Payment Systems Regulator
Pre-paid Cards Market Cartel – PSR issues Statement of Objections – 31 March 2021
The Payment Systems Regulator (PSR) has issued a Statement of Objections alleging that Mastercard, allpay, APS, PFS and Sulion engaged in anti-competitive behaviour by agreeing not to compete or poach each other’s public sector clients.
The statement represents the PSR’s provisional findings in a case which relates to pre-paid cards used by local authorities in England, Scotland and Wales to distribute welfare payments, with Mastercard, allpay and PFS having admitted in February 2021 that they took part in the alleged anti-competitive arrangements.
The PSR alleges two infringements of the Competition Act 1998, both of which took the form of coordinated commercial behaviour resulting in market sharing and customer allocation:
- the first infringement lasted six years, between 2012 and 2018, and involved all five parties agreeing not to target or poach each other’s public sector customers that were part of a network sponsored by Mastercard; and
- the second infringement lasted two years, between 2014 and 2016, and involved APS and PFS having arranged not to target each other’s public sector customers when a contract was up for renewal, including through public tender.
The parties will now have an opportunity to make representations on the PSR’s provisional findings.
PSR press release
Financial Conduct Authority
FCA Decision Notice – Non-financial misconduct – 29 March 2021
The FCA has published a decision notice dated 1 October 2020 in respect of Jon Frensham, an independent financial adviser and the sole director at Frensham Wealth Limited.
The FCA considers that Mr Frensham is not a fit and proper person and has decided to withdraw his approval to perform his current senior management functions and to make an order prohibiting him from performing any functions in relation to a regulated activity. In March 2017, Mr Frensham was convicted of attempting to meet a child following sexual grooming. He committed this offence whilst he was an approved person. Mr Frensham was sentenced to 22 months’ imprisonment, suspended for 18 months.
Mr Frensham has referred the Decision Notice to the Upper Tribunal (the Tribunal) where he and the FCA will each present their cases. The Tribunal will then determine what, if any, is the appropriate action for the FCA to take, and will remit the matter to the FCA with such direction as the Tribunal considers appropriate for giving effect to its determination. Accordingly, the action outlined in the Decision Notice is provisional and will have no effect pending the determination of the case by the Tribunal.
Decision Notice
Press release
Competition Markets Authority
SME Banking Undertakings 2002 – CMA publishes letter to Danske Bank – 30 March 2021
The Competition and Markets Authority (CMA) has published a letter to Danske Bank in relation to its breach of the Small and Medium-sized Enterprises (SME) Banking Undertakings 2002.
In 2002, Danske Bank had undertaken not to require, agree or threaten to require that customers open or maintain a business current account (BCA) with it as a condition of receiving, servicing or maintaining a loan; a process known as ‘bundling’.
On 4 May 2020 Danske Bank started to provide loans under the Government’s Bounce Back Loan Scheme (the Scheme) which was designed to enable smaller businesses to access finance more quickly during the COVID-19 pandemic. Danske Bank required 305 of its SME customers (which were operating their business finances through a personal current account with Danske Bank) to open a BCA in order to progress their application for a loan under the Scheme. The CMA found that:
- these SMEs opened BCAs with Danske Bank which they may not have wanted or needed in order to obtain finance during a critical time; and
- Danske Bank has been applying charges and fees to the BCAs.
The CMA considered that this breach is likely to have inflicted financial harm on these customers. Danske Bank agreed to end the breach and mitigate its impact by taking various actions (found in its Action Plan).
Given the positive engagement with Danske Bank and the nature and scale of the actions it has proposed and taken, the CMA does not consider it necessary to take formal enforcement action at this time. However, the CMA will monitor this issue closely and reserves the right to take formal enforcement action should Danske Bank fail to adhere to its Action Plan.
Letter from CMA to Danske Bank
Action Plan
Webpage
European Securities and Markets Authority
Conflicts of interest failures under the Credit Rating Agencies Regulation – ESMA fines CRA – 30 March 2021
The European Securities Markets Authority (ESMA) has fined five entities in the Moody’s Group — based in France, Germany, Italy, Spain and the United Kingdom — a total of €3,703,000 and issued public notices for breaches of the Credit Ratings Agencies Regulation (1060/2009) (CRAR) regarding independence and the avoidance of shareholder conflicts of interest. The breaches related to:
- the issuance of credit ratings (ratings) in violation of the ban on issuing new ratings on entities where a credit rating agency (CRA) shareholder exceeds the 10% ownership threshold and/or is a board member of the rated entity;
- failure to disclose conflicts of interests relating to the 5% ownership threshold; and
- inadequate internal policies and procedures to manage shareholder conflicts of interest.
Public Notice
Press release
Recent Cases
Financial Conduct Authority v 24HR Trading Academy Limited and another [2021] EWHC 648 – 25 March 2021
The FCA has published a press release announcing that the High Court has delivered a summary judgment in proceedings commenced by the FCA against 24HR Trading Academy Limited (24HR Trading) and its sole director, Mohammed Fuaath Haja Maideen Maricar (Maricar).
The court found that 24HR Trading and Maricar had breached the general prohibition in section 19 of the Financial Services and Markets Act 2000 (FSMA). The court found that 24HR Trading unlawfully provided trading “signals” to consumers for a fee. The trading signals were sent via WhatsApp and contained recommendations about contracts for difference (CFDs) relating to currencies and commodities. The court found that these signals amounted to unlawful investment advice.
24HR Trading also encouraged consumers to open trading accounts with ‘partner brokers’ to place CFD trades. Maricar received sign-up and other commissions for this. The High Court ruled that this constituted financial promotion without FCA authorisation.
The High Court has ordered restitution payments of £530,695 plus interest.
FCA press release
R (Donegan and others) v Financial Services Compensation Scheme Ltd [2021] EWHC 760 (Admin) – 29 March 2021
In this claim for judicial review, the claimants challenged a decision announced by the Financial Services Compensation Scheme (FSCS) stating that it would not pay compensation to a category of investors who had suffered losses arising from the collapse of London Capital & Finance plc (LC&F).
The claimants were investors who purchased securitised bonds from LC&F. The FSCS came to its decision on the basis that the sale of the bonds did not fall within any regulated activity because the bonds were said not to be transferable securities, in particular because the bond documentation contained clauses stating that they could not be transferred. The claimants argued that: (i) as a matter of law, the bonds were transferable securities; and/or (ii) that LC&F in any event engaged in the regulated activity of agreeing to deal in transferable securities even if the bonds themselves were not transferable.
Mr Justice Bourne found that the bonds were not transferable securities as they were subject to express terms prohibiting their transfer and were for that reason not negotiable on the capital market. The claimants had also argued that the non-transfer terms were unfair terms for the purposes of the Consumer Rights Act 2015 and were therefore not binding; in the absence of binding non-transfer terms the bonds were transferable securities. Mr Justice Bourne found that an order disapplying the non-transfer provisions would not turn the bonds into transferable securities for regulatory purposes.
Mr Justice Bourne further found that if the bonds were not and did not become transferable securities, then the agreements to subscribe were not agreements in respect of transferable securities.
The claim was therefore dismissed.
Judgement
