Ltd [2017] EWCA Civ 121.
Chapter 8 – Whistleblowing and References
On 16 February 2017, the PRA published CP2/17 “Occasional Consultation Paper”, which makes minor alterations to the PRA’s rules on references.
On 26 April 2107, the PRA published PS8/17 “Whistleblowing in non-EEA UK branches”, pursuant to CP15/16.
On 11 June 2017, the FCA published PS17/7 “Whistleblowing in UK branches of foreign banks”, pursuant to CP16/15.
Chapter 9 – Misconduct
Palmer v The Financial Conduct Authority [2017] UKUT 0313 (TCC) – SoP6.
On 3 May 2017, the FCA published PS17/8 “Applying our conduct rules to non-executive directors in the banking and insurance sectors”, pursuant to CP16/27.
On 12 May 2017, the PRA published PS12/17 “Strengthening individual accountability in banking and insurance: amendments and optimisations”, which follows CP/2416.
Relevant guidance / publications
See the FCA’s ‘Confirmed Guidance’: BBA/BSA/Payments UK Guidance on the Banking Conduct of Business sourcebook; IBA’s LIBOR code of conduct; IMA guidance on paperless renunciation / transfer of units / shares in authorised funds; AIC guidance on investment policies.
On 8 December 2016, the FICC Markets Standards Board published two statements of good practice: “Statement of Good Practice for FICC Market Participants: Conduct Training” and “Surveillance Core Principles for FICC Market Participants: Statement of Good Practice for Surveillance in Foreign Exchange Markets”.
On 26 April 2017, the PRA published a UK Money Markets Code.
The Chartered Banker Professional Standards Board published an ‘Intermediate Standard’ in March 2017.
On 2 May 2017, the FICC Markets Standards Board published a ‘Standard’ entitled “New Issue Process standard for the Fixed Income markets”.
FCA ‘Assessing Suitability Review – Results’ (18 May 2017).
On 24 May 2017, the Global Foreign Exchange Committee published the ‘FX Global Code’. Connectedly, the Foreign Exchange Working Group published a ‘Report on Adherence to the FX Global Code’ and the members of the Market Participants Group published a signed Statement of Intent.
On 25 May 2017, the London Bullion Market Association (LBMA) published the ‘Global Precious Metals Code’.
FCA Financial Advice Market Review GC17/4 (23 May 2017).
Relevant cases
Property Alliance Group Limited v The Royal Bank of Scotland PLC [2016] EWHC 3342 (Ch) – LIBOR.
Arif Hussein v Financial Conduct Authority [2016] UKUT 0549 (TCC) – various.
Bar Standards Board v Howd [2017] EWHC 210 (Admin) – integrity.
Malins v Solicitors Regulation Authority [2017] EWHC 835 (Admin) – integrity.
Newell-Austin v Solicitor Regulatory Authority [2017] EWHC 411 (Admin) – integrity.
O’Hare and another v Coutts & Co [2016] EWHC 2224 (QB) – due skill, care, and diligence.
Koksal t/a Arcis Management Consultancy v Financial Conduct Authority [2016] UKUT 0478 (TCC) – open and cooperative.
Chapter 10 – Sanctions
On 1 February 2017, the regulators published FCA PS17/1 PRA PS2/17 “Implementation of the Enforcement Review and the Green Report”.
Carrimjee v Financial Conduct Authority [2016] UKUT 0447 (TCC) – prohibition orders.
On 18 April 2017, the FCA published its ‘Our Mission 2017’ in FS17/1, in which the FCA stated it will consult on the use of private warnings. It also emphasises the FCA’s commitment “to the principle that we should exercise our functions as transparently as possible”.
Chapter 11 – Enforcement Procedure
Anthony Badaloo t/a Church Hill Finance v FCA [2017] UKUT 0158 (TCC) – strike out.
Stewart John Ford and Mark John Owen v FCA [2017] UKUT 0147 (TCC) – witness summons.
John Chiesa and Colette Chiesa v FCA [2017] UKUT 0275 TCC – disclosure of information relating to FCA’s investigation.
ZAI Corporate Finance Limited v AIM Disciplinary Committee of the London Stock Exchange Plc (and London Stock Exchange Plc, interested party) [2017] EWCA Civ 1294 – no Article 6 ECHR right to a disciplinary hearing in public.
On 1 February 2017, the regulators published FCA PS17/1 PRA PS2/17 “Implementation of the Enforcement Review and the Green Report”.
The government, the FCA and the PRA have each published responses to the Treasury Committee’s report into the failure of HBOS in October 2016.
On 27 August 2016, the Treasury Select Committee published a response from Tim Parkes, Chairman of the RDC.
Financial Conduct Authority (Appellant) v Macris [2017] UKSC 19 – third party rights.
Carrimjee v Financial Conduct Authority [2016] UKUT 0447 (TCC) – second referral to Tribunal.
Koksal t/a Arcis Management Consultancy v Financial Conduct Authority [2016] UKUT 0478 (TCC) – the ‘matter’.
Arif Hussein v Financial Conduct Authority [2016] UKUT 0549 (TCC) – strike out.
Robert Angus Hill v Pension Regulator [2016] UKUT 0480 (TCC) – references out of time.
Jeffery v Financial Conduct Authority [2016] EWCA Civ 187 – judicial bias (refusal of permission).
R(Holmcroft Properties Ltd) v KPMG LLP [2016] EWHC 323 (Admin) – judicial review of skilled person reviews.
R(Soma Oil & Gas Ltd) v Director of the Serious Fraud Office [2016] EWHC 2471 (Admin) – judicial review of investigations.
R(Mandic-Bozic) v British Association for Counselling and Psychotherapy [2016] EWHC 3134 (Admin) – multiple regulators investigating the same conduct.
R(SSP HEALTH LTD) v Care Quality Commission [2016] EWHC 2086 (Admin) – findings of fact.
R(Grace Bay II Holdings Sarl) v Pensions Regulator [2017] EWHC 7 (Admin) – judicial review of statutory procedures.
Adeogba v General Medical Council [2016] EWCA Civ 162 – non-attendance at disciplinary hearing.
Chapter 12 – Bonuses: the General Law
Lehman Brothers International (Europe) (in administration) v Exxonmobil Financial Services BV [2016] EWHC 2699 (Comm) – contractual discretions.
Brogden v Investec Bank plc [2016] EWCA Civ 1031; [2017] IRLR 90 – reasonable expectations as to bonus.
Simpkin v Berkeley Group Holdings PLC [2016] EWHC 1619 (QB) – good leavers and bad leavers.
Richards v IP Solutions Group Ltd [2016] EWHC 1835 (QB) – penalty.
Gray v Braid Group (Holdings) Ltd [2016] CSIH 68 – penalty.
Jeremy Hosking v Marathon Asset Management LLP [2016] EWHC 2418 (Ch) – profit shares and fiduciary duties.
Chapter 13 – The Remuneration Codes
On 4 July 2017, the FCA published a consultation on staff incentives in the consumer credit sector (FCA CP17/20).
On 3 May 2017, the FCA published PS16/10 “Remuneration in CRD IV firms”.
On 12 April 2017, the PRA published PS 7/17 “The PRA’s expectations on remuneration” and an updated SS2/17 on “Remuneration”.
On 16 February 2017, the PRA published an “Occasional Consultation Paper” CP2/17 which proposes minor changes of the deferral rules for senior managers.
In July 2016, the European Commission published a feedback statement concerning the bonus cap.
On 14 October 2016, the European Securities and Markets Authority (ESMA) published: (i) Guidelines on Sound Remuneration under UCITS; and (ii) Guidelines on Sound Remuneration under the AIFMD, which applied from 1 January 2017. The FCA confirmed on 17 November 2016 that it did not propose to issue guidance on the UCITS Remuneration Code.
On 31 October 2016, the Investment Association published an updated document entitled “The Investment Association Principles of Remuneration”.
On 28 September 2016, the European Banking Authority published a final report entitled “Guidelines on remuneration policies and practices related to the sale and provision of retail banking products and services”.
On 23 November 2016, the EU Commission proposed amendments to the 2013 Capital Requirements Directive (CRD4, 2013/36/EU) in relation to proportionality, which would have the effect of extending the bonus cap to a wider group of firms. This followed a report by the European Banking Authority entitled “Review of the Application of the Principle of Proportionality to the Remuneration Provisions in Directive 2013/36/EU: The EBA’s Response to the European Commission’s letter – 21.11.2016”.
On 29 November 2016, the FCA published letters concerning ex-post risk adjustment (malus and clawback) from the 2015/16 and 2016/17 remuneration rounds.
Chapter 14 – Malus and Clawback: Further Discussion
