April marks the fourth anniversary of a new financial regulation
landscape in the UK. The Financial Conduct Authority blazed on to the
scene in 2013 with a promise that there would be ‘nowhere to hide’ for
financial services firms and individuals who misbehaved.
Four years on, however, some solicitors representing small business
owners and punch-drunk shareholders are questioning whether anything
really changed with the arrival of the new City watchdog.
ABFA a gumless Jelly fish
As head of commercial litigation at complex disputes specialists
Stewarts Law, Clive Zietman acted for RBS shareholders in relation to
losses sustained in its April 2008 rights issue.
He told the Gazette: ‘If there was another financial crisis
you would find a lot of the banks had [again] invested in products where
they didn’t understand the underlying risk. You would be naive to think
that it has all been cleaned up. I just don’t buy that.’
The leaden pace of redress for consumers ill-served by the sector has
continued to grate. Predecessor watchdog the Financial Services
Authority was criticised for its tardy handling of the payment
protection insurance scandal, for example, not least because it gave
birth to a vast claims management industry. It was also lambasted for
repeated delays in the publication of its report into the collapse of
banking group HBOS, as well as its handling of interest rate swaps
mis-selling.
Alison Loveday, chief executive of Manchester-based Berg Solicitors,
is acting for a number of small business clients who allegedly suffered
at the hands of RBS’s controversial (and now defunct) restructuring
unit. A 2013 report by Lawrence Tomlinson, former adviser to the then
business secretary Vince Cable, alleged that the bank wrecked small
businesses in pursuit of profit. The state-controlled bank has admitted
it ‘could have done better’, but has rejected allegations it tried to
profit from distress situations.
She says: ‘We were hoping that the FCA would really take hold of the
[Global Restructuring Group (GRG)] dispute. Tomlinson clearly showed
that something had been going on for years, but we still haven’t seen
the regulator’s own report and I don’t think that puts the regulator in a
good place.’
Loveday is not the only one frustrated by how long it takes the FCA
to produce reviews into wrongdoing. Andrew Tyrie, chair of the Commons
Treasury Select Committee, has written more than once to FCA chief
executive Andrew Bailey asking for the GRG report to be published.
Meanwhile, the Treasury committee published its own report last month
into what it sees as a major cause for the frequent delays – the
so-called ‘Maxwellisation’ process, by which anyone criticised in a
report is allowed time to challenge it before publication.
The review, carried out by Andrew Green QC and barristers from
Blackstone Chambers, called for a fundamental overhaul of the practice.
Tyrie said: ‘The principle that those criticised in public reports
should have an opportunity to respond is sound. Nonetheless, there is a
balance to be struck to ensure fairness, both to those who may have been
subject to potential wrongdoing or malpractice, and to those subject to
criticism in reports.’
The review concluded that the representation process has not only
been overused, but also used for inquiries other than those conducted
under the Inquiries Act 2005 (rules 13 to 15). It proposes a list of
guidelines for chairs of inquiries not covered by this act, with the aim
of reducing the length of time it takes for reports to be published.
The report also calls on the government to revoke rules 13 to 15 as
soon as possible; David Cameron’s administration agreed to look at this
in July 2015, but nothing has happened since.
Publication delays can indeed be lengthy. The FSA’s report into the
failure of HBOS took seven years from inception to publication, while
the FCA’s report into RBS’s restructuring group began three years ago.
Loveday cannot be sure the GRG report does not contain material
relevant to her own clients’ cases. She explains: ‘We don’t know what
the report says and we are being told by the bank’s solicitors that it
is not relevant. But how do we know until we see it?’
Continue reading: https://www.lawgazette.co.uk/law/financial-regulation-city-police/5059488.article
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