FCA fines Lloyds and BoS for benchmark failings: FCA has fined Lloyds Bank and Bank of Scotland (BoS) £105 million for failings relating to LIBOR and other benchmarks. The fines cover:

  • £70 million for conduct by a manager and a trader at each entity to manipulate the (now discontinued) sterling Repo Rate benchmark over an 18-month period  in order to reduce the BoE fees due under the Government's Special Liquidity Scheme (SLS). Lloyds Banking Group (LBG) has also now paid the BoE £7.76 million in compensation for the reduced SLS fees BoE received from all relevant banks because of the conduct of the two LBG banks.
  • £35 million for misconduct involving 16 individuals, including seven managers, and one individual also involved in the Repo Rate misconduct, relating to LIBOR. The conduct was similar to the conduct for which many other banks have already been fined. For a period of over three years the individuals' conduct resulted in:
    • the banks making LIBOR submissions in relation to three currencies that took into account the profit and loss (P&L) of their money market trading books;
    • Lloyds colluding with Rabobank in an attempt to influence JPY LIBOR and both LBG banks "forcing LIBOR" to influence other banks' submissions, in each case to benefit their respective trading positions; and
    • BoS manipulating its GBP and USD submissions as a result of at least two instructions from a manager to avoid negative market perception and comments on its stability.

FCA found that the banks' inadequate systems and controls exacerbated the failings. The banks agreed to early settlement, otherwise the fine would have been £150 million. (Source: FCA Fines Lloyds and BoS for Benchmark Failings)

Tribunal upholds FCA decision on hedge fund manager: The Tribunal has upheld FCA's decision to ban Alberto Micalizzi, former CEO of the now defunct Dynamic Decisions hedge fund, and to fine him. FCA had found Mr Micalizzi had sought to deceive investors when the fund suffered massive losses. He deliberately misrepresented the fund's value and subsequently claimed to have invested in bonds which never in fact existed. The Tribunal found he had misled investors, lenders and the then Financial Services Authority. It directed the fine of £3 million be reduced to £2.7 million but agreed the failings were of the most serious nature. (Source: Tribunal Upholds FCA Decision on Hedge Fund Manager)

FCA publishes final insurance add-ons report: FCA has published its final report on general insurance add-ons. It has concluded that selling a product as an add-on often leads to consumers buying products they did not need and which are not good value. It found that lack of consumer attention to the incidental purchases, combined with the advantages of point-of-sale selling and poor information all contributed to this. The study also found the value of these products is often unclear (although it also noted unclear information and poor value in standalone products). FCA will consult next year on its proposals for remedying these market failures. (Source: FCA Publishes Final Insurance Add-Ons Report)

FCA creates remuneration page: FCA has created a new page on its website devoted to variable remuneration. The page sets out FCA's views and refers firms to EBA guidelines.  (Source: FCA Creates Remuneration Page)

Regulators advise against financial incentives for whistleblowers: FCA and PRA have published a note with the results of their research, required by Parliamentary Commission on Banking Standards, into whether to introduce US-style financial incentives for whistleblowers. They conclude that introducing such incentives is unlikely to improve the quantity or quality of whistleblowing. In their opinion, other measures will suffice to increase whistleblowing. For example, to encourage whistleblowing, FCA and PRA will start publishing, in autumn 2014, annual reports on the reports they receive and the way they handle them. (Source: Financial Incentives for Whistleblowers)