Financial Markets Disputes View – June 2025

The much awaited update to the FCA’s Enforcement Guide has now been published and it gives some interesting insights into FCA enforcement plans – see below.

Also in this edition of Disputes View:

• FCA 5 year strategy – further evidence of a focus on financial crime
• The Supreme Court has re-examined the approach to loans secured over jointly owned property
• The Supreme Court has reinforced the breadth of a fiduciary’s duty to account
• Following the Post Office scandal, the Government is consulting on the use of Private Prosecutions
• An asset manager fined in Germany for greenwashing
• New DIFC Court rules
• The FCA continues to use skilled person reports, with financial crime the main focus, followed by control and risk management frameworks
• New SFO guidance for corporates
• Round up of recent enforcement activity and APP fraud cases

Thank you to everyone who joined our recent webinar, ESG Litigation and Regulatory Enforcement Trends. We appreciated your time and engagement, and we hope you found the session insightful. If you missed it - or would like to revisit any of the topics discussed - an on-demand version is now available to watch at your convenience.

Disputes are a common feature of many ventures, especially in the Data Centre industry which involves substantial financial stakes and complex contractual and engineering frameworks with numerous stakeholders. Avoiding and resolving these disputes necessitates deliberate and strategic risk management. Join us for an insightful webinar on 2 July 2025, where we will dive into the crucial topics of risk management and dispute resolution within Data Centres. Register here.

Finally, we are delighted to share the news that we have been shortlisted for a number of awards by The Lawyer for 2025 including, Litigation Team of the Year and Pro Bono Initiative of the Year. Also one of our new Disputes Partners, Ellie di Claudio has been nominated for Associate of the Year for her competition litigation work.

FCA Enforcement Guide

The headline grabbing element of this was the FCA’s climb down on its ‘name and shame’ proposals. What remains is the ability to publish in ‘exceptional circumstances’ continues, which will be supplemented by the ability of the FCA to:

• Announce where there is suspected unauthorised or criminal activity
• Reactively confirm an investigation
• Share information on an anonymous basis where it is desirable for education or to encourage compliance with FCA Rules.

Other points that caught our eye were:

• A focus on enforcement work reducing financial crime.
• The bar has been raised for opening an investigation resulting in more use of FCA supervisory powers
• No investigation opened in the last 2 years has been closed with no further action
• Various deletions have been made to the Guide to reflect steps that were no longer used; specifically the preliminary investigation report and private warnings
• The FCA has introduced a power to refuse the attendance of a legal representative where there are concerns their attendance may prejudice the investigation, e.g. if legal advisers are representing multiple parties
• FCA clarified its practice to accept disclosure on a limited waiver basis without reaching agreement how far privilege attaches to the report

The FCA’s new 5 year strategy – Financial crime focus

The FCA has clearly taken on board the Government’s growth agenda, and the FCA’s latest 5 year strategy document gives us some pointers as to what it means for Enforcement.

The FCA plans a streamlined portfolio of Enforcement cases, with the same number of outcomes but delivered faster. We already see members of the FCA Enforcement team joining Supervisory meetings with firms, suggesting that they will use a closer working relationship to enable them to select the cases that are likely to go all of the way to a Final Notice. The hope for firms is that this now gives them the opportunity to avoid an Enforcement investigation where the conduct is less obviously a Principle or Rule breach.

The fight against financial crime was a priority in the FCA’s last 5 year strategy and remains as the most obvious outward sign of its continuing commitment to enforcement. This is picked up in Therese Chambers’ recent speech on combatting market abuse, where the FCA set out its 3Ps (Predictable, Proportionate and Purposeful). Interestingly the CMA recently published its 4Ps, adding Pace and Process to the FCA’s Predictable and Proportionate. Time will tell if the omission of ‘pace’ reflects a nervousness about the FCA’s ability to investigate quicker over the long term.

We have recently been briefing clients on key risk management lessons from FCA financial crime Final Notices, setting out actionable insights on enhancing governance, refining polices and training, and improving data and management information. Please contact Caroline Hunter-Yeats (Partner) or Tom Makin (Managing Associate) if you would be interested in a similar discussion.

Taking security over jointly owned property

The Supreme Court has handed down its judgment in Waller-Edwards v One Savings Bank PLC [2025] UKSC 22. The court had been asked to re-examine the law concerning actions which a lender should take when lending money on the security of jointly owned property. While upholding the binary test laid down in the leading cases, the court decided that when there is more than a trivial risk of borrowing that will discharge the debts of one of the borrowers, and so might not be to the financial advantage of the other, then the transaction should be viewed from the perspective of the lender as a surety transaction and not a joint borrowing transaction. Our article examines the case and its implications in more detail.

Supreme Court: duty to account: asset management implications

In Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10, the Supreme Court was asked to change English law governing a fiduciary's duty to account to its principal for unauthorised profits arising from the fiduciary's position.

Specifically, the Supreme Court was asked to overturn House of Lords precedent in order to allow fiduciaries to raise counterfactual / causation type defences to claims for breach of the duty to account. Such counterfactual arguments might include that: (i) the profit would have been made regardless of the breach; (ii) the principal would have consented to retention of the profit (had consent been sought); and (iii) the principal could not have made the profit themselves.

The Supreme Court rejected the appeal and in so doing reinforced the breadth of a fiduciary's duty to account.

In this article we consider the decision and its relevance with particular reference to asset managers and investment funds.

To discuss further, please speak to Robert Turner (Partner), or Thomas Marsh (Managing Associate).

Enhancing oversight of private prosecutions in the UK

Private prosecutions have long been a part of the UK's criminal justice system, offering an alternative route to justice when public authorities are unable or unwilling to act. Limited data is published on private prosecutions but to give an idea of scale, figures for 2023 show that 26% of all prosecutions in the Magistrates Courts were brought by private prosecutors. However, recent controversies, notably the Post Office scandal and abuse by train operating companies, have highlighted significant flaws in the current system.

The Government’s is now consulting on reforms aimed at ensuring private prosecutors adhere to consistent standards and are held accountable. In this article we examine some of the implications.

If you would like to discuss any of the issues arising from this consultation, please speak to Alexandra Webster (Managing Associate).

Historically high ESG-fine in Germany for 'greenwashing'

The Public Prosecutor’s Office in Frankfurt has imposed a EUR 25m fine on an asset manager after accusing the company of greenwashing.

The fine is certainly one of the highest issued in Germany if not in Europe. The penalty can be seen as a wake-up call in the dawn of the laws implementing new EU regulation, including the Green Claims Directive and the Empowering Consumers Directive. Both contain rules that will influence advertising as well as the provision of information companies (from financial services firms to consumer products) will have to provide to their clients. The most important measure is transparency and correctness – both regulations aim to ensure customers are not misled.

You can read more in our article or contact Udo Pickartz (Counsel).

Future Proofing a 21st Century International Court System

In March 2025, His Highness Sheikh Mohammed bin Rashid al Maktoum issued Law No. 2 of 2025, containing a new set of rules for the operation of the DIFC Courts. This replaces DIFC Law No. 10 of 2004 and Law No. 12 of 2004. In many respects, the new law codifies and re-states existing practice in the Courts, but there are some new provisions which are likely to attract particular attention from users.

For example, Article 35(A) makes it a contempt of court to fail to comply with, or decline to act upon, a court order, alongside other acts such as “wilfully insulting a Judge...witness, expert...or lawyer...either before or during proceedings”, Article 24 provides the DIFC Courts with authority to appoint Assessors, Article 13 provides for the establishment of a “Mediation Centre” under the supervision of the President of the DIFC Court and several key changes to the jurisdiction of the DIFC Courts have also been introduced.

With the DIFC Courts already well positioned for individuals and businesses locally and internationally to resolve disputes effectively, with expertise brought in from an increasing range of common law / Commonwealth jurisdictions, this new Law seeks to embed the DIFC Courts as a prime forum for years to come.

In this article, our Middle East Dispute Resolution team consider the key changes, from a practical and strategic perspective.

If you would like more information, please reach out to David Kidman (Partner) or Ed Crosse (Partner).

Skilled persons reports

The publication of the FCA’s latest statistics on its use of section 166 skilled persons reports (Q4 2024) led us to wonder how they compared with earlier data. The FCA currently identifies twelve areas of expertise for skilled persons services, referred to as Lots. These have changed over time. A summary of the current list is here.

Our analysis of the period from 2017 to Q1 2024 makes it clear that the areas of most interest to the FCA over that period were financial crime (104 reports), control and risk management frameworks (102) reports and conduct of business (99 reports). Governance and accountability came in a fairly distant fourth place with 31 reports. The remaining 6 areas made up a combined total of just 37 reports between them.

The latest figures are conduct of business (3 reports) controls and risk management frameworks (2 reports) governance, accountability strategy and culture (1 report) and prudential – adequate financial resources for FCA solo-regulated firms (1 report). Nothing for financial crime this time but the Q3 figures listed 5 financial crime reports out of a total of 10 commissioned. The primary areas of interest therefore appear to us to be pretty constant. What is perhaps more interesting is the evolving nature of the Lots themselves. For example, governance and accountability now includes strategy and culture, client assets now includes safeguarding and the number of separate prudential Lots continues to increase.

If you would like to discuss further, please contact Caroline Hunter-Yeats (Partner).

To report or not to report – SFO publishes new guidance for corporates

Corporates that promptly self-report suspected criminal conduct and go on to demonstrate genuine cooperation with the SFO will be invited into DPA negotiations, unless exceptional circumstances apply.

On 24 April, the SFO published new final guidance on its expectations around corporate cooperation and the knock-on effects on enforcement in relation to corporate criminal offending. The guidance details the SFO's key considerations under the public interest stage of the test used by Crown prosecutors when deciding whether or not to invite a corporate into deferred prosecution agreement ("DPA") negotiations. The key benefit of an invitation is that a corporate may avoid prosecution should it agree to and meet certain requirements set out in the DPA (e.g. payment of fines and implementation of specified compliance programme enhancements).

The guidance signifies a renewed SFO commitment both to DPAs as a form of corporate criminal justice and to actively encouraging self-reporting as compared to the earlier 2019 guidance. It also provides corporates with some greater (and welcome) certainty around the DPA process generally as well as additional details on the behaviours the SFO expects from corporates hoping to be invited into the process. Our article considers key points from the guidance.

For more information, please contact Camilla de Silva (Partner) or Ben Boddington (Supervising Associate).

Enforcement

FCA – John Burford: The FCA has charged John Burford with carrying on an unauthorised business and dishonestly misleading investors. He is suspected of generating over £1m through the provision of daily trade alerts. The FCA alleges that he repeatedly misrepresented the money he had lost while trading.

PRA – George Jay Hambro: The PRA has fined George Hambro, a former notified non-executive director of Wyelands Bank Plc £72,000 for breaching PRA Individual Conduct Rule 2 (due skill, care and diligence) in relation to the recognition of capital, large exposures assessments, and Wyelands’ internal policy to manage potential risks of conflicts of interest. Separately the Financial Reporting Council fined PwC and partner Jonathan Hinchliffe for failings in their 2019 audit of Wyelands when it was part of the Gupta Family Group Alliance. PwC was fined £4.5m, discounted to £2.9m after agreeing to settle early, while Hinchliffe was fined £55,000, reduced to £33,500. PwC also paid the costs of the investigation.

FCA Final Notice – London Metal Exchange: The FCA has fined the London Metal Exchange over its handling of the nickel short squeeze that led it to cancel $12bn in trades three years ago. The LME was fined £9.2m for failing to ensure its systems and controls were adequate to manage the crisis. The FCA found that the LME’s systems and controls were not adequate to ensure orderly trading under conditions of severe market stress. In particular, the LME did not have adequate controls or policies relating to the operation of its automatic volatility controls, its ‘price bands’.

OFSI – Herbert Smith Freehills CIS LLP: OFSI has imposed a penalty of £465,000 against Herbert Smith Freehills CIS LLP (HSF Moscow) for breaching the Russia sanctions regulations. The penalty relates to six payments made by HSF Moscow with a collective value of £3,932,392.10 to designated persons subject to an asset freeze. OFSI.

In the courts

The last few weeks have seen 2 interesting cases arising out of authorised push payment (APP) frauds. In Santander UK PLC v CCP Graduate School Ltd Mrs Justice Eady had to consider whether, in circumstances where payments had been made into a bank account as a result of fraud, a tortious duty of retrieval could arise in relation to the receiving bank (Santander) when the paying party (the victim of the fraud) was not a customer of that bank. She held that there was no such duty in these circumstances. The identification in Philipp v Barclays Bank UK plc of an arguable duty of retrieval, owed by a bank to its own customer and arising out of the contractual relationship between them, did not provide a basis for the incremental development of an equivalent duty owed to a party with whom the bank had no contractual relationship.

In Hamblin & Anor v Moorwand Ltd & Anor the second respondent, RND held an account with the first respondent payment services provider, Moorwand and was allowed to operate an electronic wallet. Mr Justice Marcus Smith concluded that a lower court had erred in dismissing a claim brought by victims of a push payment fraud, seeking repayment of monies which they had been induced to pay to RND, held in the electronic wallet and which had been paid away by Moorwand on RND’s instruction. He held that Moorwand must restore the monies (just under £160,000). The judge had inter alia wrongly discounted a number of factors which meant that Moorwand was on inquiry for Quincecare purposes. Moorwand (being on inquiry) should never have debited the account without satisfying itself that the payment instructions were proper and not based on fraud. An exclusion clause in the terms and conditions between RND and Moorwand did not bite on a claim for reinstatement of the account. The judge expressed the hope that his judgment would not end up being a pyrrhic victory for the victims as the monies had to be restored to the account for the use of RND’s administrators.

Following the decision in February 2025 that revoked an anti-suit injunction (ASI) obtained against RusChemAlliance by UniCredit, at the bank's own request, three more German banks have sought to undo the protection they obtained from the English courts against breaches of an arbitration agreement. The decision in Bayerische Landesbank, Landesbanken Baden-Wurttemberg and Commerzbank AG v RusChemAlliance LLC further highlights the preliminary analysis needed to determine whether an ASI from the English courts will bring practical benefits. Where a party has assets within reach of the Russian courts and its Russian counterparty has little exposure to the UK, an English ASI may prove ineffective, given Russia's recent laws that enable its courts to take jurisdiction regardless of the parties' agreement and to grant a Russian ASI in support of that jurisdiction. Where a party has substantial assets within the English jurisdiction, however, and few assets in Russia which could be attached in retaliation, an English ASI may still prove an effective deterrent against breaches of arbitration agreements. For more information, read our article.

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Our contentious asset management team has released a series of podcasts covering contentious trends in the asset management and investments funds sector. Listen here.