Having had their summers ruined by volatile markets, risk managers’ working lives deteriorated even further this month following the latest induction to the rogue traders’ Hall of Fame. While few concrete details have yet entered the public domain it appears that Kweku Adoboli may have actually hinted at his worsening predicament on Facebook up to a week in advance.

Investment firms now face the thorny dilemma of whether to ban social networking by staff or to perhaps embrace it within their compliance monitoring and risk management procedures! On a serious note, many firms will or should have been diligently stress testing their anti-fraud and risk management controls with the scenario of a 31 year old building-up billions of dollars of exposure while he is meant to be hedging.

So with all the economic anxiety and the man in the street now asking the legitimate question of how a single staff member can wipe out a global company\’s entire quarter\’s profits (equivalent to the savings meant to accrue from the loss of 3,500 jobs), it is perhaps partially understandable that Hector Sants, FSA chief executive, said in June 2011 that trust in the financial sector is at an all time low. However, not all members of a sector deserve to be tarred by the same brush. For instance, it is likely that only a miniscule minority of journalists hacked mobile phones, but the resulting implications are always felt by an entire group. Such is the way of law and regulation, that new rules are introduced to curb the past excesses of the few while the entire sector and ultimately its consumers meet the added cost of doing business.

The other financial story of the summer has been the dramatic impact on the markets of the Eurozone debt crisis. With politicians lurching from one inconclusive solution to the next, it was only matter of time before that great anachronistic spectre of capital markets – the short selling ban – was wheeled out. ESMA did a reasonably good job of publicising the matter promptly but failed miserably at persuading the EU’s regulators to act in unison in relation to short selling, which ideally would have been not to introduce any prohibitions.

And so onto this edition and our pervasive theme of coping with regulatory change. On that, we have updated our Regulatory Timeline first published in January.

The EU will have made progress over the summer in negotiating the final draft of the Short Selling Regulation and European Markets Infrastructure Regulation. We will cover these in subsequent publications. As we report below, ESMA has conducted its consultations on the “Level 2” detail of AIFMD and we await its advice to the Commission in November. Upcoming changes to FSA rules are discussed in our articles on voice recording and client money and assets. We use the opportunity of the FSA’s themed work and related enforcement associated with the promotion – or mis-promotion of regulated funds – to recap on the fundamentals of to whom hedge and private equity funds may be marketed to in the UK.

The Weavering judgement and Visser enforcement case afford a valuable opportunity to discuss corporate governance from first principles. And as usual, we discuss a number of developments in the world of financial crime before concluding with our enforcement round-up. The FSA certainly appears to be going out with a bang in terms of the volume of enforcement cases. This is one last hurrah that authorised firms would not wish to feature in.

IMS was founded as a compliance consultancy focusing on the wholesale sector. From the outset IMS has invested a great deal of time and effort training and educating clients on FSA compliance and regulatory reporting

IMS was founded as a compliance consultancy focusing on the wholesale sector. From the outset IMS has invested a great deal of time and effort training and educating clients on compliance FSA compliance and regulatory reporting. http://www.theimsgroup.co.uk/regulation-and-compliance.html

Author Bio: IMS was founded as a compliance consultancy focusing on the wholesale sector. From the outset IMS has invested a great deal of time and effort training and educating clients on FSA compliance and regulatory reporting

Category: Finances
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