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Summary Of Miscreants In the Global Wealth Management Industry

Tom Burroughes, Group Editor , 30 April 2014


Here is the latest updated list of firms that have fallen afoul of global financial regulators.

The “naughty corner” for miscreant banks and other wealth management institutions is getting crowded and also highlights why compliance is such a major spending and recruitment issue for firms these days. Charges of interbank rate fixing, lax anti-money laundering controls and questionable pricing policies have been levelled - and in some cases punished heavily.

Some of the failings that have been punished, such as Barclays’ misbehaviour over the interbank interest rate rigging affair, go back several years and as of the time of writing, firms have moved, or say they have done so, to clean up their act. Some firms making the headlines recently, most obviously HSBC (anti-money laundering) and Barclays (LIBOR rigging) are aware of the work they must embark upon to improve their reputation. These firms must engage as openly as they can with clients (and for that matter, constructive critics such as this publication). In the case of Barclays, for example, it has recruited top talent such as former UK Financial Services Authority chief executive Hector Sants to head up its efforts to improve compliance. Other banks have added to risk management teams in recent months, and no doubt will continue to do so.

By way of a guide to some of the problems that have hit these firms, here is a summary of the main institutions. Not all of the cases mentioned are complete and could be subject to further action. The summary here is in no way a comment by this publication as to the specific responsibility of the firms concerned.

We also invite readers who want to comment on what is being done to improve compliance to share their thoughts with us at this publication, and they can email the editor at tom.burroughes@wealthbriefing.com

We urge readers to view Compliance Matters, a new publication from the publisher of this website. To register, click here.

Invesco Perpetual
The Financial Conduct Authority in the UK fined Invesco Perpetual £18.6 million ($31.3 million) for exposing investors to greater levels of risk than they had been led to expect. Between May 2008 and November 2012, Invesco Perpetual did not comply with investment limits designed to protect consumers by minimising their exposure to risk. The FCA said that the rules designed to limit the risks to investors were broken on 33 occasions across 15 funds, resulting in losses of £5 million.

Standard Chartered
The Monetary Authority of Singapore took "appropriate supervisory actions" against the bank following it was found that bank statements of some private banking clients had been stolen. The issue pertained to a report by Standard Chartered in December 2013 that around 560 of its private banking clients' February bank statements had been stolen at its third-party service provider, Fuji Xerox Singapore. Fuji Xerox had been the designated printer of the bank's statements for private banking customers. The police alerted Standard Chartered of the theft.

Standard Bank
The Financial Conduct Authority fined the UK subsidiary of South Africa's Standard Bank Group £7.6 million ($12.6 million) for failings relating to its anti-money laundering policies and procedures over corporate customers connected to politically exposed persons. The FCA said Standard Bank had failed to take reasonable care to ensure that all aspects of its anti-money laundering policies were applied appropriately and consistently to its corporate customers connected to PEPs between 15 December 2007 and 20 July 2011.

Royal Bank of Scotland
The US Department of the Treasury’s Office of Foreign Assets Control announced a $33 million agreement - as part of a combined $100 million settlement - with the Royal Bank of Scotland to settle the UK-listed firm’s potential liability for violations of US sanctions regulations. The settlement resolved OFAC’s investigation into apparent violations by RBS of US sanctions programs relating to Iran, Sudan, Burma and Cuba. From 2005 to 2009, RBS engaged in payment practices that interfered with the implementation of US economic sanctions by financial institutions in the U.

Lloyds Banking Group
The UK bank was fined a record £28 million ($45.8 million) by the Financial Conduct Authority for "serious failings" relating to its sales incentives, which resulted in a culture of mis-selling among advisors. The FCA said it was the largest ever fine imposed by it or its predecessor the Financial Services Authority for retail conduct failings.

SAC Capital
The $15 billion hedge fund run by Steve Cohen, one of the biggest names in the global hedge fund business, will forfeit its investment advisory business and pay a total fine of $1.8 billion after pleading guilty to insider trading charges, the US Department of Justice has announced. The settlement brings to an end a seven-year-long investigation by US prosecutors and fuels months of speculation as regards whether Cohen might turn the remainder of his business into a family office-type structure

Rabobank, the Netherlands bank,agreed to pay more than $1 billion in criminal and civil penalties to settle investigations by US, UK and other regulatory authorities into its role in manipulating global benchmark interest rates. Rabobank’s chief executive, Piet Moerland, stepped down immediately after the announcement.

The settlement with Rabobank is the second largest agreement after the $1.5 billion penalty imposed on UBS related to the manipulation of benchmark rates, which help determine the borrowing costs for trillions of dollars of mortgages, business loans, credit cards and other financial products. As part of the settlement, Rabobank will avoid criminal charges as long as it continues to cooperate with investigators. The firm will pay a $325 million criminal penalty to the US Justice Department and $475 million to the Commodity Futures Trading Commission, as well as $170 million to the UK’s Financial Conduct Authority and about $96 million to the Dutch authorities.

A unit of the bank was ordered to pay $2.46 billion after a US court ruled that one of the bank’s subsidiary companies along with three of its senior executives had made false statements that inflated the company’s share price. The ruling was against credit card and mortgage lender Household International, acquired by London-based HSBC in March 2003. Household - now known as HSBC Finance Corp - is believed to have made misleading statements that inflated the company’s share price. When contacted by this publication, HSBC stated that the matter had been noted in its filing for some time and that this was the next legal step in “an eleven year case.”

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