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Welcome ome and Introdu roduction ion Test? – An online test will be set after t oday’s event (open next week) - £100.00 prize for the best result (A tie breaker question sent in the event of a draw) Contact Comsure for more details 2
We Welcome me and In Intr troduction tion 1. Speakers start time: 12.15 2. Speakers finish time: 13.45 3. Event Finish: 13.45 - 14.00: 4. CPD Value1.5hrs = CPD certificates will ONLY be sent after the event AND ONLY if you have signed in on the event register that will be found at the event registration desk 3
• Mathew Beale Regulatory update, Sanctions and Lesson from the UK - FCA & Invesco Perpetual (£18 million fine) TOPICS • Paul Wilson & Mark Rawlins Lessons for directors which provide valuable lessons for all businesses and directors. Look at recent cases, including AND Weavering, Arch Cru and SPEAKERS Horizon, • ALL Corporate governance - throughout the presentation the speakers will consider the main areas for analysis for businesses and directors who wish to meet best industry standards 4
Risk Governance [Environmental] Dashboard 5
FATCA = US IGAs & UK IGAs. 1. 30 JUNE 2015 deadline for the first reports of FATCA information under the reporting regimes that have been put in place in both Guernsey and Jersey to ensure compliance with the i. US/Jersey (US/Guernsey) Intergovernmental Agreements regarding FATCA (“the US IGAs”). 2. The deadline for the first reports in relation to the i. UK/Jersey (UK/Guernsey) Intergovernmental Agreements regarding a FATCA- type reporting regime (“the UK IGAs”) is 30 JUNE 2016. 3. Whilst most list Jersey (Guernsey) funds (“Funds”) may DELEGATE FATCA reporting to a third party service provider, FATCA reporting obligations remain the FUND’S RESPONSIBILITY. 6
Regulatory Risk – Fines 7
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Guernsey 10
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UK - FCA 12
FCA FINES 1.2014 was a bumper year for the FCA in terms of the level of enforcement fines it imposed. 2.A total of over £1.4 billion was levied in fines by the FCA in 2014, 3.This dwarfs the total figure of just under £500 million in 2013. 13
2014 FCA 1. In keeping with its CREDIBLE DETERRENCE AGENDA, the FCA continued to take enforcement action in 2014 in other key areas, demonstrating the importance it places on firms complying with its rules on: i. Client money and assets. ii. Financial promotions. iii. Dealing with conflicts of interest. iv. Transaction reporting. v. Senior management responsibility 2. MORE ACTION IS taken for BREACH OF PRINCIPLE 3 (the requirement to have appropriate systems and controls) than any other of the FCA’s Principles. 14
Bank of Beirut fined £2.1m 1. March 2015 - The FCA fined the Bank of Beirut £2.1m AND prohibited it from acquiring new customers from high-risk jurisdictions for 126 days i. AS A RESULT OF the bank providing the FCA with misleading information when addressing concerns regarding its financial crime systems and controls. 2. The FCA has also fined two approved persons at the bank for failing to deal with the regulator in an open and cooperative way . i. Anthony Wills, Compliance Officer (former!!)= £19,600.00 ii. Michael Allin, The Internal Auditor = £9,900.00 15
FCA update (best practice) 16
FCA guidance on financial promotions in social media 1. The FCA has published finalised guidance (FG15/4) entitled i. “Social media and customer communications: The FCA’s supervisory approach to financial promotions in social media”. 2. The guidance is designed to:- i. Assist firms in their use of social media and ii. Ensure that they are COMPLIANT with the FCA’s financial promotion requirements, and iii. Contains EXAMPLES of acceptable and unacceptable financial promotions. 17
FCA thematic review on asset management firms and market abuse 1. The FCA has published a thematic review (TR15/1) entitled “Asset management firms and the risk of market abuse”. 2. The review (with a primary focus on equities and insider dealing) examined how firms control the risks of 1. insider dealing, 2. improper disclosure and 3. market manipulation, 3. The FCA found that, while firms had put in place some practices and procedures to control the risk of market abuse, these are only comprehensive in a small number of firms. 4. The FCA believes that , in many firms, further work is required to ensure the procedures operate effectively and cover all material risks. 5. The review highlighted a need for firms to pay more attention to the possibility of receiving inside information through all aspects of the investment process and also a need to improve the effectiveness of post- trade surveillance. 18
FCA's Risk Outlook Sets out its top Seven high-level risks The financial services sector Should consider in coming Years……. 19
The FCA will continue to look at: 1. TECHNOLOGY DEVELOPMENTS and its impact on firms’ investment, consumers and regulators 2. HOW POOR CULTURE AND CONTROL continues to threaten market integrity 3. IMPACT OF LARGE BACK-BOOKS on how firms deal with existing customers 4. PENSIONS and RETIREMENT INCOME PRODUCTS consumer outcomes Specifically on consumer credit and COMPLEX TERMS AND CONDITIONS the FCA will monitor: 5. poor culture and practice in consumer credit affordability assessments that could result in unaffordable debt 6. impact of the Consumer Rights Act coming into force in the autumn There is one new area of forward looking focus: 7. FIRMS’ SYSTEMS AND CONTROLS IN RELATION TO FINANCIAL CRIME 20
JFSC update 21
JFSC Regulatory updates 1.Customer Due Diligence – use of smart phone and tablet applications 2.AML/CFT Handbooks: Appendix D2 updated 3.Consultation Paper No. 4 2015: Revisions to the Money Laundering (Jersey) Order 2008 and Commission AML/CFT Handbooks 4. Sanctions…… (More later…!!!!) 22
RISK AND REGULATORY SEMINAR 26 March 2015 Mark Rawlins Paul Wilson 23
• Arch Cru • Weavering • Horizon 24
Arch Cru – The Background • A complete mess – involving £650m odd of total investments, Greek ships and student accommodation • FSA findings/hearings – lack of integrity, compliance monitoring and failure to manage conflicts properly • A ‘voluntary’ payment scheme of £54m provided through Capita, HSBC and BNY • On going litigation in Guernsey over the GSY fund administrator and the directors of the GSY funds • CISX reborn at the hands of John Moulton into the CISE… £190k fine by GFSC. • This one is a UK case – delivered at the end of 2014. The judgment runs to 200 odd pages 25
Arch Cru – The Facts Bordeaux Services 6400 (Guernsey) Limited = Administrator Investors CISX LISTINGS GSY ICS Arch Cru Arch Cru (the “Arch Cru Funds”) Diversified Investment Fund Fund 22 ICS - Directors - Robert Addison (Arch COO) + Bordeaux Directors (Redford + CAPITA Financial Meader) Managers Limited = Authorised Corporate Private Real Director Equity Estate Arch Financial Products LLP = Investment Manager UNDERLYING INVESTMENTS 26
Arch Cru - The Investment Manager • Arch Financial Products LLP Mr and Mrs Farrell Arch International Group Holdings (AIGH) Robin Farrell/Arch Addison Group (UK) CEO = Robin Farrell - FSA approved – previously Investment Investment global head of alternative investments at Dresdner Manager Manager Kleinwort Wasserstein (LLP) (LLP) COO = Robert Addison 27
Arch Cru - The Deal • Timing … late 2007 (pre -crash) • A student accommodation provider - Clubeasy – up for sale • A high valuation (based on continued operation) but an alleged distressed seller, Mr Jason Hayes • Substantial borrowings by the Clubeasy group • A JV partner - Foundations - owned by Mr Lee Barkman 28
Arch Cru - The Deal Structure Lee Barkman Phillip Montague Foundations Capital Arch UK Limited (BVI) 35% 65% Foundations Program Plc (IoM) Directors = Farrell Addison Foundations Holdings Barkman Limited (IoM) Montague JV Co 29
The Deal - Terms • A holding company, Lonscale Ltd was established to acquire the Clubeasy business. • An initial deposit was paid by one of the ICs (£1m). • One IC (AT1) was used as a conduit to acquire interests in Lonscale • Lonscale issued shares and loan notes to AT1 • AT1 issued loan notes in a total amount of £21m - to the GSY ICs – for £20.2m; and to FPP for £0.8m. • The ICs invested under the control of the IM, Arch Financial Products, appointed under identical investment management agreements. 30
The £21m • The £21m received by AT1 from the GSY ICs – and indirectly from the UK OIECs was used (via a solicitor’s client account) – • To repay the bridge finance for the £1m deposit • To acquire the Clubeasy business from Hayes - £12.21m • To fund working capital ~ £1.5m • To pay transaction costs and stamp duty • To pay £3m to FCL as a structuring fee • To pay £3m to Arch the IM as a structuring fee 31
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