Friday 31 March 2017

UK: FRC budget and plan for 2017/18

The Financial Reporting Council has published its plan and budget for 2017/18: see here (pdf). Its priorities include a comprehensive review (and update) of the UK Corporate Governance Code and work to improve audit quality.

Thursday 30 March 2017

UK: The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2017

The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2017 was laid before Parliament today and comes into force on 3 January 2018: see here or here (pdf). The purpose of the Order is - to quote directly from the accompanying explanatory memorandum (herepdf) - "to allow regulated firms to provide more help and guidance to their customers without inadvertently crossing the boundary into regulated financial advice".

Wednesday 29 March 2017

Latvia: corporate governance in Latvia - an OECD report

The OECD has published the review of corporate governance in Latvia that it undertook as part of Latvia's accession to OECD membership in 2016: see here.

Tuesday 28 March 2017

UK: FCA orders compensation for market abuse

The Financial Conduct Authority has, for the first time, used powers given to it under section 384 ("Power of Authority to require restitution") of the Financial Services and Markets Act 2000, to require a listed company - Tesco plc - to pay compensation for market abuse in respect of a trading update that gave a false or misleading impression as to Tesco plc shares and certain Tesco group bonds. Compensation will be paid to purchasers of Tesco shares and bonds, equal to the 'inflated amount' for each share or bond. This amount has been determined by an independent expert appointed by the FCA. Further information is available in the final notice issued to Tesco plc (and Tesco Stores Ltd) by the FCA: see here (pdf). It is also available on the website setup by the firm, KPMG, administering the compensation scheme: see here.

Monday 27 March 2017

India: IRDAI's Stewardship Code for Insurers

The Insurance Regulatory and Development Authority of India (IRDAI) has written to the chief executives of insurance companies to explain what is expected of insurers under IRDAI's new Stewardship Code for Insurers: see here. A draft Code was published earlier this year; IRDAI's letter suggests that a final version has been agreed but it has not yet been published on IRDAI's website.

Friday 24 March 2017

UK: Banking Standards Board panel event on law, ethics and culture in banking

Earlier this week the Banking Standards Board organised a panel event titled 'Worthy of Trust?' Law, Ethics and Culture in Banking'. The Panel comprised the Governor of the Bank of England, the President of the New York Federal Reserve and the Lord Chief Justice of England and Wales. A recording of the event was made and is available below:

Thursday 23 March 2017

UK: OECD report on the implementation of the OECD Anti-Bribery Convention

The OECD has published a report concerning the UK's implementation of the OECD Anti-Bribery Convention: see here (pdf). A summary of the report, produced by the OECD Working Group on Bribery, is available here. Whilst noting the strong progress that the UK has made, the report nevertheless highlights areas of concern including: the questions that remain regarding the role of the Serious Fraud Office in foreign bribery cases; and extent to which the UK is doing enough, working with the Crown Dependencies and Overseas Territories, to detect foreign bribery.

Wednesday 22 March 2017

UK: England and Wales: FCA notices - third party rights and identification

The Supreme Court gave judgment earlier today in Financial Conduct Authority v Macris [2017] UKSC 19. A press summary is available here (pdf). At issue was whether an individual, Mr Macris, had been identified in penalty notices given to his former employer. Individuals identified in such notices are given certain 'third party' rights under section 393 of the Financial Services and Markets Act 2000, including receiving a copy of the notice and the right to make representations about its contents. Mr Macris had been JP Morgan's International Chief Investment Officer and whilst the notices did not name him they were critical of JP Morgan's Chief Investment Office in London and New York.

The Court of Appeal (see [2015] EWCA Civ 490) and Upper Tribunal (see [2014] UKUT B7 (TCC)) held that Mr Macris had been identified. The Supreme Court has held, by a majority of 4 to 1, that Mr Macris had not been identified. The lead judgment was delivered by Lord Sumption and he observed (at para. [11]):
In my opinion, a person is identified in a notice under section 393 if he is identified by name or by a synonym for him, such as his office or job title. In the case of a synonym, it must be apparent from the notice itself that it could apply to only one person and that person must be identifiable from information which is either in the notice or publicly available elsewhere. However, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice. Thus a reference to the “chief executive” of the X Company may be elucidated by discovering from the company’s website who that is. And a reference to “CIO London Management” would be a relevant synonym if it could be shown to refer to one person and that person so described was identifiable from publicly available information. What is not permissible is to resort to additional facts about the person so described so that if those facts and the notice are placed side by side it becomes apparent that they refer to the same person".

Monday 20 March 2017

UK: reporting on payment practices and performance - secondary legislation made

Section 3 of the Small Business, Enterprise and Employment Act 2015 gave the Secretary of State the power, through secondary legislation, to require certain companies to publish information regarding their payment practices and policies, together with their performance in respect of those policies and practices. Secondary legislation was made last week and comes into force on 6 April.

Two statutory instruments were made, one for companies and one for limited liability partnerships: see, respectively, the Reporting on Payment Practices and Performance Regulations 2017 (here or herepdf) and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 (here or herepdf). Further information is available in the explanatory memorandums accompanying the Regulations: see here (pdf) and here (pdf). The Regulations contain the threshold conditions that must be met before a company, or limited liability partnership, becomes subject to these new reporting obligations.

UK: culture in financial institutions - a speech by the chief executive of the Financial Conduct Authority

Andrew Bailey, the Chief Executive of the Financial Conduct Authority, delivered a speech last week at the Hong Kong Monetary Authority's inaugural conference for independent non-executive directors: see here. The speech is interesting not least because of Mr Bailey's comments on the development of corporate governance over the past 25 years. This period began with the dominance of agency theory in shaping the role and definition of governance; governance is now being shaped by a substantial broadening of the public interest in the behaviour of firms.


The HKMA has recently written to bank chief executives setting out further expectations regarding culture and governance: see here (pdf).

Friday 17 March 2017

Europe: a statute for social and solidarity based enterprise

A report exploring the legal frameworks within Member States governing social and solidarity based enterprises has been published: see here (pdf). The study was commissioned by the European Parliament’s Committee on Legal Affairs. The report recommends the introduction of legislation in order to permit the recognition of entities called European Social Enterprises (or ESEs).  Such entities would be those meeting qualifying conditions, and would include companies, cooperatives and foundations. The suggested conditions include having an exclusive (or dominant) community or social purpose as well as constraints on profit distribution.

Europe: the 'right to be forgotten' and company registers

The Court of Justice of the European Union gave judgment earlier this month in Camera di Commercio, Industria, Artigianato e Agricoltura di Lecce v Salvatore Manni (C-398/15). The court held that there was no 'right to be forgotten' in respect of information in company registers. It was, however, open to Member States to provide for restricted access to such data after a sufficiently long period has elapsed from the date of the company's dissolution. A summary of the decision is available here (pdf).

Thursday 16 March 2017

UK: OPBAS and updated Money Laundering Regulations

The Government yesterday announced the creation of a new organisation: the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), as part of work updating the Anti-Money Laundering (AML) supervisory regime: see here. OPBAS will be hosted by the Financial Conduct Authority and will be funded through a fee paid by professional body supervisors. In general terms, the role of OPBAS will be to work with the supervisors to ensure compliance with the Anti-Money Laundering Regulations. The Government is seeking views on the precise mandate and powers of OPBAS: see here (pdf). It is also seeking views on draft Money Laundering Regulations 2017 that were also published yesterday: see here.

Wednesday 15 March 2017

Europe: Parliament approval for Shareholders' Rights Directive

The European Parliament, in a Plenary session yesterday, approved the proposed Shareholders' Rights Directive: see here. The resolution was passed by 646 votes to 39 (there were 13 abstentions). The Directive now requires approval by the EU Council of Ministers. Further information about the Directive, in the form of FAQs published by the European Commission following the vote, is available here. The Directive contains provisions designed to make it easier for shareholders to exercise their voting rights; it also sets out a framework for a shareholder 'say on pay' vote in respect of remuneration; and it also sets out provisions for greater disclosure by institutional shareholders and asset managers (largely reflecting the provisions found in the stewardship codes that are being introduced across the world, including the UK).

Update (17 March 2017) - the European flag now appears; the UK flag inadvertently appeared at first.

Tuesday 14 March 2017

UK: The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017

The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 were made earlier this month and come into force on 31 March: see here or here (pdf). The Regulations have several purposes including the extension of new gender pay gap reporting to the public authorities specified in Schedule 2 of the Regulations. Further information is available in the accompanying explanatory memorandum: see here (pdf).

Monday 13 March 2017

UK: The Insolvency (England and Wales) (Amendment) Rules 2017

The Insolvency (England and Wales) (Amendment) Rules 2017 were laid before Parliament today and come into force on 6 April: see here or here (pdf). Their purpose is to amend the Insolvency (England and Wales) Rules 2016 in order to make minor corrections and clarifications. Further information is available in the accompanying explanatory memorandum is available here (pdf).

Friday 10 March 2017

UK: Criminal Finances Bill - second reading in the House of Lords

The Criminal Finances Bill was introduced in the House of Commons last year and is now proceeding through the House of Lords. Yesterday the Bill received its second reading: see here. The Bill contains, amongst other things, provisions that will introduce a new corporate offence of the failure to prevent the facilitation of tax evasion. Further background information about this new offence is available here. Draft Government guidance is also available: see here (pdf).

Second reading provided an opportunity for general debate and one topic dominated: the transparency of beneficial ownership information in the Crown Dependencies and British Overseas Territories, and the extent to which the Government should through legislation take action to bring about more rapid improvements in the information that is publicly available.

Thursday 9 March 2017

UK: the governance of charities - updated HMRC guidance on the 'fit and proper test' for charity trustees and directors of corporate charities

The Finance Act 2010 (section 30 and schedule 6) introduced a definition for tax purposes of charities and other organisations entitled to UK charity tax reliefs, including a 'management condition' that is satisfied where the managers of a body of persons or trust are 'fit and proper persons to be managers of the body or trust'. The legislation does not define or explain what is meant by 'fit and proper'. HMRC does, however, provide guidance and an updated version of this guidance was published today: see here.

Wednesday 8 March 2017

Mauritius: launch of new corporate governance code

The National Committee on Corporate Governance officially launched Mauritius's new corporate governance code last month. A copy of the code, which operates on the basis of 'apply and explain', is available here (pdf).

Tuesday 7 March 2017

UK: England and Wales: the Bhullar family derivative claim litigation

In the early summer of 2015, Mr Justice Morgan, in Bhullar v Bhullar [2015] EWHC 1943 (Ch), granted permission to continue certain parts of a derivative claim under Part 11 of the Companies Act 2006.  The case involved a family well known to company lawyers (see [2003] EWCA Civ 424). The claim was heard in January this year and the next episode in the story - the judgment Bhullar v Bhullar [2017] EWHC 407 (Ch) - published a few days ago. The trial judge held that the claim for equitable compensation for breach of fiduciary duty was successfully made.

Monday 6 March 2017

UK: FCA consults on reforms to the availability of information in the UK equity IPO process

The Financial Conduct Authority has published a consultation paper titled Reforming the availability of information in the UK equity IPO process: see here (pdf). A key objective of the proposed reforms is to restore the centrality of the prospectus document in the IPO process.

Friday 3 March 2017

UK: The Companies Documentation (Transgender Persons) Bill 2016-17

The Companies Documentation (Transgender Persons) Bill 2016-17 was introduced in Parliament earlier this week under the Ten Minute Rule procedure by the Rt Hon Nicky Morgan MP and received its first reading: see here. The purpose of the Bill, to quote directly from the Parliament website, is to "... enable transgender persons to apply to the registrar of companies for England and Wales for documentation relating to their change of name to be treated as protected information under the Gender Recognition Act 2004; and for connected purposes". A copy of the Bill is not yet available, but will be published closer to the time of its second reading.

Thursday 2 March 2017

UK: FRC calls for improvements in audit firms' quality control systems

The Financial Reporting Council has published the results of a thematic review considering selected aspects of audit firms' quality control systems: see here (pdf). The FRC is calling on firms to improve their quality control systems, having found that one third of the audits sampled required more than limited improvements.

Wednesday 1 March 2017

Europe: access to companies' beneficial ownership registers [updating the 4th AML Directive]

Earlier this week the Economic and Monetary Affairs Committee and the Civil Liberties, Justice and Home Affairs Committee agreed amendments to a proposed Directive the purpose of which is to amend the Fourth Anti-Money Laundering Directive. The agreed amendments would permit EU citizens much greater access to companies' beneficial ownership registers (the need to demonstrate a 'legitimate interest' would be removed). The Committees also agreed that trusts (and similar structures) should be subject to greater transparency requirements. For further information: see here.