Information for firms who use certain exemptions to the Financial Promotions Order

Trading Scam News Editor - July 31, 2021: FCA United Kingdom Alerts FCA United Kingdom Alerts Information for firms who use certain exemptions to the Financial Promotions Order

Following onshoring changes made to The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the FPO), the definition of Relevant Market inadvertently no longer includes relevant UK markets.
This means the exemptions under Articles 37, 41, 67, 68, 69 of the FPO do not cover financial promotions relating to relevant UK markets or investments traded on such markets. These exemptions will be restored by Government Statutory Instrument (SI).
Until such date as this SI comes into force, we do not propose to take enforcement action against persons for breach of the financial promotion restriction if such breach only comes about because the relevant exemption no longer applies on account of this omission.
We reserve the right to pursue enforcement action in the event of misconduct by an affected person that goes beyond a failure to meet the criteria for exemption as a result of the above.

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Joint Bank of England and FCA review of open-ended investment funds

In the report on Assessing the resilience of market-based finance published today, the Bank of England has set out the conclusion to the joint review by the Financial Conduct Authority (FCA) and the Bank of England on open-ended investment funds and the risks posed by their liquidity mismatch.
In concluding the review, the Bank and FCA have now put forward a suggested possible framework for how a liquidity classification framework for funds could be designed, as well as considerations around the calculation and use of swing pricing. Recognising the global nature of asset management and of key markets, the purpose of this framework is to guide FCA and Bank of England’s engagement with ongoing international work on open-ended funds.

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FCA obtains High Court Order to remove hundreds of HM Land Registry charges, notices and restrictions registered against consumers’ properties by illegal money lender

This application is the latest in several legal proceedings commenced by the FCA against Mr Gopee arising out of his illegal money lending activities.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said: ‘Unauthorised money-lending is a criminal offence and causes serious harm, often to vulnerable communities. Mr Gopee’s offending caused substantial harm to a large number of vulnerable consumers. The order obtained today will ensure Mr Gopee’s hold over properties owned by his victims is relinquished, by removing charges, notices and restrictions that he obtained in carrying out his illegal activities and which he continued to hold.’
Between 2012 and 2016, Mr Gopee acted as an illegal lender despite being refused a consumer credit license by the OFT, and without authorisation from the FCA after 1 April 2014. He loaned money to vulnerable consumers at high rates, securing the loans against their property.  He then sought to take possession of consumers’ homes if they failed to pay. Over the 4-year period, his own loan books showed that he issued approximately £1 million of new loans and took in at least £2 million in payments from old and new consumers, none of whom were aware that he did not have the required consumer credit license.
Whilst the FCA was investigating Mr Gopee’s misconduct, the FCA obtained a restraint order against him under the Proceeds of Crime Act 2002 in June 2015. The FCA then brought two sets of proceedings against Mr Gopee for contempt of court in relation to repeated breaches of that restraint order. In April 2016, having denied various breaches of the restraint order – including failing to disclose assets, continuing to deal with assets, opening and using new accounts – he was found to be in contempt and imprisoned for a term of 18 months. He was released early by the court in September 2016 having promised to comply with the order. However, he went on to commit various additional breaches. Further proceedings were brought against him, and on this second occasion, having admitted the new breaches, he was imprisoned for a term of 15 months in October 2017.
Following the FCA’s investigation, Mr Gopee was convicted and sentenced to three and half years’ imprisonment for offences under the Consumer Credit Act 1974 and the Financial Services & Markets Act, 2000. When sentencing Mr Gopee on 9 February 2018, trial judge HHJ Beddoe noted that Mr Gopee was aware of the FCA’s serious concerns, but ignored them, deciding instead to ‘…deliberately flout the law’ ignoring the fact that he had lost his consumer credit licence, and endeavoured to enforce agreements he knew were unenforceable but that debtors did not. He continued to pressurise debtors with demands for payment, threatening court action that he knew could not be sustained.
The FCA then secured a confiscation order against Mr Gopee in the sum of £5,118,018.72. The effect of the order was to require Mr Gopee to disgorge the value of his criminal proceeds as an illegal money lender. Mr Gopee was also ordered to pay almost £230,000 in compensation to consumers. He also continues to be subject to a Serious Crime Prevention Order, which imposes financial restrictions upon him for five years.
Today’s action benefits hundreds of Mr Gopee’s victims by removing entries registered against their properties by Mr Gopee’s illegal activities. 
The charges, notices and restrictions are registered in the names of the following companies, formerly under the control of Mr Gopee but now in liquidation: Barons Finance Ltd, Euro Business Finance PLC, Ghana Commercial Investments Ltd, Reddy Corporation Ltd, Barons Finance 1 Ltd, Ghana Commercial Finance Ltd, Barons Bridging Finance 1 Ltd, Pangold Estate Ltd, Moneylink Finance Ltd, Speedy Bridging Finance Ltd, Agni Estates Ltd and Pangold Investments Ltd.
Notes to editors
1.    The FCA’s press release in relation to the prosecution action dated 9 February 2018.2.    The FCA’s Press Release in relation to the confiscation order dated 11 December 2019.3.    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.

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FCA proposing changes to streamline decision-making

The FCA is consulting on moving some decision-making from its Regulatory Decisions Committee (RDC) to its Authorisations, Supervision and Enforcement Divisions. This will give greater responsibility for decisions to senior members of FCA staff close to the matters.
As part of the FCA’s transformation, the FCA is making changes to ensure that it will continue to be more innovative, assertive and adaptive. The changes proposed today will involve streamlining the FCA decision-making and governance so it can move more quickly to stop and prevent harm faster.
Emily Shepperd, Executive Director of Authorisations said:
‘The proposed changes will allow us to be more efficient by making best use of the breadth of expertise across the FCA and by putting certain decisions back to the subject matter experts. As a result of that there will be greater accountability in those areas. The changes will help to increase the speed and reduce the regulatory costs of dealing with firms and individuals that fail to meet the FCA standards.
‘As part of our transformation we will continue to take a fresh approach to tackle firms and individuals who do not meet the required standards. As part of this, we aim to become a forward looking, proactive regulator – one that is tough, assertive, confident, decisive and agile.’
The RDC is a committee of the FCA Board. At present it takes certain decisions on behalf of the FCA. The consultation is proposing that certain decisions will now be made by FCA staff including:  

imposing a requirement on a firm or varying its permissions by limiting or removing certain types of business 
making a final decision in relation to a firm’s application for authorisation or an individual’s approval that has been challenged 
making a final decision to cancel a firm’s permissions because a firm does not meet the FCA’s regulatory requirements
the decision to start civil and/or criminal proceedings 

The RDC will continue to make decisions in relation to contentious enforcement cases, where the FCA is proposing a disciplinary sanction or seeking to impose a prohibition order.
The consultation closes on 17 September 2021. Following this consultation, the FCA will consider the feedback and aims to publish a Policy Statement in or around November 2021.

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FCA consults on proposals to boost disclosure of diversity on listed company boards and executive committees

The FCA is consulting on changes to its Listing Rules to require listed companies to publish annually: 

A ‘comply or explain statement’ on whether they have achieved certain proposed targets (see notes to editors) for gender and ethnic minority representation on their boards, and 
As part of the same annual disclosure obligation, data on the make-up of their board and most senior level of executive management in terms of gender and ethnicity  

The FCA is also proposing changes to its disclosure and transparency rules to require companies to ensure any existing disclosure on diversity policies addresses key board committees (see notes to editors) and also considers broader aspects of diversity. This could include, for example, considerations of ethnicity, sexual orientation, disability, lower socio-economic background and other diversity characteristics. The FCA also encourages companies to provide further data on the result of their diversity policies considering these wider aspects where possible.
The Listing Rule diversity targets are not mandatory for companies to meet, so the FCA is not setting ‘quotas’, but providing a positive benchmark for issuers to report against. The proposals would apply to UK and overseas companies with equity shares in either the premium or standard listing segments of the FCA’s Official List, while the disclosure and transparency changes apply to companies with securities traded on UK regulated markets, such as the Main Market of the London Stock Exchange.
While some companies may already provide diversity disclosures to existing voluntarily UK initiatives and in annual reports, the FCA’s measures will help ensure reporting beyond the largest listed companies and ensure more consistency. Its approach also provides flexibility for overseas companies, since the ‘comply or explain’ approach allows any national or cultural context to be explained. 
Clare Cole, Director of Market Oversight at the FCA commented on the proposals:  
 ‘There is a current lack of standardised and mandatory transparency about diversity on listed company boards, particularly outside the FTSE 350 who do not provide data to the voluntary initiatives in this area. But interest from investors is growing and companies are increasingly focusing on this topic due to ESG investing, as well as wider social and public policy concerns.  
‘Our proposals are intended to increase transparency by establishing better, comparable information on the diversity of companies’ boards and executive committees. This will provide better data for companies and investors to assess progress in these areas and make investment decisions, reduce investor search costs, and inform shareholder engagement, enhancing market integrity.  
‘Over time, we expect enhanced transparency may strengthen incentives for companies towards greater diversity on their boards and encourage a more strategic approach to diversity in their pipeline of talent. This may have broader benefits in terms of the quality of corporate governance and company performance in due course.’  
The FCA’s proposals aim to build on progress achieved under existing initiatives to improve diversity on the boards of the largest UK companies. Such initiatives include the Hampton-Alexander Review and Parker Review, and similar initiatives in international markets.   
The changes also follow the FCA’s recent discussion paper published earlier in July, exploring how to promote diversity and inclusion across the financial services sector as a whole. Diversity will be an ongoing focus for the FCA, beyond the proposals it sets out here.  
The FCA is consulting for 12 weeks on these proposals, with a closing date of 22 October 2021. Subject to consultation feedback and FCA Board approval, it will seek to make relevant rules by late 2021. 
Notes to editors

The ‘comply or explain’ statement targets are as follows: 

At least 40% of the board should be women (including those self-identifying as women). 
At least one of the senior board positions (Chair, Chief Executive Officer (CEO), Chief Financial Officer (CFO) or Senior Independent Director (SID) should be a woman (including individuals that self-identify as a woman.  
At least one member of the board should be from a Non-White ethnic minority background (as defined by the Office for National Statistics).

‘Key board committees’ include those required under the UK Corporate Governance Code, specifically committees on audit, remuneration and nominations. 
The scope of the Listing Rule proposals includes UK and overseas companies with equity shares, or equity shares represented by certificates (including global depositary receipts), admitted to either the premium or standard listing segments of the FCA’s Official List in the UK or considering admission to such listings.

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FCA publishes final rules to strengthen investor protections in SPACs

On 30 April 2021, the FCA consulted on proposals to remove the presumption of suspension for SPACs that meet certain criteria which are intended to strengthen the protections for investors, while maintaining the smooth operation of the market. The proposed changes were designed to provide an alternative approach for SPACs that must otherwise provide detailed information about a proposed target to the market to avoid being suspended.
The additional investor safeguards that the FCA will require SPACs to provide in order to benefit from the alternative approach include: 

a ‘redemption’ option allowing investors to exit a SPAC prior to any acquisition being completed
ensuring money raised from public shareholders is ring-fenced
requiring shareholder approval for any proposed acquisition
a time limit on a SPAC’s operating period if no acquisition is completed

SPAC issuers unable to meet the conditions, or those choosing not to, will continue to be subject to a presumption of suspension.
In response to feedback received, the main changes the FCA has made to its original proposals are to: 

Lower the minimum amount a SPAC would need to raise at initial listing from £200 million to £100 million.
Introduce an option to extend the proposed 2-year time-limited operating period (or 3-year period if shareholders have approved a 12-month extension) by 6 months, without the need to get shareholder approval. The additional 6 months will only be available in limited circumstances. This is intended to provide more time for a SPAC to conclude a deal where a transaction is well advanced.
Modify its supervisory approach to provide more comfort prior to admission to listing that an issuer is within the guidance which disapplies the presumption of suspension.

The final rules aim to provide more flexibility to larger SPACs, provided they embed certain features that promote investor protection and the smooth operation of our markets. Private companies listing in the UK via a SPAC will also still be subject to the full rigour of the FCA’s listing rules and transparency and disclosure obligations.
SPACs continue to have risks and remain a more complex investment, which investors should ensure they can adequately assess and understand before investing. This includes understanding their capital structure, such as the risk of conflicts of interest, dilution from shares allocated to sponsors, and assessing the potential value and return prospects of any proposed acquisition target. Investors, particularly individual investors, should carefully consider all available information and risks before deciding whether to invest in a SPAC, regardless of whether a SPAC has structured itself to comply with our new rules and guidance.
The new rules and guidance come into force on 10 August 2021.

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Consumer warning on Coinburp Limited

The FCA has become aware of promotional material indicating that Coinburp Limited (the Firm) is intending to launch the CoinBurp $BURP Token and Initial DEX Offering on Monday 26 July 2021. 
The Firm does not yet hold full FCA Registration under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended) (MLRs) but has submitted an application to the FCA for registration.
The Firm does appear on the FCA’s Temporary Registration Register (TRR). The TRR was established to allow existing cryptoasset businesses to continue to trade whilst the FCA assesses their application.
It does not allow any firm to claim to be Registered or Authorised by the FCA. Whilst firms with this status can continue to trade, such firms and their personnel have not yet been assessed as fit and proper, and we have not yet determined their application for the purposes of the MLRs.
The FCA has very limited powers to protect you if you invest in cryptoassets. We have warned previously that investing in cryptoassets (and investments and lending products linked to them) usually involves very high risks.
Crypto tokens can become very difficult to sell or may significantly reduce in value – and consumers that invest in them should be prepared to lose all their money. It is unlikely that you will have recourse to the Financial Ombudsman Service or Financial Services Compensation Scheme if something goes wrong.
More information on the regulation of cryptoassets
On 10 January 2020, the FCA became the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for some activities undertaken by cryptoasset firms operating by way of business in the UK, including exchanges of money into cryptoassets, cryptoassets into money and exchanges of cryptoassets for other cryptoassets.
This includes situations where a firm is issuing or creating the token themselves, commonly referred to as an ‘Initial Coin Offering’.
Consumers seeking to invest in cryptoassets should ensure they understand the information in our consumer alert and consumer webpages.
We have previously provided information for consumers on Initial Coin Offerings.

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Ian Hudson sentenced to 4 years imprisonment for fraudulent trading and carrying on regulated activities without authorisation

Today, at Southwark Crown Court, His Honour Judge Tomlinson sentenced Ian James Hudson to 4 years’ imprisonment for one count of fraudulent trading, with two additional terms of 14 months, each reflecting a breach of s19 FMSA, to run concurrently following his earlier guilty plea. This followed charges laid by the FCA namely carrying on a business, Richmond Associates, for a fraudulent purpose and carrying on regulated activities when not authorised or exempt.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
‘Mr Hudson’s defrauding was calculated and persistent over a number of years, preying on victims who believed he was a financial adviser and trusted friend when he was neither of these things. We remind investors to check the FCA’s register of authorised person to ensure any financial adviser is authorised to provide financial advice by the FCA.’
Between 1 January 2008 and 31 July 2019, Mr Hudson advised on regulated mortgages, pensions and other investments and purported to invest significant deposits received by him from clients on their behalf. At no point during this time was he authorised by the FCA to undertake these, or any, financial services, as is required by law. 
In addition, while Mr Hudson told clients that the money they deposited with his business, Richmond Associates, would be invested in various financial vehicles or otherwise put to specific uses, this was not always the case. Instead he used those deposits to re-pay existing clients, to make payments to other individuals, or to fund his own lifestyle. In total, approximately £2m was deposited by Mr Hudson’s clients.
Confiscation proceedings are being pursued by the FCA. Any sums recovered from Mr Hudson will be used to compensate victims.
Notes to editors:

Ian Hudson’s date of birth: 16 April 1966
Previous press release. 
If you believe you have suffered a financial loss as a result of dealing with Ian Hudson, please email [email protected]

Mr Hudson was charged with the following criminal offences between January 2008 and July 2019:

Participating in a fraudulent business, namely Richmond Associates, contrary to section 9 of the Fraud Act 2006;
Carrying on a regulated activity (namely, accepting deposits), without authorisation or exemption, contrary to section 23(1) of the Financial Services and Markets Act 2000; and
Carrying on a regulated activity (namely, advising on investments) without authorisation or exemption, contrary to section 23(1) of the Financial Services and Markets Act 2000.

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Information for firms who use certain exemptions to the Financial Promotions Order

Trading Scam News Editor - July 31, 2021: FCA United Kingdom Alerts FCA United Kingdom Alerts Information for firms who use certain exemptions to the Financial Promotions Order

Following onshoring changes made to The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the FPO), the definition of Relevant Market inadvertently no longer includes relevant UK markets.
This means the exemptions under Articles 37, 41, 67, 68, 69 of the FPO do not cover financial promotions relating to relevant UK markets or investments traded on such markets. These exemptions will be restored by Government Statutory Instrument (SI).
Until such date as this SI comes into force, we do not propose to take enforcement action against persons for breach of the financial promotion restriction if such breach only comes about because the relevant exemption no longer applies on account of this omission.
We reserve the right to pursue enforcement action in the event of misconduct by an affected person that goes beyond a failure to meet the criteria for exemption as a result of the above.

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The FCA and the Bank of England encourage market participants in a switch to RFRs in the LIBOR cross-currency swaps market from 21 September

A key milestone recommended by the Working Group on Sterling Risk-Free Reference Rates (‘the Working Group’) is to cease initiation of new cross-currency derivatives with a LIBOR-linked sterling leg expiring after 2021, during Q2/Q3 2021, other than for risk management of existing positions. The PRA and FCA expect firms to meet the Working Group’s milestones as set out in the recent ‘Dear CEO’ letter sent to regulated firms.
The Dear CEO letter also noted the PRA and FCA’s expectation that firms further the adoption of RFRs in non-sterling LIBOR currencies, including to cease new use of USD LIBOR as soon as practicable and no later than the end of 2021, in line with the supervisory guidance issued by the US authorities.
On 13 July, the US CFTC’s Market Risk Advisory Committee (MRAC) formally recommended a series of ‘SOFR First’ initiatives in US dollar markets, beginning with interdealer swap markets on 26 July. The MRAC recommendation also includes a subsequent step to replace use of LIBOR with RFRs in cross-currency swaps, identifying a potential date of 21 September.
In order to support markets in building the necessary liquidity to meet these milestones, the FCA and the Bank of England have encouraged UK market participants to support the US-led ‘SOFR First’ initiative on 26 July and have also been engaged with authorities across LIBOR jurisdictions to build the necessary consensus around the subsequent initiative for cross-currency swaps in September. Support for this has also been expressed publicly by the US Alternative Reference Rates Committee and National Working Group on Swiss Franc Reference Rates.
In light of the above, the FCA has engaged with UK market participants, including liquidity providers and interdealer brokers (IDBs), to determine support for a change in the quoting conventions of LIBOR cross-currency swaps in the interdealer market on the proposed date of 21 September.
An FCA survey of UK market participants identified strong support for a change in the interdealer quoting convention, which would see RFRs rather than LIBOR become the default price from 21 September 2021.
The FCA and the Bank of England therefore support and encourage all participants in the LIBOR cross-currency swaps market to take the steps necessary to prepare for and implement these changes to market conventions on 21 September and shift liquidity away from LIBOR to RFRs. In the period leading up to 21 September, the FCA and the Bank of England will continue to engage with market participants and relevant international authorities to determine whether market conditions allow the switch to proceed smoothly.
Background & technical notes
This is an extension of the successful similar changes to the interdealer quoting conventions for linear sterling swaps during Q4 2020, and non-linear sterling derivatives in May 2021, and the upcoming SOFR First initiative on 26 July 2021. Extending this to cross-currency derivatives is intended to increase alignment in RFR markets and help to accelerate a reduction in new LIBOR exposures.
The proposed change will involve IDBs moving the primary basis of their pricing screens and curve construction for cross-currency swaps from LIBOR to RFRs.
Specifically, the quoting conventions in the interdealer market for the GBP, CHF and JPY legs of cross-currency swaps would switch from LIBOR to SONIA, SARON and TONA respectively from 21 September.
Cross-currency swaps with a USD leg would switch from USD LIBOR to SOFR from 21 September when paired with another LIBOR currency i.e. GBP/USD would switch to SONIA/SOFR, CHF/USD to SARON/SOFR and USD/JPY to SOFR/TONA.
If the USD leg is paired with a non-LIBOR currency, or IBOR, then in line with the US authorities’ guidance on the timing for ceasing new use of USD LIBOR, the USD leg would switch to SOFR as soon as is practicable from 21 September and no later than the end of 2021.
FCA survey results
Total respondents: 19
Q1. Do you support a ‘RFR-First’ Convention Switch for the LIBOR cross-currency swaps market? Yes / No.
100% of respondents selected ‘Yes’ to this question.
Q2. If you answered Q1 with Yes: Do you think a switch on 21 September 2021 would be an appropriate date for the interdealer LIBOR cross-currency swaps market?
95% of respondents who selected ‘Yes’ to the first question supported the 21 September date. One market participant was supportive for all LIBOR currencies except one. There was also one abstention.

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