Litigation

Court dismisses application to judicially review KPMG's role in IRHP mis-selling case

In R (on the application of Holmcroft Properties Limited) v KPMG LLP, the Administrative Court decided that KPMG was not amenable to judicial review in its capacity as the independent reviewer under Barclays' FCA supervised scheme to provide redress to customers mis-sold interest rate hedging products.

Under the redress scheme it was agreed that Barclays would not make offers of compensation unless it had KPMG's approval and KPMG would only approve offers if it considered them to be appropriate, fair and reasonable. The Claimant argued that the way Barclays decided not to compensate it for consequential loss was unfair because it was made on the basis of material which was not disclosed to it. KPMG therefore acted in breach of a public law duty to secure fair process by approving a process which was defective.

The Court held that although KMPG was helping the FCA in the performance of public law functions, it did so in the context of a voluntary scheme, in which its review powers were conferred by contract which did not involve it performing a regulatory obligation or prevent the FCA taking a more active role and as such its role did not have a sufficient public law element to make it amenable to judicial review. The Court also held that even if KPMG were under a public law duty to secure fair process as there had been no unfairness in Barclays' decision there could not be a breach by KPMG.

Administrators fail in attempt to claim redress payment

In Walker v National Westminster Bank Plc [2016] the Court decided that the Bank was not obligated to make a redress payment due under the FCA supervised review of IRHP sales to the previously appointed administrators of a company which had since been dissolved.

As part of the FCA review the Bank concluded that the dissolved company might be"entitled to redress of £62,000 in respect of the possible mis-selling of the swaps."  Upon the administrators' application the question was whether the redress payment should be made direct to them as an asset caught by the charge arising under paragraph 99(3) of Schedule B1 of the Insolvency Act 1986 in respect of their costs.  

The administrators' application was refused. HHJ David Cooke held that the offer of a redress payment under the FCA supervised scheme did not depend on the making of a claim in law or the establishment of a cause of action. The court had no jurisdiction to order the Bank to make any payment until a legal right was successfully asserted against it or a binding settlement between the Bank and a person entitled to represent the company was agreed. The redress payment was not therefore an asset and could not be subject to the charge under paragraph 99(3).

Regulatory Decisions

FCA bans former Deutsche Bank trader

Michael Curtler pleaded guilty before the US District Court for the Southern District of New York for his role in a conspiracy to manipulate Deutsche Bank's US Dollar Libor submissions.

As a result, the FCA has found that Mr Curtler lacked honesty and integrity and banned him from working in the UK financial services industry.

Firm A v Financial Conduct Authority

Firm A was a debt management firm who had held an OFT licence for a number of years. The firm acquired interim permission to carry on its activities from the FCA when the responsibility for regulating the firm passed from the OFT to the FCA.

Firm A applied for the required permissions but that application was refused by the FCA, which issued a decision notice. Firm A referred the matter to the Upper Tribunal on the same date.

The issue before the tribunal was whether Firm A's interim permission ceased to have effect when the decision notice refusing the application was issued or whether it continued where the matter was referred to the tribunal and, if dismissed, a final notice given. The question required the Tribunal to consider Article 58(3)(c) of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2013 (the Order).

The Tribunal held that the correct construction of Article 58(3)(c) of the Order was that a firm would lose its interim permission to carry on regulated activities at the point the FCA refused its application and gave it a decision notice.

The Tribunal accepted that unless the effect of Article 58(3)(c) of the Order could be suspended by a decision of an independent and impartial tribunal then the applicant's due process rights under the European Convention of Human Rights would be infringed. However, it stated that the Tribunal has such power of suspension under the Tribunal Procedure (Upper Tribunal) Rules 2008 r.5. It further stated that it would not be fatal if there was a gap between the ceasing of the firms interim permission and the application being made.

National Audit Office Report on Financial Services Mis-selling

On 24 February 2016, the NAO published its report on financial services mis-selling.

The report assesses how bodies involved in financial services mis-selling coordinate their activities with respect to mis-selling and the costs involved, how the FCA acts to prevent and detect mis-selling and how redress is provided to consumers.