Welcome to the latest edition of Corporate Update, our fortnightly bulletin offering a two-minute read of the latest developments which we consider relevant to corporate counsel. Please get in touch with your usual contact if you want to explore any of the topics covered in more detail. If you would like to subscribe to this bulletin as a regular email, please click here.
In this issue
NEWS
Government introduces new corporate offence of failure to prevent fraud
On 11 April 2023, the Home Office announced that it will put forward the long-trailed amendment to the Economic Crime and Transparency Bill (the ECCT Bill) to create a new corporate criminal offence for failure by an organisation to prevent fraud or false accounting offences committed by their 'associates'. As drafted, the definition of associates include employees, agents or subsidiaries or any other person who performs services for, or on behalf of, that organisation. However, the offence will not introduce personal liability for directors and senior managers for failure to prevent fraud. The proposed new offence follows the Law Commission’s 2022 Options Paper on Corporate Criminal Liability on options for reform of the law relating to corporate criminal liability, including an expansion of existing ‘failure to prevent’ corporate offences relating to bribery and tax evasion to encompass fraud.
The offence would only apply to “large” bodies corporate and partnership (that is, those which meet two of the following three criteria: turnover exceeding £36 million, total assets of more than £18 million, and more than 250 employees in the financial year preceding the year in which the offence is committed). An organisation within scope will be strictly liable where an associate commits a specified fraud or false accounting offence under UK law with intent to benefit the organisation or another person to whom they provide services on the organisation’s behalf. It is a defence for the organisation to prove that it had in place reasonable fraud prevention procedures at the relevant time. The government will publish guidance on the nature of reasonable procedures to prevent fraud before the new offence comes into force.
As a next step, the House of Lords will consider the proposed new offence along with other amendments to the ECCT Bill at the Committee stage (which resumed on 18 April 2023).
Government launches call for evidence as part of investment research review
On 3 April 2023, HM Treasury published ‘Call for Evidence: Investment Research Review’ to inform the independent review of investment research announced by Chancellor Jeremy Hunt as part of the Edinburgh Reforms in December 2022. The Review will focus on two key objectives:
- assessing the link between levels of investment research and the attractiveness of the UK as a destination for companies to list; and
- evaluating options for improving the UK market for investment research and making appropriate recommendations for actions to be taken by the government, regulators, and the financial services industry.
The Review will also gather information on the amount, quality, and type of investment research available in the UK by setting out a non-exhaustive list of questions for respondents to consider.
The call for evidence will be open until 24 April 2023, after which the Review will have discussions with interested parties from all market sectors to explore any further issues and then report back to the government by mid-June 2023.
Companies House publishes revised guidance to reflect changes to the MLR 2017
On 1 April 2023, Companies House has published an updated version of its Guidance: Report a discrepancy about a beneficial owner on the PSC register. The Guidance has been updated to reflect changes to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) made by the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, which now includes a new definition of ‘material discrepancy’. From 1 April 2023 in the updated Guidance, an obliged entity must only report a material discrepancy if it can reasonably be linked to one or more of money laundering, terrorist financing, or concealing details of the customer’s business
These material discrepancies must also be reported throughout the business relationship, rather than just at the start. They also extend to discrepancies regarding information on the register of overseas entities from the same date.
Wolfsberg Group publishes updated anti-bribery and corruption guidance
On 17 April 2023, the Wolfsberg Group published its updated Guidance: Anti-Bribery and Corruption Compliance Programme and accompanying executive summary. The Guidance replaces the 2017 version and advises the financial services industry on how to develop, implement, and maintain an effective anti-bribery and corruption compliance programme.
The Guidance has been amended to reflect enforcement actions since 2017, with the Wolfsberg Group (i) updating the red flags section (examples include but are not limited to no obvious added commercial value added by the person or entity of) and (ii) expanding the section on customer-related transaction risks. The Guidance also includes a new section on identifying, reporting and mitigating emerging bribery and corruption risks and has been aligned to current and evolving legal regulatory expectations, while providing additional guidance in relation to post-acquisition due diligence.
LEGISLATION
Draft order supplementing CJA 1993 on insider dealing published
On 17 April 2023, the draft Insider Dealing (Securities and Regulated Markets) Order 2023 (2023 Order) was published, supplementing the Criminal Justice Act 1993 (CJA 1993).
As it currently stands, the list of securities within scope of the CJA 1993 is narrower than the list of securities covered by the civil insider dealing offences in UK Market Abuse Regulation. The 2023 Order therefore introduces certain changes, the effect of which is to align the securities and markets on which the criminal offence of insider dealing can be committed under CJA 1993 with those to which UK MAR applies. The 2023 Order will enter into force 21 days after the day on which it is made.
