This latest example of strategic coordination between Hong Kong regulators confirms a broader regulatory mission and shared objectives.

By Dominic Geiser, Truman Mak, Evangeline Tsui, and Charlotte Wong

On 5 March 2024, the Hong Kong Stock Exchange (HKEx) issued a Statement of Disciplinary Action (Statement) against two former directors (the Former Directors) of a company listed on the Growth Enterprise Market (GEM) of the HKEx for misappropriating company funds during the listing process. The disciplinary action followed efforts by the HKEx and the Securities and Futures Commission (SFC) to investigate the directors, and highlights strategic coordination on enforcement actions on IPO-related misconduct. The Monetary Authority of Singapore (MAS) also provided assistance.

Hong Kong’s highest court confirms that its financial markets regulator may serve proceedings on foreign defendants for restoration orders as of right.

By Dominic Geiser, Simon Hawkins, Truman Mak, and Adrian Fong

The Hong Kong Court of Final Appeal (CFA) held in a recent judgment that the Securities and Futures Commission (SFC) does not need to seek leave of the Hong Kong court to serve false trading proceedings against defendants out of the jurisdictions for restoration orders.

The FCA reminds market soundings recipients of their obligations under UK MAR best practices for trading during the market sounding period.

By Nicola Higgs, James Inness, Rob Moulton, and Jonathan Ritson-Candler

On 31 October 2023, the FCA published Market Watch 75 reminding firms of the importance of robust market soundings procedures. In particular, the publication sets out the FCA’s recent observations around the practices of market soundings recipients (MSRs) and their conduct in the period between being asked to consent to being sounded by disclosing market participants (DMPs), and the sounding itself taking place.

Market soundings can involve the communication of confidential and/or inside information under UK MAR and act as a safe harbour to an unlawful disclosure offence on the basis that a compliant market sounding is performed in the normal exercise of a DMP’s employment, profession, or duties. The market soundings process includes standardised arrangements and information requirements to ensure that no potentially sensitive information is unnecessarily disclosed.

The case provides instructive practical examples of the “reasonable steps” companies can take according to the FCA and a reminder of the FCA’s cultural expectations of CEOs.

By David Berman, Jonathan Ritson-Candler, and Sean Wells

On 16 November 2022, the FCA issued a final notice (Final Notice) to the former CEO of Sonali Bank (UK) Limited (SBUK), Mr Prodhan, for anti-money laundering (AML) failings for a period running from 2012 to 2014 (the Relevant Period).

The Final Notice provides a reminder to firms of the FCA’s expectations in relation to AML compliance; in particular:

  • the role of senior management oversight of the Money Laundering Reporting Officer (MLRO);
  • the individual accountability of the senior manager tasked with overseeing the firm’s AML and financial crime compliance; and
  • the importance of senior management engendering a strong compliance culture, including in relation to AML.

As the FCA’s remit continues to grow, the regulator pledges flexibility in the face of global financial and geopolitical headwinds.

By Rob Moulton, Anne Mainwaring, Jaime O’Connell, and Dianne Bell

On 7 April 2022, the FCA released its new Business Plan as part of a package including  a three-year strategy document setting out the outcomes it expects all firms to deliver across UK markets. In his introductory message, FCA Chief Executive Nikhil Rathi noted that the regulator’s broad and growing remit means “prioritisation is inevitable”. The FCA’s more outcomes-based approach means its commitments for the next three years fall into three stated areas of focus:

  1. Reducing and preventing serious harm: for example, protecting consumers from harm caused by authorised firms, including tackling fraud and poor treatment. The FCA expects to “harness data to assess problems more quickly”, with the aim of preventing harm from happening in the first place.
  2. Setting and testing higher standards: for example, focusing on the impact authorised firms’ actions have on consumers and markets. The FCA expects the new Consumer Duty to give firms greater certainty about how they should treat consumers as well as flexibility on how they deliver good outcomes.
  3. Promoting competition and positive change: greater regulatory open-mindedness, for example, by building on the globally copied “sandbox” and introducing a “scalebox”.

This annual publication outlines some of the primary focus areas in 2022 for UK-regulated financial services firms. There has been a marked shift away from dealing with immediate post-Brexit priorities to more fundamental consideration of the direction of travel of UK financial services regulation, and this is borne out across many of the topics covered in this year’s publication.

While monitoring regulatory divergence between the UK and the EU will be a key theme for 2022, other familiar topics will

This annual publication outlines some of the primary focus areas in 2021 for UK-regulated financial services firms. Some of these topics are attracting attention because they are an emerging trend, or because they are at a key stage in the implementation cycle. Other topics are longstanding, but remain at the top of the PRA’s and FCA’s priority lists.

While this publication looks beyond Brexit and COVID-19, inevitably, in the short term, these issues continue to be dominant themes.

We hope

ESG and the reasonable investor test under MAR.

By David Berman, Rob Moulton, and Nicola Higgs

Background

Historically, “profit maximisation” has been regarded as the sole (or predominant) objective for investors. Today, however, an ever-increasing proportion of investors have additional/alternative — sustainability (or ESG)-related — objectives[i]. These investors are not seeking profit at all costs — rather, “cleaner” profits that derive from the sustainable/green activities of investee companies. They are perhaps willing to forego some element of (near-term) profit in return for the environmental and societal benefit, brought about by the investee company, that (they hope) will accrue over time. Many such investors will believe that, in the long run, they may in fact end up maximising their returns — on the premise that sustainability-focused companies are more likely to survive (and thrive) in the future, while others will ultimately fail.

The FCA publicly censured the IT service provider for publishing false information about its net debt and holdings of cash and cash equivalents.

By Chris Horton, James Inness, David Berman and Katy Sanders

On 26 June 2020, the FCA issued a final notice to Redcentric PLC (Redcentric), publicly censuring Redcentric for committing market abuse, between 9 November 2015 and 7 November 2016, by publishing false information about its net debt and holdings of cash and cash equivalents in November 2015 (the November 2015 Statement) and June 2016 (the June 2016 Statement) (together, the Statements).

The FCA found that Redcentric knew, or could reasonably have been expected to know, that the information about its net debt and cash and cash equivalents published in the Statements was false and misleading and that it gave, or was likely to give, a false or misleading impression as to the value of its shares. This resulted in the market price for Redcentric shares being artificially inflated — which continued until Redcentric made an announcement and statement on 7 November 2016 (the November 2016 Announcement) — and in investors paying more for purchased shares than they would have had they known the true position. The estimated loss to affected shareholders was £43 million.