As we all start to get used to the Spring sunshine, we see the FCA adjusting its approach in light of the Government’s push for growth. This will make 2025 a very interesting year from a Supervision and Enforcement perspective – we already know that there are fewer Skilled Person Reviews than in 2023/4 (which was a bumper year), but there remains a clear focus on financial crime, controls and risk management frameworks, plus conduct of business. We have guided a number of firms through to a successful s166 outcome, so do contact Caroline Hunter-Yeats or Tom Makin if our experience may be of assistance.
What’s coming up?
Since our last webinar on Russia sanctions litigation in October 2024, there have been significant developments. Firms continue to face risks from litigation initiated by Russian sanctioned entities in Russian courts. In our second webinar, co-hosted with Alrud law firm, we will discuss recent trends in Russia sanctions litigation, including joint liability of group companies with a Russian subsidiary, developments concerning western parties seeking anti-suit relief outside of Russia, trends in the enforcement of Russian judgments, and practical implications for sanctions compliance. Click here to register your place.
Enforcement Transparency proposals
The FCA has published a letter to the Treasury Select Committee, which, in addition to detailing the “significant” improvements the FCA has made in terms of the pace of its investigations, outlines the next steps on its approach to transparency of enforcement investigations, confirming that:
- The FCA will not take forward its proposal to shift from an exceptional circumstances test to a public interest test for proactively announcing investigations into regulated firms, given the considerable concerns it received in relation to this proposal. We feel confident in saying that this will come as a relief to the industry
- The FCA will take forward proposals in relation to: (i) reactively confirming investigations already in the public domain, (ii) issuing public notifications which focus on the potentially unlawful activities of firms operating outside the regulatory perimeter, and (iii) publishing greater detail of issues under investigation on an anonymous basis (i.e. an Enforcement Watch or similar publication).
- The final policy will be published by the end of June this year.
For more information, please speak to Emma Sutcliffe (Partner) or Tom Makin (Managing Associate).
Conflicts – Private funds
The latest podcast in our series on contentious themes and trends in the asset management sector looks at conflict management in the private funds context. Conflict management has become a more prominent topic in a private fund context with the rise of GP-led transactions (in which conflicts are inherent). It is also a current hot topic for the FCA, and we explore the issues arising from its recent asset management alternatives portfolio letter, its review of private market valuation practices published last week as well as potential conflict issues for private funds more generally. Listen to our podcast here.
European Court of Justice rules on asymmetric clauses
The ECJ has considered the validity of an asymmetric jurisdiction clause for the first time and held that they can be valid. However, they must designate with sufficient precision the jurisdictions within the Brussels Recast Regulation or Lugano Convention which the party with freedom of jurisdiction may select and identify objective factors which will enable a court seised to know whether it has jurisdiction. The decision does not address the validity of asymmetric clauses in favour of the English courts, but the risk of these being held to be invalid in EU Member State courts must be increased, given that the UK is not covered by the Regulation or the Convention. Read more here.
Enforcement
FCA Final Notice – Arian Financial LLP: The FCA has issued a Final Notice against Arian Financial LLP, imposing a fine of more than £250K for failing to implement adequate systems and controls against financial crime. This enforcement action underscores the critical importance of robust risk management systems. This one will be of particular interest to MLROs (SMF 17s) and those holding prescribed responsibility (d) for financial crime.
FCA – Criminal charges including fraud: The FCA has charged Mr John Dance (SMF 27 and SMF 16) with nine criminal offences, including fraud and money laundering, related to his role at WealthTek LLP. This highlights the FCA’s increasingly rigorous approach to tackling financial misconduct and protecting customer interests. Mr Dance allegedly misappropriated £64 million from client accounts to fund personal ventures, including horseracing and property investments. Mr Dance was granted conditional bail and will next appear at Newcastle Crown Court. The FCA also published this relating to Mrs Lisa Campbell, also charged with multiple criminal offences including fraud by abuse of position and providing false / misleading information to the FCA to conceal her wrongdoing.
Court of Appeal – Mr Markou: In a recent Court of Appeal decision, the FCA successfully appealed the Upper Tribunal's ruling concerning Mr Markos Markou, a director and chief executive of a mortgage broker firm (see SMCR+ View - May 2023 for more background on the UT’s decision). The Court upheld the FCA's decision to ban Mr Markou from financial services and imposed a reduced fine of £10,000 (originally £25,000). The Court upheld the ban because Mr Markou was considered to be reckless, and his recklessness demonstrated his lack of integrity thus justifying the FCA’s prohibition order.
FCA Final Notice – Infinox Capital Limited: Infinox has been fined £99,200 by the FCA for failing to submit 46,053 transaction reports which risked market abuse going undetected. This is the first fine for transaction reporting failures under MiFIR.
FCA Final Notice – Mako Financial Markets Partnership LLP: The FCA has fined Mako £1,662,700 for failing to maintain effective systems and controls to prevent financial crime and for not adequately applying existing policies and procedures, breaching FCA Principles 2 and Principle 3. This case concludes the FCA's investigations into cum-ex trading, with fines totalling over £30m. Between December 2013 and November 2015, Mako executed over-the-counter equity trades worth approximately £68.6bn in Danish equities and £23.6bn in Belgian equities on behalf of Solo Group clients, earning £1.45m in commissions. The circular nature of these trades suggested financial crime, aimed at arranging withholding tax reclaims in Denmark and Belgium. Mako also failed to identify red flags in other transactions related to the Solo Group, resulting in a €2m loss for the Solo Group’s controller and increased money laundering risks. Mako's failure to spot these issues made it vulnerable to financial crime. This was the eighth enforcement case brought by the FCA and concludes its investigations into cum-ex trading.
Following an investigation by the Competition and Markets Authority, 4 banks have agreed to pay fines for specific instances in which traders shared competitively sensitive information about aspects of the pricing of UK bonds. Individual traders at each of the banks took part in private one-to-one Bloomberg chatrooms in which they shared sensitive information relating to buying and selling gilts on specific dates. The banks, Citi, HSBC, Morgan Stanley and Royal Bank of Canada will pay fines totalling over £100 million – Deutsche Bank has immunity for reporting its conduct which began in 2009 and ended in 2013.
If you have any questions on any of the FCA enforcement actions, please reach out to Emma Sutcliffe (Partner) or Tom Makin (Managing Associate) or to Duncan Green (Managing Associate) in relation to the CMA fines.
In the courts
Several decisions have caught our eye over the last few weeks.
The Supreme Court gave permission to appeal in the motor finance commission cases at the end of last year. In a fresh round of decisions which will impact the shape of the appeal hearing itself it has refused applications by the Treasury and The Finance & Leasing Association to intervene in the case whilst granting permission to intervene to the FCA. The FCA has published its proposed summary grounds of intervention. It suggests that it can assist the court in relation to (i) the proper approach to the interpretation of its rules and related legislation; (ii) the interaction between private law remedies and the regulatory framework; and (iii) the broader context of the motor finance and related consumer markets. The hearing has been listed for 1 April.
In El-Husseiny and another v Invest Bank PSC, the Supreme Court was asked to examine the construction of section 423 of the Insolvency Act 1986. This provides remedies to creditors where a debtor takes steps to defeat or prejudice their claims by entering into a transaction on terms that mean the debtor receives no consideration in return or a consideration worth less than that which the debtor has provided. The issue was whether the section was confined to a dealing with an asset owned by the debtor or whether it extended to the type of transaction in this case – namely where the debtor had caused a company owned by him to transfer a valuable asset for no consideration or at an undervalue thereby reducing the value of his shares. The court found a ‘straightforward’ reading of section 423(1) showed that a transaction such as the one in this case was caught and that the creditor was therefore entitled to a remedy under it.
Still with the Supreme Court, a UK-based securities trader, Joseph El-Khouri, accused of insider dealing by the US, has avoided extradition. The Court had to examine Section 137 of the Extradition Act 2003 which determines whether a person’s conduct constitutes an extradition offence. The double criminality rule requires that the conduct alleged in the extradition request constitute a crime under the law of both the requesting and the requested state. The section gives effect to the double criminality rule by way of separate tests depending on whether the conduct occurs in the requesting state’s territory (section 137(3)) or outside the requesting state’s territory (section 137(4)). The court noted that given this binary distinction, the two sections are clearly intended to be mutually exclusive categories. It is necessary to allocate each case to one or the other. In the lower courts it had been assumed that section 137(3) applied. The test for this section requires transposing all the acts done in the territory of the requesting state to the United Kingdom and considering whether, in that situation, there would be an offence under domestic law. However, the interpretation of section 137(3) as extending to conduct that occurs outside the requesting state’s territory so long as its intended effects are felt within the territory was mistaken. As all of the relevant acts occurred outside the US the case fell within section 137(4). The double criminality test for this section requires the assumption to be made that the conduct occurring in the United Kingdom (and therefore outside the territory of the United States) occurred in the United States (and therefore outside the United Kingdom). On this basis no offence had been committed in the United Kingdom and the double criminality rule was not satisfied. This was so despite acknowledgement that if the alleged conduct were proved at a trial it could amount to an offence of insider dealing in the United Kingdom. El-Khouri v Government of the United States of America [2025] UKSC 3.
The Competition Appeal Tribunal has handed down a judgment approving the £200m settlement of Merricks v Mastercard following the hearing on Wednesday 19 February. The funder Innsworth Capital’s objections that the figure agreed is too low and that a new class representative and lawyers should be appointed to continue the claim, was unsuccessful. Innsworth funded the claim to the tune of £45m and will receive £100m under the settlement, half of the total value.
Finally, in UniCredit Bank GmbH v RusChemAlliance LLC [2025] EWCA Civ 99 the Court of Appeal held that it has the power to vary or revoke a final anti-suit injunction at the request of the party who originally obtained it. Our article on the judgment is here.
Climate and Environmental Litigation and Regulatory Enforcement Tracker
Climate and environmental litigation is on the rise, increasingly affecting companies' financial performance and credit risk. Our Climate and Environmental Litigation and Regulatory Enforcement Tracker delivers regular updates and insights on global cases, helping teams stay informed. Available in both standard and customised versions, the tracker includes RAG ratings to highlight key cases and regulatory developments.
If you think you would benefit from receiving a demo, please get in touch with Robert Allen (Partner) and Frances Gourdie (Managing Associate).
Arbitration
The Arbitration Act 2025 has received Royal Assent and will come into force shortly. The Act includes a number of significant changes, the most important of which are summarised in our article here. In a further development, the Court of Appeal has held that an arbitral award against a state can be enforced in the UK. The decision is notable for its interpretation of the ICC rules.
Please contact Basil Woodd-Walker (Counsel), William Dunning (Supervising Associate) and David Bridge (Senior Knowledge Lawyer) for more information.
Competition class actions
Simmons & Simmons successfully defeated the first-ever competition class action to be brought in the UK. This was a £1.3 billion claim alleging abuse of dominant position and excessive pricing in respect of legacy landline telephone contracts. This is a really significant milestone in the competition class actions. This result means that Simmons is the only firm to have successfully defended a client in a full trial. The decision will be of particular relevance to any company which might be facing competition issues, either because of having a dominant position or because of involvement in alleged cartel activity.
You can find our article on the decision here.
Things you may have missed
APP scam reimbursement webinar with the PSR – The PSR has published a policy statement containing its new Compliance Monitoring Framework (PS25/2). We hosted a webinar with the PSR to discuss the publication and how it will apply in the context of APP scam reimbursement. As discussed in a thought piece published alongside the Monitoring Framework, the PSR announces that it is planning to make changes to its Process and Procedures Guide later in 2025. It will also be publishing a similar document to the Monitoring Framework relating to its enforcement work. To discuss further, please contact Doug Robinson (Partner).
Economic Crime and Corporate Transparency Act – Criminal law changes – We have produced a toolkit addressing both the change in corporate criminal liability to encompass the actions of “senior managers” and the introduction of a new Failure to Prevent Fraud offence under ECCTA. Organisations have until 01 September 2025 to put in place reasonable procedures to prevent fraud by associated persons for the benefit of the organisation or its customers, in order to avail themselves of the statutory defence should an employee, agent or subsidiary commit one of a broad range of fraud offences. The toolkit provides a risk assessment tool, guidance on risk assessment and reviewing existing controls, board briefings, a draft anti-fraud policy and training materials. It is available for clients to purchase as a whole or in modules and we are providing bespoke support to many FI clients as they prepare for the new offence to enter into force. For more information see here or speak to Camilla de Silva (Partner) or David Bridge (Senior Knowledge Lawyer).
Disputes and Investigations Predictions for 2025 – After another year of significant change in 2024, we look at what key developments to expect in 2025. Click here to view online.
Deferred prosecution agreements – Deferred Prosecution agreements (DPAs) were first introduced in the Crime and Courts Act a decade age. Our tracker provides a summary of the DPAs approved, rejected or known to be pending approval between the Serious Fraud Office or the Crown Prosecution Service, and corporate bodies who have been charged with economic offences. Our article on the recent decision High Court decision in relation to Guralp Systems which confirms that the SFO can apply to the court to deal with a breach of a DPA after the date upon which it was stated to come to an end is here. Please speak to Nick Benwell (Partner), Emily Agnoli (Partner) or David Bridge (Senior Knowledge Lawyer) for more information.
Contentious asset management podcast series – Our contentious asset management team is releasing a series of podcasts covering contentious trends in the asset management and investments funds sector. In this podcast from the series, Tom Bowen (Managing Associate), Camilla de Silva (Partner) and Adam Brown (Partner) consider fraud risk.
Beyond the headlines - the evolving global trade landscape under the new US administration – Our webinar series discussing the impact on international trade, the potential for regulatory divergence (competition, national security and sanctions, global law enforcement, ESG/D&I and the digital sector) and China relations. To watch on demand, please click here.
US Foreign Corrupt Practices Act – The US Foreign Corrupt Practices Act in its current version serves the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. The FCPA was enacted in 1977 and is part of a number of laws that were passed as a result of Nixon’s Watergate scandal. A new executive order issued by US President Donald Trump puts a hold on enforcement of the FCPA. In this article we examine the impact and potential consequences of the order. To discuss any of the issues raised by the article, please contact Dr Hans-Hermann Aldenhoff (Partner) or Dr Johannes Schröder (Associate).
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