In this episode we look at some deadlines that the FCA has extended because of the pandemic, the lessons to draw from some fines for bad money-laundering controls and two websites that the FCA has set up for the collection of tip-offs. We also scan a case of market abuse, a review of early reporting and, as ever, more data about Brexit.

FRC publishes review of early reporting

This review of early reporting under the Stewardship Code 2020 seeks to help prospective signatories in their planning by reiterating the Financial Reporting Council's expectations for disclosure of high quality. This expands on what the FRC expects to see from reports. Investors ought to remember the following when preparing their reports.

• They should explain the structures and processes that underpin stewardship decision making and the rationale for the approaches that they take, looking at how effective those approaches are and any related results.
• They should 'address' all asset classes and countries.
• Reports should concentrate on activities and results. They should be supported with specific evidence from the reporting period in question, rather than just general statements of approach.

Firms that aspire to sign the Stewardship Code should pay attention. Between them, the FCA and the FRC are ambiguous about whether this-or-that firm ought to sign up to the code, though it is obvious that the FCA expects the managers of professional clients to "disclose their commitment" to the code. Firms that do wish to become (or remain) signatories to the code ought to review this feedback from the FRC because their reports have to be approved by it before they publish them.

SM&CR: the day after tomorrow?

Back in July we reported that the Financial Conduct Authority was consulting the industry with a view to extending the deadlines for each of the following things from 9 December to 31 March.

• The date by which firms ought to have assessed the fitness and propriety of their certified staff.
• The date on which the conduct rules come into force for staff members who are not senior managers or certified persons.
• The date by which relevant employees must have been trained to know about the conduct rules.
• The deadline for the submission of information about directory persons.

Last month the FCA published two user guides, both relating to the publicatino of directory persons data. The FCA has published a series of user guides over recent months that relate to how firms can input and amend data in the new FCA directory. Added to this is a further guide to help firms complete annual data attestations to confirm that the data kept in the FS Register that pertains to them is complete and correct. They ought to complete this attestation every 12 months.

The policy statement of 28th October which says this confirms the FCA's intention to extend the deadline. It confirms the FCA's view that the majority of firms are able to meet the deadline of 9 December with only firms that are severely affected by the Coronavirus seeking to make use of the extension.

The message is that if firms can meet the deadline, they should.

The user guides come with stern words from the FCA, which says that firms that do not keep up-to-date records of directory persons could be disobeying its rules and enforcement action could be around the corner. Yet the directory will be incomplete when it is opened to the public as the deadline for firms to certify staff has been extended until 31 March, so HNW consumers may not see the whole picture until that date.

Financial crime – a horror story

On 21 October the FCA slapped a final notice on Goldman Sachs for its three bond transactions for 1Malaysia Development Berhad – the scandal and the details of the FCA's objections are covered here.

The main lesson for firms to draw from this – once they have asked themselves the question "did they really do that?" – is to realise that it is a fatal mistake not to follow up 'red flags' and to rely for evidence on people who are too close to the trades and who lack independence. It is also a bad idea not to explain these occurrences to the internal committees that are responsible for reviewing things and to fail to keep the evidence. This tale of financial-crime-related non-compliance is a veritable horror story.

Market conduct and short selling

Again, details of the fine of £873,118 that the FCA levied on Asia Research and Capital Management Ltd, based in Hong Kong, in a decision notice on 14 October can be found here. The firm failed to tell the FCA and the public about its net short position in Premier Oil plc between February 2017 and July 2019. This is the FCA's first short-selling fine. The FCA says that ARCM relied on third-party materials and did not conduct any further checks – a surprising oversight for a specialist credit and energy hedge fund manager. Such managers are not normally guilty of such sloppiness.

Governance and compliance standards – a consultative exercise.

On 19 October HM Government made it clear that it wants a post-Brexit regulatory set-up to be based on one coherent source of regulatory requirements for firms – the regulators' rulebooks. It watched the UK's regulatory set-up develop under detailed European Union regulatory standards up to 2015 and beyond; now it wants to delegate responsibility for this to the financial service regulators, as was the case back in 2000. It wants a more flexible, responsible and accountable regulatory set-up. A new external, independent "scrutiny function" is proposed.

Telltales and tipsters

The FCA has opened two new websites to help informants with stories to tell about bad behaviour. They outline the processes through which such people ought to speak to the FCA. They provide information on the legal protection available to 'narks' and also provide case studies regarding mis-selling, anti-money-laundering (AML) checks and the reportable misconduct of senior managers.

The FCA, once again, has taken the occasion to tell stool pigeons that it thinks that they are important. The short case studies show that if anybody at a financial institution were to point the finger, the result would at the very least be to shine a light on the systems that the firm employs for handling tips.

SYSC 18.3.1 requires every firm to make a report to its governing body about the operation and effectiveness of its disclosure arrangements. Every firm ought to do this.

* Jonathan Wilson can be reached on +44 (0)20 3146 1869 or at jon@elliswilson.co.uk