Category: Regulation

Cyber Security Insurance: New Steps to Make UK World Centre
Global ComplianceRegulation

Cyber Security Insurance: New Steps to Make UK World Centre

The report, ‘UK cyber security: the role of insurance in managing and mitigating the risk’, has been produced in collaboration with the UK’s insurance market and a number of top UK companies. It aims to make the UK a world centre for cyber security insurance. In particular, it highlights the exposure of firms to cyber attacks among their suppliers with a key agreement that participating insurers will include the government’s Cyber Essentials certification as part of their risk assessment for small and medium businesses.

Read the report: UK cyber security: the role of insurance in managing and mitigating the risk.

Cyber threats are estimated to cost the UK economy billions of pounds each year with the cost of cyber attacks nearly doubling between 2013 and 2014. The report found that, while larger firms have taken some action to make themselves more cyber-secure, they face an escalating threat as they become more reliant on online distribution channels and as attackers grow more sophisticated. It issues a call to arms for insurers and insurance brokers to simplify and raise awareness of their cyber insurance offering and ensure that firms understand the extent of their coverage against cyber attack.

Companies are recommended to stop viewing cyber largely as an IT issue and focus on it as a key commercial risk affecting all parts of its operations. The product of collaboration between government and the sector following a summit held last November, the report recommends that firms examine the different forms of cyber attacks they face, to stress-test themselves against them and to put in place business-wide recovery plans.

The report also notes a significant gap in awareness around the use of insurance, with around half of firms interviewed being unaware that insurance was available for cyber risk. Other surveys suggest that despite the growing concern among UK companies about the threat of cyber attacks, less than 10% of UK companies have cyber insurance protection even though 52% of CEOs believe that their companies have some form of coverage in place.

On 23 March, Francis Maude, Minister for the Cabinet Office with responsibility for the UK Cyber Security Strategy, is hosting an event at the Cabinet Office for chairmen and senior executives of insurers and top UK companies on the role of insurance in managing growing cyber threats.

Francis Maude, Minister for the Cabinet Office and Paymaster General said:

“It is part of this government’s long-term economic plan to make the UK one of the safest places in the world to do business online. The UK’s insurance market is world renowned and we want it to be the same in relation to cyber risks. The market has extensive knowledge and experience of more established risks to help businesses manage and mitigate relatively new cyber risks.”

“Insurance is not a substitute for good cyber security but is an important addition to a company’s overall risk management. Insurers can help guide and incentivise significant improvements in cyber security practice across industry by asking the right questions of their customers on how they handle cyber threats.”

A Positive Budget for the Energy Sector
AccountancyRegulation

A Positive Budget for the Energy Sector

What a difference four years has made. The windfall tax introduced at 2011’s budget was widely criticised by industry and commentators who suggested it would stifle investment and add cost to an already high cost basin. After four years the Chancellor has reversed the windfall tax (after a slight reduction at the Autumn Statement), reduced the petroleum revenue tax on older fields, introduced an investment allowance and put money aside for seismic surveys to boost exploration. These measures are welcome and come at a time when government support is essential if we are to fully maximise the potential of the UK continental shelf (UKCS).

While the fall the oil price helped push the issue of UKCS taxation and the future of the basin up the political agenda it is not the reason why action on the fiscal regime last week was essential. The 2011 windfall tax was justified because oil prices were around £120 per barrel. However the assessment that these high oil prices meant the industry could bear a higher tax rate – a marginal rate of more than 80% in some fields – was incorrect.

The UKCS is a mature basin and operators are facing ever higher costs as infrastructure ages and fields become more difficult to develop. Add to this the global nature of the oil and gas sector and the finite capital available to the sector to invest and it’s easy to see how the windfall tax could damage confidence and drive much needed investment abroad. Even with a high oil price the CBI was critical of the UKCS tax regime. In our paper Fuelling Growth in 2013 we said “in seeking to understand how best to enhance recovery in the North Sea the CBI believes taxation is crucial and identifying further opportunities to improve the competitiveness of the tax framework is essential.” As a global commodity the price of oil is consistent across the globe but the costs associated with exploration, development and production are specific to each basin. Government must do all it can to help reduce these costs if we are to attract the private sector investment needed.

We need a stable and competitive fiscal regime that prioritises consistency and whose ultimate goal must be the economic maximisation of resources. The price of oil is volatile and that is a lesson global commodity markets have reminded us of in recent months. Future governments should always think about the UKCS both in terms of the costs associated with operating there and its competitiveness with other regions. Budget 2015 is a good start but the next government, and all future governments, will need to take a long-term view of the UKCS and think hard about how to provide further support to avoid causing unnecessary damage.

Elsewhere in the budget

The Budget also outlined the government’s intention to bring forward the small-scale Feed-In Tariff component of the compensation package for energy-intensive industries to the earliest point at which State Aid approval is received in 2015-16. This fell short of the CBI’s calls to bring forward the full compensation package (covering FITs and the Renewables Obligation), but will provide some relief to these industries. We will continue to press the importance of competitiveness with a new government, and look to ensure a more strategic approach to supporting these industries is taken.

The Chancellor announced that the government has decided to enter in to the first phase of negotiations on a Contract for Difference for Swansea Bay Tidal Lagoon.

Government Creates New Business to Save Up to £105 Million in IT Costs
Corporate GovernanceRegulation

Government Creates New Business to Save Up to £105 Million in IT Costs

In the past, individual departments paid different amounts to either build their own centres or outsource the service as part of their own locked-in IT contracts. This deal will, for the first time, provide a cross-government approach to buying data hosting services and will save up to £105 million for the taxpayer by utilising the government’s combined buying power. It will also allow government to tap into the latest advances in industry and improve energy efficiency – using data centres that are equipped with the latest technological advancements such as real time dynamic cooling and unique monitoring systems, all within secure compounds.

The new service will be available to the whole of government and the wider public sector. The 3 initial customers are the Department for Work and Pensions, the Home Office and the Highways Agency (operations), and each will be able to use the service on a ‘pay for what you use’ basis which will avoid the risk of being locked into long-term, inflexible contracts.

Minister for the Cabinet Office Francis Maude said:

“As part of this government’s long term economic plan, we’re determined to utilise our unique buying power and become a more intelligent customer. It doesn’t make sense for departments to host their servers in different ways and at different costs, and in the past Whitehall wasn’t even sure how many of these centres there were.”

“With this new joint venture, we will save millions and be able to access the necessary commercial and technical skills in the market to create a thriving new business that will deliver better services and allow government to share in its future success.”

Steve Hall, CEO at Crown Hosting Data Centres said:

“The joint venture company will simplify the data centre services selection process in government and further drive the unbundling of large legacy contracts.”

“It provides publicly-funded, mandated and regulated organisations with a pre-approved contract that leverages the buying power of the whole of government for the fastest, simplest access to secure data centre services.”

Minimum Wage Workers Will Be Hit by Chancellor's Cuts
LegalRegulation

Minimum Wage Workers Will Be Hit by Chancellor’s Cuts, Says TUC


“For the low paid to get a fair share of the recovery, this was a year in which we could have had a much bolder increase in the minimum wage.

“With one in five workers getting less than a living wage, this is nowhere near enough to end in-work poverty. Britain’s minimum wage workers should be very fearful of the billions of pounds of cuts to government help for the low paid that the Chancellor is planning if re-elected.

“Apprentices will welcome the increase to their minimum wage, which will reduce the shortfall in their minimum pay relative to 16 and 17 year-old employees. But there really shouldn’t be a gap at all. The TUC will continue to call on the Low Pay Commission to recommend a future increase that will match the apprentice rate to that for 16 and 17 year-olds.”

Simplification
Corporate GovernanceRegulation

Simplification, Not Regulation Is the Solution for Tax Avoidance, says IEA

“Successive governments have developed loopholes specifically designed to reduce tax bills, so it’s hardly surprising to see companies use the very schemes politicians have created. Politicians need to stop moaning and reform the system they set up.

“The UK corporation tax system is monstrously complex, with profits taxed not in the hands of shareholders, but according to very complex rules in particular jurisdictions. It’s inevitable this system is gamed by multinational corporations; for as long as it’s legal it’s unsurprising that companies don’t pay more tax than is due.

“Tax avoidance occurs because our system is overly complex and because rates are too high. If the government wants to reduce tax avoidance it should reduce and simplify taxes.”

Politicians Shouldn't Focus on Regulation to Make UK Labour Market Work Better
Corporate GovernanceRegulation

Politicians Shouldn’t Focus on Regulation to Make UK Labour Market Work Better, Says CIPD

With less than 100 days to go until the General Election, the CIPD, the professional body for HR and people development, is warning that regulatory changes shouldn’t form the cornerstone of labour market election promises. According to new research, the UK’s flexible labour market is generally working well in comparison with our international peers, suggesting there isn’t a strong case for the next Government to either de-regulate further or to strengthen employment rights.

The report, Employment Regulation and the Labour Market, indicates that the UK is highly unlikely to get much benefit from more employment regulation or from significant deregulation of the labour market, as it already performs well in comparison to many of its OECD counterparts on a number of measures. The link between the stringency of regulation and labour market outcomes such as productivity or job quality is in many areas either weak or complex and thus difficult to predict. Instead, the CIPD is urging policymakers to focus efforts on improving productivity through a much stronger focus on improving workplace practices while increasing awareness of existing rights and enforcing them more effectively.

The report,commissioned by the CIPD, and compiled by The Work Foundation, considered the impact of employment regulation on broad labour market measures. The Nordic countries (Denmark, Sweden, Finland and Norway) and the Netherlands score consistently well and the UK sits comfortably mid-table or above on most indicators. However, there are some economies in Southern and Eastern Europe, such as Spain, Italy and Greece, where the data does suggest that labour market outcomes could be improved by greater liberalisation.

The report indicates that despite the UK rating below average among OECD countries on measures of employment protection, the quality of employment in the UK compares more favourably with other countries than is often thought to be the case:

-In comparison to other OECD countries, the UK has a high share of permanent employment – 79% of UK workers in 2013 were on a permanent contract, compared to 77% in Germany and 65% in Italy

-Compared with the European average, the UK has a larger proportion of ‘good’ jobs and a smaller proportion of ‘low quality’ jobs. Overall 65% of jobs in the UK are rated as good jobs*, compared to just 54% in Italy, 50% in France and 49% in Germany

-The average weekly hours worked by employees in the UK in 2013 was 36, which was in line with the OECD average. However the UK does have a comparatively high proportion of long hours jobs (those involving 50 hours or more a week) with 12% falling into this category

-In all, 84% of UK workers say they are satisfied with their working hours (EU 28 average 80%) and 77% report they are satisfied with their work-life balance (EU 28 average 74%). UK workers don’t seem much more fearful of losing their jobs than workers in countries with stricter employment protections (12-14% across UK, Germany, France and Italy) and over 40% said they were either optimistic or very optimistic they could find another job at a similar wage.

Ben Willmott, head of public policy at the CIPD said: “The public debate can often seem polarised between calls for greater regulation and employee protections from trade unions and, at the other end of the scale, employer organisations that want to reduce regulatory burdens on business. Our report shows that more or less regulation is not the issue. Overall, UK workers are more satisfied with their jobs, working hours and ability to progress than their counterparts in France, Germany and Italy. The solution to some of the challenges we face in the UK such as poor productivity and the high proportion of low paid jobs in the economy doesn’t lie in quick legislative fixes. We don’t need yet another employment bill or another zig-zag between more and less regulation. Instead, what we need is a fundamental review of the UK’s skills policy to understand how we can generate more high-skilled jobs and better progression routes for those in low-skilled and low-paid jobs. We also need a much greater focus on improving workplace practices in the areas of leadership, management and HR capability to increase demand among employers to invest in workforce development.”

While the UK performs well overall, it performs comparatively poorly in three important areas – productivity, low pay and the integration of young people into the labour market.

-The UK performs poorly on productivity compared to many of its international peers, however, there seems little association between labour market regulation and productivity. Between 1985 and 2013, relative productivity compared with the US fell in relatively lightly regulated UK, New Zealand and Canada. Among the more highly regulated economies, relative productivity fell in Italy and increased slightly in France and Germany

-While the UK doesn’t have the highest share of low-paid jobs in the OECD, it does sit uncomfortably in the top quarter. The UK, US and Canada all have 20-25% of employment in low-paid work compared with 18% in Germany and 10% in Italy

-The UK sits in the lower half among OECD countries in terms of its youth unemployment rate and in the bottom quartile among EU 28 countries on the youth unemployment ratio.

Willmott concludes: “It’s clear that the UK struggles on productivity, low-pay and unemployment among young people, but the wider picture is much more positive. The stage seems set for a good performance but something is missing in the delivery. We have good investment in ICT, above-average shares of knowledge-intensive industries and better quality employment than many European economies, including some with much higher productivity levels. Rather than meddling with regulation, a renewed focus on enforcing and improving awareness of existing rights among employers and workers is needed to help curb any abuses of employment rights where they do occur, as well as a much more explicit policy focus on the workplace to improve practice and productivity.”

The CIPD has suggested the creation of a Workplace Commission to help support a more strategic approach across government to developing policy on the workplace with the objective of improving productivity and enhancing job quality where poor practice exists.

UK Regulators Network (UKRN) Publishes Report on Affordability
Corporate GovernanceRegulation

UK Regulators Network (UKRN) Publishes Report on Affordability

The report focuses on the energy, communications and water sectors. On average, energy and communications household spend is at 5%1 and 4%2of total household spend, respectively. In water, 1.4%3 of household income is going towards paying for this service.

The report considers:

-How affordability issues are approached in different regulated sectors.

-What data gathered from regulators and other sources show about the nature of affordability issues in these sectors.

-The drivers of affordability issues and the role of regulators in addressing these issues.

Work will now begin on the second phase report which will consider how to address vulnerability across regulators. It will also look at what could impact bills in the future, particularly as a result of infrastructure investment. UKRN members will work closer than ever to tackle some of the issues identified in the report and align their work to support vulnerable consumers.

Elevate Integrates Seal Contract Discovery and Analytics to Expand Legal Management Services Portfolio
LegalRegulation

Elevate Integrates Seal Contract Discovery and Analytics to Expand Legal Management Services Portfolio

Seal Software announced a partnership with Elevate Services, Inc., a next generation legal service provider. Leveraging Seal’s Contract Discovery and Analytics solution as part of its legal service offerings enables Elevate to deliver a more robust and efficient contract review and management process, in turn delivering more streamlined results for its clients.

Elevate provides a wide range of services to its clients, including consulting, legal support services and technology. Within its extensive document review offering, the company uses a variety of review methods to serve its clients as efficiently as possible. To better manage the varying nature of contract review projects, Elevate partnered with Seal Software to automate the discovery, extraction, and analysis of relevant unstructured contracts, resulting in a quicker, comprehensive, and more accurate review process, and delivering results that could not be achieved using traditional manual methods.

“Elevate has many clients with a wide range of use cases including contract management, migration, contract standardization and clause library creation,” said Kevin Colangelo, vice president, Client Relations and Strategic Communications at Elevate. “Seal Software provides a comprehensive system for contract discovery and analytics that enables us to deliver a more robust and cost-effective service to our clients.”

Seal Co-Founder and CEO Ulf Zetterberg said, “Elevate is a key player in the contract services market, and this strategic partnership will allow the company’s contract review team to manage a larger scale of contract document review more efficiently. By utilizing Seal’s Contract Discovery and Analytics platform, the company will be able to offer better visibility into its clients’ corporate transactions.”

To learn more about Seal Software solutions visit the website, download the latest e-book, “The Business Case for Seal Software,” or read the IDC Technology Spotlight “Contract Discovery and Analytics: Driving Value from Within Your Contracts,” which examines the intricate issue of managing the hidden data within business contracts in a time of ever-changing government regulations and compliance, disparate systems, and an exploding number of contracts across all aspects of business.

Elevate is a global legal service provider helping law firms and corporate legal departments operate more effectively. Elevate provides practical ways for clients to improve efficiency, quality and outcomes through consulting, managed services, talent and technology. For more information, visit elevateservices.com. Follow Elevate on Twitter @ElevateServices and on LinkedIn at www.linkedin.com/company/elevate-services.

Seal Software’s Contract Discovery and Analytics platform helps companies maximize revenue opportunities and reduce expenses and costs associated with contracts, and contract management systems and processes.
Seal Contract Discovery locates contractual documents within minutes wherever they reside within an organization and is rapidly deployable; extracting key contractual terms and clauses, rendering them for easy review, and populating corporate repositories, including Customer Relationship Management (CRM), Contract Lifecycle Management (CLM), and Enterprise Resource Planning (ERP).

Seal Contract Analytics empowers clients to analyze contracts by discovering specific language and clause combinations that are most relevant to your business.

New Rules Credit Brokers Rules Will Protect Consumers
Global ComplianceRegulation

New Rules Credit Brokers Rules Will Protect Consumers, Says FCA

New Financial Conduct Authority (FCA) rules will ban credit brokers from charging fees to customers, and from requesting customers’ payment details for that purpose, unless they comply with new requirements ensuring that customers are given clear information about who they are dealing with, what fee will be payable, and when and how the fee will be payable. The rules come into force on 2 January 2015.
Martin Wheatley, chief executive of the FCA, said: “The fact that we have had to take these measures does not paint this market in a particularly good light. I hope that other firms will take note that where we see evidence of customers being treated in a blatantly unfair way, we will move quickly to protect consumers from further harm.”
The new rules have been made without prior consultation because the FCA considers that the delay arising from the time it would take to consult would be prejudicial to the interests of consumers. The FCA also believes that enforcement action alone is not sufficient to protect consumers from the poor practices identified in the market.

The FCA’s concerns relate to:

• a lack of transparency, resulting in consumers often not realising they are dealing with a broker rather than a lender;
• fees being taken without informed consent, for example where terms and conditions are hidden or misleading;
• consumers being misled as to the purpose of giving their payment details;
• firms passing on consumers’ details, including their payment details, without informed consent, to other firms who also take a fee; and
• consumers facing difficulty in identifying the firm that has taken a fee, and in obtaining a refund from the firm or a response to their complaint.

Today’s announcement is part of a package of measures which will also require credit brokers to:

• include their legal name, not just their trading name, in all advertising and other communications with customers;
• state prominently in all advertising that they are a credit broker and not a lender; and
• report quarterly to the FCA listing their website domain names, if they charge fees to customers.
• Consumers will also have a 14-day right of cancellation where credit broking contracts are entered into as distance contracts, for example online.

Over 40 per cent of consumer credit complaints received by the FCA relate to credit brokers, 80 per cent of which relate to firms who charge upfront fees. The FCA has also received relevant intelligence from consumer groups and others who are seeing increasing complaints from people who have had money taken from their accounts unexpectedly and often by more than one broker.

The FCA is investigating a number of credit broking firms; seven firms have been stopped from taking on new business and, to date, three further cases have been referred for enforcement action.

The key changes for credit brokers are as follows:

Information notices and customer confirmation: a ban on credit brokers charging fees, or requesting payment details for that purpose, unless:

• the broker has provided an explicit notice to the customer (an ‘information notice’), setting out:

     o the firm’s legal name;
     o a statement that the firm is, or is acting as, a credit broker (not a lender);
     o a statement that a fee will or may be payable;
     o the amount or likely amount of the fee;
     o when and how the fee will be payable; and

• the customer has acknowledged receipt of the notice, and awareness of its contents (the ‘customer confirmation’).
Each broker will have to send its own information notice, and receive its own customer confirmation, before being able to charge a fee. The information notice and customer confirmation must be on paper, by email, or in another durable medium, and the broker will have to keep records of them.

Transparency: credit brokers will need:

• to include their legal name (as it appears in the Financial Services Register) in all financial promotions and communications with customers;.
• to state prominently in all financial promotions that the firm is, or is acting as, a credit broker and not a lender; and
• in the case of fee-charging brokers, to notify the FCA quarterly of their domain names.

Right to cancel:

1. Clarification that consumers have a 14-day right of cancellation and right to a refund where credit broking contracts are entered into as distance contracts (e.g. online).
2. Policy statement 14/18: Credit broking and fees.
3. On 1 April 2014, the FCA became responsible for approximately 50,000 consumer credit firms, including credit card providers.
4. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.

Chase De Vere Fined for Life Settlement Product Sales Failures
LegalRegulation

Chase De Vere Fined for Life Settlement Product Sales Failures

The Financial Conduct Authority has fined independent financial advisers Chase de Vere £560,000 for failures surrounding sale of Keydata Products.

Between August 2005 and June 2009 Chase de Vere’s advisers sold Keydata life settlement products to 2,806 customers who invested a total of £49.3 million. The Financial Services Compensation Scheme has paid compensation to eligible customers up to the scheme limit, which was £48,000 per customer at the time. 139 customers invested a total of £4.4 million over the scheme limit and the majority of these customers may not recover the full losses arising from their investment.

Chase de Vere did not research the Keydata products well enough to understand the risks they posed to customers and did not ensure that its advisers understood those risks. As a result, the advisers did not explain the risks of investing in Keydata products properly to customers, and the firm made this worse by ceasing to provide standardised wording to advisers to help them describe the risks to customers.

As a consequence of this, Chase de Vere failed to disclose to its customers certain distinctive features and risks of the Keydata products in a way which was clear, fair and not misleading.

Tracey McDermott, FCA director of enforcement and financial crime said:

‘Firms need to ensure that they fully understand and explain to customers the risks of investing in the products they are offering. That includes researching the products thoroughly before they decide to offer them and ensuring advisers have the tools they need to explain the risks to customers. Chase de Vere failed to do this, leaving its customers without a full understanding of the risks they were taking by investing their money in Keydata products.’

The FCA considers that had Chase de Vere researched the Keydata products properly from the outset, it would have realised that they had distinctive features and risks requiring additional controls and restrictions on sales, particularly to customers with a cautious attitude to risk.

The firm has agreed to review its sales to any customers who have not already made a claim to Chase de Vere or the Financial Services Compensation Scheme about Keydata, and to provide redress where appropriate.

Chase de Vere agreed to settle at an early stage of the investigation and therefore qualified for a 30% Stage 1 discount. Without the discount the financial penalty would have been £800,000.

ASEAN Development
AccountancyRegulation

ASEAN Development

The establishment of the ASEAN Economic Community (AEC) 2015 is a “very ambitious project”, one which will need thousands of skilled finance professionals who can work across borders, agreed a panel of experts at an ACCA (the Association of Chartered Certified Accountants) session at the recent Malaysian Institute of Accountants conference held in Kuala Lumpur.

When asked “what is the one thing accountants need to do to ensure they are ready for the AEC?” PwC’s Mr Soo Hoo Khoon Yean said: “The obvious one is to upscale skills, but more importantly to have a change in mindset. Instead of looking at it as a glass half empty, we should be looking at the AEC as a glass half full. Today, it’s about our readiness to prepare to be mobile because your company or clients will move towards regionalisation. And we must be able to rise up to the challenge to contribute in tandem with their progress.”

Steve Heathcote, ACCA’s executive director of markets, said: “The ten member countries of the AEC have a total population of 626 million and a combined GDP of USD 2.4 trillion. The GDP for the region is expected to double by 2020, according to the Boston Consulting Group. As such, this large-scale economic plan depends on capacity building. ACCA, with its partners across this wide region, all work to ensure the talent pipeline for accountants remains strong and well supplied.

“ACCA’s presence across the ASEAN region, with offices in Cambodia, Indonesia, Malaysia, Myanmar, Singapore and Vietnam, and with students and members in all other markets – Brunei, Laos, Philippines and Thailand – means that we can ensure this economic programme has the finance professionals it needs to make it a success.”

Heathcote also emphasised that partnerships and joint working are important, adding: “ACCA has signed Memoranda of Understanding (MoUs) and has a close working relationship with national accounting bodies and regulators across ASEAN. This enables us not just to meet the intense demand for qualified finance professionals in this region, but also to anticipate it and deliver it with our partners. ACCA regularly participates in the ASEAN Federation of Accountants (AFA) council meetings to strategise how to build capacity and strengthen the finance profession across ASEAN to meet the demands of the AEC, and to achieve the wider economic ambitions and social development goals of the region.”

SEC Investigates Pimco ETFs
LegalRegulation

SEC Investigates Pimco ETFs

Hit by internal squabbles and under performance from its funds in recent months, it is the latest trouble to hit the world’s largest manager of bonds.

Saying that it was fully co-operating with the SEC, Pimco said:

“we take our regulatory obligations and responsibilities to our clients very seriously.”

The firm went on to state that its pricing polices were appropriate and aligned with industry standards.

The statement was released by the firm after the Wall Street Journal reported the investigation by the US federal agency.

It is understood that investigators from the commission have interviewed a number of executives at Pimco, including its chief executive and founder Bill Gross. It is also understood that the investigation, which Pimco says is a ‘non-public’ affair, has been going on for a number of months.

The investigation by the commission is examining whether Pimco gave clients investing in its Total Return ETF an inaccurate picture of the performance of the fund.

It is also looking at whether the firm is guilty of buying products at a lower price only to make its profit calculations based on a lower valuation.

Indian Supreme Court Cancels Coal Mining Licences
LegalRegulation

Indian Supreme Court Cancels Coal Mining Licences

The action has been taken following a corruption scandal surrounding how licences were handed out.

With tens of billions of dollars thought to have been lost as a result of the scandal over the illegal awarding of licences, the court has scrapped 214 of the 218 permits that were issued.

The only four licences that have been upheld are those associated with large state-backed projects.

Shares in major coal firms such as Hindalco and Jindal Steel have slumped on the court’s announcement.

The issue was first brought to attention by federal auditors in India in 2012. According to the team investigating the matter, India had lost out on around $33bn (£20bn) due to the cheap price the coalfields were sold for.

After earlier saying that the transactions had been illegal, the Attorney General of India, Mukul Rohtagi advised reporters of the cancellations.

Only forty-six of the fields have seen any work take place however, with these being given six months to wind down all operational activities.

The remaining 168 fields have not seen any work take place as yet. These have all been told to shut down immediately.

The court said that after a six month abatement from the decision being made a new bidding process can commence for all coalfield permits.

Rockefeller to Divest From Fossil Fuels
Global ComplianceRegulation

Rockefeller to Divest From Fossil Fuels

The fossil fuel divestment is a change in direction for Rockefeller – Photo sourced from Shutterstock.

According to reports the Rockefeller Brothers Fund (RBF) will play an integral role in the forming of a coalition to divest over $50bn (£31bn) of assets in fossil fuels. With the Rockefeller fortune largely made from oil, it is a significant statement – made ahead of the UN summit on climate change opening today, Tuesday 23 September.

The fund was formed in 1940 by the sons of John D Rockefeller. A philanthropic organisation, it had investment assets amounting to around $860m at the end of July this year.

Made up of a number renowned philanthropists, the coalition the fund will be a key part of is understood to be formed of over 830 individual institutional investors.

The director of RBF, Stephen Heintz, said in a statement:

“We are quite convinced that if he [John D Rockefeller] were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy,”

The climate change summit at the UN headquarters in New York opened earlier this morning with US President Barack Obama, British PM David Cameron and more than 120 heads of state and senior government officials in attendance.

The summit is being hosted by Secretary-General of the United Nations Ban Ki-moon who is hoping the world’s leaders can make significant inroads to agree a universal climate agreement.

Ban Ki-moon hopes the agreement will be signed by all nations by the end of next year.

White House Launches Tax Inversion Crackdown
Corporate GovernanceRegulation

White House Launches Tax Inversion Crackdown

The White House wants to limit US tax inversionPhoto sourced from Shutterstock

The action, being taken largely in response to US-based firms looking to redomicile to countries with lower corporate tax rates, is targetting those seeking mergers and acquisitions with overseas firms.

However, the tax avoidance tax practice has been a long-held target of President Barack Obama and his administration. He has subsequently charged a new department within the US Treasury to make tax inversion less appealing to corporates.

Removal of hopscotch loans

The plans being put in place will make it more difficult for profits made in other countries to be accessed by US firms inverting their tax base.

The removal of ‘hopscotch loans’, lending facilities set up between foreign business units and the US business, will be the main route of approach for this.

Another step to limit tax inversion will see the new treasury department introduce further restrictions for US owners of inverted firms. Once the plans are brought into place, newly inverted firm owners will only be able to own up to 79% of the company.

Not adding up financially

As a result, the department says, there will be some inversion deals that simply do not add up financially.

Applauding the actions being taken by the treasury and the treasury secretary Jack Lew, President Obama said in a statement.

“We’ve recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill, and I’m glad that [the treasury secretary] is exploring additional actions to help reverse this trend,”

A recent high profile inversion deal saw US fast food chain Burger King acquire Canadian coffee and doughnut firm, Tim Hortons. The firm is now able to benefit from Canada’s corporate tax rate of 26.5%, nearly a full 10% under the US rate of 35%.

GSK Hit With Fine for Bribery in China
LegalRegulation

GSK Hit With Fine for Bribery in China

GSK Building, Brentford – Courtesy of Flickr

One of the biggest drug producers in the world, GSK has come under a lot of scrutiny from the Asian super power. This has culminated in court action with the UK-based pharmaceuticals company hit with the fine after allegations the firm bribed medical staff and institutions to promote its products.

GSK’s firmer head of operations in the country, Mark Reilly, has also been handed a suspended prison-sentence of three-years and will be deported. Further executives at the firm have also received suspended jail terms.

Saying that it had published an apology to the Chinese authorities and its people, the boss of GSK, Sir Andrew Witty, said in a statement:

“Reaching a conclusion in the investigation of our Chinese business is important, but this has been a deeply disappointing matter for GSK,

“We have and will continue to learn from this. GSK has been in China for close to a hundred years and we remain fully committed to the country and its people,”

He went on to add that the firm will continue to invest in China, saying:

“We will also continue … to support the government’s health care reform agenda and long-term plans for economic growth.”

Analysts of the Chinese marketplace said that GSK will now be able to draw a line under the episode but should expect a dip in its operations in the country for some time.

Tesco Launches Inquiry and Suspends Execs Over Profit Exaggeration
Corporate GovernanceRegulation

Tesco Launches Inquiry and Suspends Execs Over Profit Exaggeration

Tesco’s overstatement was more than a little – Picture sourced from Shutterstock

The firm, which is understood to have suspended its UK managing director Chris Bush as one of the four, overstated its profit guidance by £250 million, a quarter of its announced profits to date.

Chris Bush will be replaced throughout the duration of the investigation by Robin Terrell, the multi-channel director for Tesco.

Disappointment would be an understatement

Launching the investigation being led by Deloitte, the CEO of the firm, Dave Lewis said that to say he was disappointed would be an understatement. Mr Lewis, who only took over at the top of the firm at the start of September said:

“It doesn’t take away from what I’m able to build at Tesco”.

Mr Lewis also went on to say that the suspensions were not as part of any disciplinary action being taken by the firm or should be perceived as an admission of guilt in regards to the individuals involved.

Uncertain for investors

With shares in Tesco falling by over 8% in morning trading on the London Stock Exchange, market analyst Robert Gregory told the BBC Breakfast programme:

“Investors are really uncertain about Tesco at the moment and its future direction.”

Clive Black, an analyst at Shore Capital said:

“Such an announcement is not the stuff of a well operated FTSE-100 organisation.”

At the end of August, the retailer said its expected trading profit for the first half of 2014 was around £1.1bn. In its latest statement to the stock market however, Tesco said this overstatement was largely as a result of an:

“accelerated recognition of commercial income and delayed accrual of costs”.

It also apportioned some of the blame to accounting issues with its suppliers.

Alerted to the error by ‘an informed employee’, Tesco said that the Financial Conduct Authority, the financial regulator for the UK, had been informed.

FTSE Business Leaders Targeted for Pay Reforms
AccountancyRegulation

FTSE Business Leaders Targeted for Pay Reforms

Courtesy of Shutterstock

The council, which administers financial reporting rules in the UK, has said that the salaries of top staff at firms in the country should be geared towards the long term – to better support future growth and prosperity of their companies and staff.

Updated Governance Code

In practice that would mean longer periods of deferral before they received their full remuneration. The FRC also see the proposals as instigating a shift from cash bonuses to shares and stocks, further contributing to a long-term vision.

The new rules were issued on Wednesday by the FRC under its UK Corporate Governance Code. The updated code said:

“Boards of listed companies will need to ensure that executive remuneration is aligned to the long-term success of the company and demonstrate this more clearly to shareholders,

“Executive directors’ remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied,”

The code is enforced through a ‘comply or explain’ process, whereby companies not complying with the rules have to provide supporting evidence of how they ensure good governance instead.

The updated rules, which has also asked firms to introduce processes allowing for pay to be recovered if deemed necessary, apply to all 916 ‘premium-listed’ UK companies.

OECD Demands New Tax Rules for Biggest Firms
Global ComplianceRegulation

OECD Demands New Tax Rules for Biggest Firms

Courtesy of Shutterstock

The plans have been announced to target corporate tax avoidance on the world stage, which sees many of the world’s multinational companies reducing their tax bills by moving profits from one country to another.

Recent accusations have seen the likes of Amazon, Google and Starbucks accused of employing such practices, though all firms are resolute in saying they operate within the law.

Announcing the proposals in Paris yesterday the head of tax at OECD, Pascal Saint-Amans, said that they would:

“change the rules of the game”

M. Saint-Amans went on to explain that it the plans would ensure companies pay taxes in the country in which they have been generated. He went on to say that all of the 44 nations which contribute 90% to the world’s economy are in favour of the plans.

Under present rules, firms are able to exploit rules in place to prevent double taxation and benefit from double deductions against their tax instead.

Many also use internal billing processes to see that profits are registered in countries offering lower corporate tax rates.

The plans would see such practices prevented, obligating firms to declare staffing levels, revenues and profits in each jurisdiction they operate in.

The proposals will be set before the G20 finance ministers when they meet in Australia this weekend.

Poland Backs Growth Spending by EU
Global ComplianceRegulation

Poland Backs Growth Spending by EU

Further denigrating opinion of the plans instigated by Germany, to cut back on spending, the Polish finance minister has called for a fresh €700bn spending found to 2020. According to Mateusz Szczurek, the current state of play risks a long-term economic decline in Europe.

Speaking to the Financial Times earlier in the week, Mr Szczurek said:

“Europe is strangling itself,”

He went on to say that the current policy in action was ‘exhausted’.

Mr Szczurek’s plea backs up the opinion of Mario Draghi, the European Central Bank’s president. He has called for the stronger economies in Europe to ramp up their spending. He says that by these countries taking such action, the threat of deflation will be thwarted. Mr Draghi also believe it is the best way to stimulate growth.

German Opposition

However, such manoeuvring is not likely to go down well in Germany. It has long believed that a prudent approach is the best approach.

This is not the view across all of Europe. In France and in Italy, it is widely believed by financial commentators that attitudes to austerity measures are changing. France has already missed hitting the EU’s deficit target, while Italy’s economy is stalling.

Under plans being presented by Mr Szczurek today, the EU’s member states would contribute capital amounting to €700bn to an infrastructure fund. Financing projects throughout the EU, with a focus on retarded and slow output countries such as Greece and Portugal.

The plans would see around €60bn contributed by all member states, while Mr Szczurek said that Germany could use the fund as a depositary for its ‘idle savings’. He has admitted that he expects opposition from Germany over the plans.

The plans are to be announced to the EU’s finance ministers later today, (Friday 12 September).

Pension Providers Withdrawing from AE Should Be Fined: Defaqto
AccountancyRegulation

Pension Providers Withdrawing from AE Should Be Fined: Defaqto

With a number of traditional providers expected to pull out of the AE process as SMEs come on board, due to lack of cost-effectiveness, wealth analyst Richard Hulbert for the financial research firm said:


“We’ve had some discussion here about ways to get around that and one of the things which has come up a couple of times is if there should be a levy on those providers that exit the market before auto-enrolment is completed.

“That way the money could be used to support those smaller providers that are meeting the need because creaming the profits off and leaving is somewhat selfish really.”


According to figures from the company, 20% of workplace schemes through traditional providers have a minimum contribution per month of £80 or higher. Another 30% or so were demanding minimum contributions of £20.

Defaqto also found that 18% of the schemes had a minimum of 11 enrolled employees and the majority, 82%, demanded a minimum age for members.

These restrictions are, according to Hulbert, acting as a barrier to smaller companies too.

However, the director of group savings and investments for LEBC, Glynn Jones, said that this was simply about traditional providers targeting employers wanting quality schemes for their staff.

He explained that it was for the government-backed NEST scheme and schemes such as The People’s Pension to fulfil the requirements of those firms only wanting to comply with the AE basics.

 

LegalRegulation

UK Starting Talks to Open up India’s Legal Sector

On a visit to India this week, Shailesh Vara said that he had started the process for talks with his Indian counterpart and other key figures about opening up the country’s legal system.

Speaking on his trip to Ahmedabad, Mr Vara said:

“I had met Indian Law Minister Ravi Shankar Prasad and chief of Bar Council of India during my visit to Delhi. Today I met Chief Justice of Gujarat High Court and state head of the Bar Council and talked to them about the need to open up the Indian legal system,”

Addressing a press conference in the city, Mr Vara went on to state how easing access for international law firms to operate in India would be of great benefit to the country.

Outlining how many British-based, and other foreign firms, prefer to retain the services of their legal teams and law firms when looking at opportunities abroad, Mr Vara continued:

“we have just initiated a debate with our Indian counterparts and we would like to discuss the issue, as it would be beneficial to India.”

One of the prescribed intentions of the Indian Prime Minister Narendra Modi is to attract greater numbers of foreign companies. Mr Vara said that this much sought-after investment from international organisations would likely increase if they could use their existing legal partnerships in the country.

Eager to stress that it would not be about taking over from Indian law firms, Mr Vara gave Britain as an example of how an open and freely accessible legal system can strengthen a country.

Saying that with a more open system India could become a ‘hub’ of legal talent as Britain has been for many years, Mr Vara said allowing international teams to guide investing firms would help attract the world’s best practicing talent and legal students to the country.


US Targets Tax Inversion Firms
Corporate GovernanceRegulation

US Targets Tax Inversion Firms

The plan will see the Internal Revenue Service (IRS) introduce steps to prevent the practice known as tax inversion, with President Barack Obama denouncing it as ‘unpatriotic’.

The Associated Press quoted Obama recently, saying:

“They’re basically renouncing their citizenship and declaring that they’re based somewhere else, just to avoid paying their fair share,”

The IRS hope the move, being introduced largely because of the disparity between the UK and US Corporate Tax rates, will deter firms from moving abroad.

In the UK, the rate is soon to be set at 20 per cent, down from 21 per cent, to attract new investment. In the US the corporate rate is presently 35 per cent.

The news comes as Walgreen’s completed its full acquisition of Alliance Boots, with the US pharma investigating the viability of redomiciling its tax operations in the UK.

It also comes just three months after Pfizer’s AstraZeneca take over collapse and with Canadian pharmaceutical Abbvie preparing to purchase Shire, the Jersey-registered, Irish-headquartered biopharmaceutical company.

The motivation for both deals is widely thought to be over tax issues by many in the financial industry, partly at least.

A draft bill has already been drawn up for the plans. It sets out a framework which would impinge on foreign tax centres by increasing the 20 per cent threshold of shared-ownership with overseas-based firms.

Over a two-year period, any such deals would have to be structured to 50 per cent.

Whitehall
AccountancyRegulation

Whitehall “Lacking Finance Skills”

The world’s largest accountancy body, ACCA (the Association of Chartered Certified Accountants) has warned that urgent up-skilling in financial management across Whitehall was needed if the civil service was going to make long-term savings and improved service delivery.

ACCA says that while there is strong expertise in the finance function of the UK’s public sector, there is a need for Whitehall to invest in skills development in areas such as data analysis, procurement, project as well as financial management if savings in government are going to be made over the long term.

Gillian Fawcett, head of public sector at ACCA, said: “Spending cuts and the need to make savings in central government and other public sector bodies is set to increase in the coming years, so it is vital that there are improvements in public financial management for the taxpayer. There has been much trumpeting of the Treasury’s decision to appoint Whitehall’s first chief financial officer earlier this year, but a more root and branch reform of the public sector’s finance function is needed to garner genuine change. Like the private sector, public sector finance professionals need to see the bigger picture to be more effective, which is why skills linked to data analysis and procurement, as just two examples, are more relevant now than historically.

“There has been some recognition in Whitehall that there is a need to up-skill but there is a failure to acknowledge the biggest obstacle – building an effective finance profession in central government which is perceived positively and valued by their colleagues in an organisation which is largely made up of generalists. We believe that a culture change is necessary whereby economists and generalists value the potential contribution that financial management can make to government decision-making.”

ACCA points that a running theme that continues to crop up within the public sector is that the trend of the civil service finance professionals in government either leaving or changing roles could be hindering good governance and is in urgent need of attention.

Fawcett said: “The revolving door nature of the senior service is well-known, but it poses significant problems when it comes to delivery of good governance and corporate memory. It inhibits the ability to learn from mistakes and stifles the dissemination of best practice. This is also not helped by the skills gaps relating to procurement, project and financial management that still persist across Whitehall.”

Real Estate Finance Duo to Join Hogan Lovells
LegalRegulation

Real Estate Finance Duo to Join Hogan Lovells

Hogan Lovells has recruited real estate finance partners Andrew Flemming and Jo Solomon to join the London finance practice. They join from Berwin Leighton Paisner and bring a wealth of real estate finance experience with them.

Flemming ‘s transactional experience includes advising Barclays Capital on a £660m loan-on-loan to Maybourne Finance Limited and advising Lloyds Banking Group on a £266m investment facility to Peel Holdings to refinance a large portfolio of UK regional properties, which involved acting for a club of five lenders.

Solomon’s deals include advising on the St. David’s Limited Partnership, a joint venture between Land Securities Group PLC and Capital Shopping Centres PLC, to refinance the cost of acquisition and development of the St David’s and St David’s 2 shopping centres in Cardiff; and advising Blackstone on the development finance provided by Lloyds TSB Bank Plc in relation to the development of building 6 at Chiswick Park.

Commenting on their arrival, Sharon Lewis, global head of Hogan Lovells finance practice, said: “First class strength in depth in a wide breadth of different banking specialisations is vital to maintaining our position as a leading adviser to banks and other key financial institutions so continuing to grow our finance practice globally is a key strategic priority for the firm. Andrew and Jo’s expertise is a natural fit with our banking and real estate practices. I am delighted that they will be joining our team”.

Flemming said: “Hogan Lovells has a thriving global finance practice with numerous high profile clients across a range of sectors and a truly collaborative culture. I am looking forward to working closely with the banking and real estate teams to continue to build the strength and depth of Hogan Lovells’ real estate finance practice”.

Solomon added: “Hogan Lovells’ international platform is a significant benefit to global borrowers and lenders in being able to offer them a seamless international service that few other firms can provide. I’m delighted to joining a firm with such a stellar real estate reputation and with such strong expertise across a number of different practice areas that are needed to carry out complex, high value real estate finance deals.”

Compliance “Is at a Tipping Point”
Global ComplianceRegulation

Compliance “Is at a Tipping Point”

Today’s Chief Compliance Officers (CCOs) are in a position similar to that of Chief Financial Officers (CFOs) 15 years ago, and they face a comparable opportunity and challenge: how to become a more strategic partner in the organisation; a vital member of the C-suite, according to the fourth annual State of Compliance 2014 Survey released by PwC US. Survey findings show the role of the CCO has gained more prominence over the last decade and is evolving rapidly.

“As the CCO’s role further evolves, compliance will become more integrated with business performance and CCOs will assume a more strategic role. Overall, the future of compliance depends on defining not just the compliance function, but also specifically the organisation’s desired role for the compliance chief,” said Sally Bernstein, principal, PwC. “It’s difficult to be ‘chief’ in the current environment, but more companies recognise they need to get into the ‘business of compliance,’ and are working towards that goal.”

The results of the survey show that compliance officers have been tasked with an increasing number of responsibilities, asked to manage a complex variety of compliance risks and exceeded expectations in many areas. Despite sometimes having a shortage of resources, CCOs have often achieved successes within their companies. The business and regulatory environment, however, is becoming more complex and CCOs are expected to deliver better information to help executive management identify and manage organisational risks.

“There is an increased focus on compliance as a business-enabling function and a growing interest in the topic overall. This is clearly demonstrated by this year’s survey participation rate which grew 35 percent to over a thousand respondents from under 800 last year,” said Andrea Falcione, managing director, PwC. “PwC sees the increase in survey participants as an indication that many companies are using this study as a benchmarking exercise to help determine their ongoing compliance program needs.”

According to PwC, to assume a more strategic role in their organisations, CCOs should engage with the business in more meaningful ways. PwC recommends that emulating the behaviours of Chief Information Officers (CIOs) to achieve a similar evolution can be beneficial for CCOs, suggesting that CCOs exhibit the following behaviours: cultivate strong support of the CEO; maintain close working relationships with business leaders to drive understanding; leverage innovation ideas from other companies and functions; understand the organisational strategy and the broad range of risks associated with that strategy; and, recognise that compliance skills must be an enterprise-wide capability.

Survey results show corporate compliance staffing and budgets are trending up across the board. For the majority of companies surveyed, compliance budgets and staffing are increasing or staying at the same level across all industries. The survey also finds that organisations with more mature compliance functions, which are typically more regulated, tend to have larger budgets and staff than less regulated companies.

UK Law Firms Achieve Modest Growth in Q4
LegalRegulation

UK Law Firms Achieve Modest Growth in Q4

Fees per fee earner at the top 100 UK law firms have increased by 2.4% this quarter, compared with the same period last year, according to the latest quarterly legal sector survey from Deloitte. This resulted in overall growth of 3.6% in fees per fee earner this financial year.

While the underlying rates of growth were relatively modest this quarter, firms ranked between 51-100 boosted fee income by 7.1% in the last 12 months, driven largely by merger activity.

Jeremy Black, partner in Deloitte’s professional service practice, said: “Despite a slowing rate in fee income growth this quarter, firms have on average delivered strong progress over the financial year. This year’s figures highlight the consolidation in the market, particularly amongst the smaller firms.”

The survey also tracked annual fees per fee earner over a six year period and found that the UK’s 10 largest firms generated 18% growth over the last six years. In contrast, firms in the 26-50 category achieved only a 1% increase reflecting a decline in real terms. For firms in the 51-100 category things were even tougher with fees per fee earner still well below the April 2008 figures.

Black commented: “The different performance levels experienced by firms in the various size categories reflect different market dynamics, with particularly intense competition in the more commoditised end of the market. Despite modest underlying growth in the final quarter, for the larger firms we are seeing confidence continue to increase. As the economy picks up we would expect to see a further widening in the gap in underlying performance between firms in the top 50 by size and the smaller firms.”

CSI and YBS Fined for Unclear Promotions
Global ComplianceRegulation

CSI and YBS Fined for Unclear Promotions

The Financial Conduct Authority (FCA), the UK financial watchdog, has fined both Credit Suisse International (CSI) and Yorkshire Building Society (YBS) for failing to ensure financial promotions for CSI’s Cliquet Product were clear, fair and not misleading. CSI was fined £2,398,100 and YBS’s fine was £1,429,000.

The Cliquet Product was designed by CSI to provide capital protection and a guaranteed minimum return with the apparent potential for significantly more if the FTSE 100 performed consistently well. The probability of achieving only the minimum return was 40-50% and the probability of achieving the maximum return was close to 0%. Despite this CSI’s and YBS’s financial promotions marketed the potential maximum return on the product as a key promotional feature.

The target market for the Cliquet Product was described by CSI as “stepping stone customers” who were conservative and risk averse. The product was typically sold to unsophisticated investors with limited investment experience and knowledge through a number of distributors. 83,777 customers invested a total of £797,380,716 in the product; with YBS being the distributor responsible for approximately 75% of the total amount invested.
The maximum return figure was given undue prominence in both CSI’s product brochures for the Cliquet Product, which YBS approved and provided to their clients, and in YBS’s own financial promotions for the product, some of which also did not clearly explain how returns were calculated.

Tracey McDermott, FCA’s director of enforcement and financial crime, said: “It is crucial that firms consider the needs of their customers from the time that products are being designed through to their marketing and sale. The information provided to customers forms an important part of this. Financial promotions are often the primary source of information for consumers and in this case CSI and YBS let their customers down badly. These promotions were a serious breach of the requirement to be clear, fair and not misleading.

“CSI and YBS knew that the chances of receiving the maximum return were close to zero but they nevertheless highlighted this as a key promotional feature of the product. This was unacceptable.”

In September 2010, following concerns raised by third parties, including Which?, YBS changed its promotions so that undue prominence was no longer given to the potential maximum return. However, YBS continued to cite the potential maximum return and to give an unfair impression of the likelihood of achieving it. CSI also reviewed its promotions in response to the third parties’ concerns, but decided not to change its product brochure significantly.

In addition, the FCA found that CSI failed to have a procedure in place for a complete review of their long running promotions on a periodic basis. If CSI’s processes had included such a review, this may have resulted in the problems with the product brochure being remedied earlier.

FCA to Give Firms Regulatory Help
Global ComplianceRegulation

FCA to Give Firms Regulatory Help

Innovative firms, particularly smaller start-ups, will be offered the chance to work with the Financial Conduct Authority (FCA) whilst they develop new technologies and approaches to ensure they are compliant with regulations from the moment they go live, says FCA chief-executive Martin Wheatley.

Speaking at the London office of Bloomberg, the financial media company, Wheatley said the initiative, Project Innovate, was designed to ensure that the regulatory environment supported innovation in the market and was not seen a as a barrier. Wheatley said he also wanted a situation where regulators were keeping pace with technological advancement and not playing catch up.

Wheatley said that given London’s position as a European leader in the development of financial technology it was vital that the FCA took an open approach which would benefit firms and consumers.

Wheatley said: “It’s an imperative for regulators to be standing on the right side of progress. And this is one of the reasons why the FCA has launched Project Innovate.

“A key objective of the programme is to make sure that positive developments, the ones that promise to improve the lives of consumers or clients, are supported by the regulatory environment. In other words, we want an FCA that creates room for the brightest and most innovative companies to enter the sector.

“So, priority areas here might include the likes of mobile banking, online investment or money transfer, where we’re seeing innovations such as apps that allow you to take a picture of a bill and make payments with a tap of the smartphone. The possibilities opening up are extraordinary – and it’s clearly important they can be developed in the UK.

“To help this happen, the FCA is opening its doors to financial service firms (large and small) who are developing innovative approaches that aren’t explicitly addressed by current regulation – or where the guidance may be ambivalent.

“This engagement has already begun with a number of start-ups, as well as organisations like Tech City and Level 39, coming to talk to the FCA.

“Following on from this, we will be pulling together a scoping document exploring how innovation can be supported more effectively. That paper will focus on FCA expectations of firms, as well as specifics around advice and support for businesses bringing new models of financial service to market.

“In the meantime, we’ve already opened a hub in our policy team, which is pulling together FCA expertise to support innovators in two distinct ways.

“First, by providing help to firms developing new models or products advice on compliance so navigating the regulatory system. Second, by looking for areas where the system itself needs to adapt to new technology or broader change – rather than the other way round.”

“On top of this, we’ve also launched an incubator to support innovative, small financial businesses ready themselves for regulatory authorisation.”

Unqualified Accountants a Risk for UK Small Businesses
AccountancyRegulation

Unqualified Accountants a Risk for UK Small Businesses

UK small businesses could be inadvertently damaging their growth prospects by paying accountants who aren’t even qualified, warns the Association of Chartered Certified Accountants (ACCA).

The warning comes after research from cloud accounting software provider ClearBooks showed just 8% of small businesses considered an accountant’s qualifications when choosing one. ACCA points out that there is no law preventing anyone from calling themselves an accountant, and that as a result small businesses could be unknowingly paying someone without the necessary skills to handle their finances and help their business grow, who isn’t regulated or insured against risk.

Sarah Hathaway, head of ACCA UK, said: “Unlike solicitors and some other professional roles, the term accountant is not protected by law, so absolutely anyone can call themselves one, even without any training. Even those with minimal training in book-keeping or just one aspect of accountancy, will not always have the same rigorous qualifications and insurance as a chartered certified accountant. They will also be limited in helping the business grow.

“The ClearBooksPro survey showed that 32% of small businesses, when asked what they wanted help with from their accountant, identified business strategy – the largest response to that question. A successful small business accountant, whether it is an external practitioner or an in-house person, has to perform multiple roles and be able to provide strategic and operational input – it is impossible to get this from an unqualified person who has trained for book-keeping or tax only, because their skill-set is too narrow.

“Equally, any business with serious growth potential needs a person who can adapt quickly to their changing management accounting needs, and ideally be able to build and manage a professional finance function. Business growth is never even and rarely goes according to plan, so it’s vital to have the right skills in place early.

“If you were employing someone for a job, you would check their qualifications. You should be even more thorough when you are hiring the services of someone who will be at the helm of your business strategy,” said Hathaway. “To be sure you have the right kind of finance professional for your small business, who has a wide skill-set – the enterprise needs to grow – check they are fully qualified.”

Capgemini to Deliver Finance and Accounting Services to NBCUI
AccountancyRegulation

Capgemini to Deliver Finance and Accounting Services to NBCUI

Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, has announced that Capgemini America Inc., its North American subsidiary, has been selected by NBCUniversal International (NBCUI), the international arm of one of the world’s leading media and entertainment companies, to deliver business process outsourcing (BPO) services to help standardise and optimise its finance and accounting operations. With this newly signed contract, Capgemini now provides BPO services to four of the top five companies in the media and entertainment industry.

As part of the project, Capgemini aims to provide NBCUI with services in general accounting, accounts payable and accounts receivable via Capgemini Global Delivery Centres, while partnering with NBCUI’s finance team across its international divisions. Using Capgemini’s Global Enterprise Model1, NBCUI will benefit from the accelerated adoption of global finance standards, streamlined processes and the enhanced performance of its transactional finance activities, driving working capital and cash flow improvements, as well as better customer and partner insights.

“Capgemini has a strong track record of working with many of the world’s largest media and entertainment companies, and we’re excited to support an integral part of NBCUI’s key operations,” said Brenda Heath, Head of Capgemini BPO’s Media and Entertainment business unit. “The combination of our people, integrated solutions and Global Enterprise Model approach will help drive best-in-class operating performance for NBCUI’s finance and accounting functions.”

Key finance and accounting services that Capgemini intends to provide to NBCUI include Procure-to-Pay (P2P), Order-to-Cash (O2C) and Record-to-Analyse (R2A). In addition, the implementation of new command centre capabilities will help provide NBCUI with clear insights into its finance and accounting activities.

Financial Services Industry “Out of Step With FCA Phone Regulations”
Global ComplianceRegulation

Financial Services Industry “Out of Step With FCA Phone Regulations”

UK Financial Services companies are still struggling to comply with Financial Conduct Authority regulations which require them to record mobile phone conversations, a new report from analyst firm Ovum has found.

Research from call compliance specialist TeleWare, who sponsored the paper, estimates that as many as 45,000 mobile devices are at risk of non-compliance. This is far higher than the 25,000 often cited by the industry.

In 2012, TeleWare found that almost half of UK organisations didn’t have a fully compliant solution in place. This new report has found that two years down the line, non-compliance is still an issue and that the majority of impacted businesses continue to operate without effective measures in place.

A large number of organisations rely on simply imposing policies to prevent use of mobile devices for conversations which would fall under the regulations, but this approach is largely ineffectual, Ovum argues.

Steve Haworth, CEO of TeleWare, said: “This approach may be technically compliant, but is short-termist at best and unworkable at scale. Technical solutions, rather than policies, provide the most effective method of ensuring compliance without hamstringing employees.”

The exact scope of the regulation – including which companies are implicated and which of their operations and activities on mobile devices need to be recorded – has caused much confusion, despite the regulation coming into force in 2011.

“Some firms still believe they are altogether exempt and as a result are making no effort to comply. What is clear, however, is that all asset classes and instruments are included in the regulation, as are all sizes of buy- and sell-side firms. As for what needs to be recorded, the original wording states that ‘any relevant conversation’ should be recorded and stored, which is an extensive and highly inclusive statement”, added Rik Turner, senior analyst at Ovum.

Businesses Demand More from Legal Teams
LegalRegulation

Businesses Demand More from Legal Teams

A rising level of threats to business, and increasing numbers of regulatory requirements, are combining to ensure in-house general counsel are no longer focused solely on company legal matters. Instead, a new report from KPMG reveals that in-house lawyers’ work is dominated by commercial decision making as boardrooms seek validation of their business and operational plans.

The report, which is based on a series of in-depth interviews with general counsel, reveals that senior in-house lawyers have adopted six new core functional responsibilities, in addition to their role as legal advisers. Chief amongst these is a focus on cyber security, as concerns rise about the risk of data breaches brought about by human error and intentional sabotage.

Malcolm Marshall, global head of cyber security at KPMG, said: “In the last five years we’ve seen cyber security move from the back room to the board room and, in extreme cases, the court room. Against this sort of backdrop few people will be surprised to see it come in as the fastest growing risk for general counsel and that’s why in-house legal teams should have a seat at the table providing advice about the policies and vigilance required to tackle cyber risks for business.”

In addition to the new focus on cyber security, the report highlights that general counsel are now expected to manage:

• enterprise risks, such as geo-political events or technological failures

• a rising tide of regulation as the ‘new regulatory norm’ increases global compliance demands

• corporate liability for the conduct of third-parties

• execution of contracts, in addition to long-held expectations around the negotiation and drafting of contracts

• flexible approaches to dispute resolution, rather than an outright reliance on negotiation.

KPMG’s analysis goes on to reveal that there is a growing demand for in-house lawyers to conduct due diligence of suppliers, customers and other business parties, as corruption through the supply chain is tackled through increasingly tough legislative and judicial actions. According to the report, senior executives are also turning to their legal teams in recognition that their professional training ensures general counsel can ‘take on complex issues, distil them and arrive at a sensible conclusion’ with many respondents indicating that their lawyers are more likely to find solutions to common business problems, than colleagues in other business departments.

Strong Case for Investing in Staff Health
Corporate GovernanceRegulation

Strong Case for Investing in Staff Health

There are clear business benefits to supporting employee health and wellbeing, says a new CBI and Medicash report. The UK’s leading business group has outlined how improving employee health can contribute to better business performance through lower absence, higher productivity and better employee engagement.

The direct costs of employee absence to the economy are estimated at over £14 billion per year – and the CBI’s latest absence survey found that the average total cost to business for each absent employee is £975. These figures would be higher still if productivity lost due to presenteeism—staff attending work despite being unwell—was included as well.

Neil Carberry, CBI Director for Employment and Skills, said: “Having healthy staff is an essential part of running a healthy business. Investing in the wellbeing of employees is not only the right thing to do, it has real business benefits.

“It’s time for businesses and government to work hand-in-hand to move from a reactive to proactive approach on health and wellbeing in the workplace. Encouraging investment that gets people back to work sooner, with less of a burden on the NHS, is in everybody’s interest.”

Sue Weir, CEO of Medicash, said: “Developing and implementing a targeted healthcare strategy can help business avoid costly absenteeism and ensure their workforce is a happy, healthy and committed one. That’s why more and more businesses looking to increase output and maximise business performance are putting into place robust health and wellbeing strategies.

“Offering a health and wellbeing package is an affordable and beneficial means of doing this and of attracting, motivating, rewarding and retaining staff.”

Reducing Red Tape in Business Would Boost Greek Productivity – OECD
Global ComplianceRegulation

Reducing Red Tape in Business Would Boost Greek Productivity – OECD

Greece could save its businesses hundreds of millions of euros a year and improve their competitiveness by reducing administrative burdens, according to a new Organisation for Economic Co-operation and Development (OECD) report.

Measurement and Reduction of Administrative Burdens in Greece: An Overview of 13 Sectors identifies 3.3 billion euros worth of burdensome regulations weighing on businesses each year and says a quarter of these could be eliminated. Around three-quarters of the costs relate to company law, tax administration and public procurement.

Greece has worked to strengthen its public finances and restore competitiveness as it emerges from a deep crisis, but it needs now to reduce the layers of administrative requirements on businesses to support economic growth and jobs, the report says.

“This report takes a careful look at what it is costing Greek businesses to comply with rules and regulations which in many cases are unnecessary,” said OECD Deputy Chief of Staff Luiz de Mello, presenting the report in Athens. “Cutting some of this red tape would enable companies to spend less on administration and more on doing business.”

The report makes 87 recommendations for cutting down paperwork in 13 areas, including energy, telecommunications and fisheries. Many involve eliminating obligations to submit several paper copies of a document or dossier to different public authorities.

The 87 specific recommendations include:

• Setting a turnover threshold of 10,000 euros below which companies do not have to submit receipts to register value-added tax payments.

• Reducing the legal requirements on publishing annual financial statements.

• Allowing farmers simpler and faster access to European Union development aid, rather than a cumbersome existing system that uses intermediaries.

• Increasing the use of framework agreements in public procurement across all sectors, to make it simpler to draw up specific contracts.

• Simplifying annual leave records that need to be kept by employers.

• Enabling environment permits to be submitted and tracked online rather than via reports in paper form.

Towers Watson Launches Global Benefit Solution
Corporate GovernanceRegulation

Towers Watson Launches Global Benefit Solution

Global professional services company Towers Watson has announced the launch of a simplified global benefit solution designed for the multinational marketplace. The offering, Global Access, allows multinational employers to deliver local-country, pre-packaged benefit programs that include life, accident, health and disability, with three fixed, benchmarked benefit levels.

Developed in conjunction with leading global insurance carriers and designed around Towers Watson’s Benefits Data Source survey data, Global Access is aimed at employee populations where customization is not required in benefit design, and is available in more than 30 countries around the world (except for North America).

“Multinational companies often struggle with delivering quality employee benefit programs due to insufficient local-country HR functions and little or no availability of local benchmarking data on employee benefit packages,” said Cecil Hemingway, leader of Towers Watson’s Global Health and Group Benefits practice.

Hemingway continued, “Global Access addresses these challenges head on. We’ve developed a first-of-its-kind, alternative benefit solution that provides employers with the simplicity of a fully benchmarked ‘off the shelf’ product that can be implemented within days, while also reducing costs and workload.”

For employee populations where no customization of benefit design is required, the offering replaces the need for employers to either negotiate or place policies directly with insurance carriers, or having to retain a local broker to do so. In addition, Global Access has very low minimum head count requirements for coverage, enhanced underwriting features that include higher guaranteed issue or free cover limits, and removal of pre-existing condition requirements for members who have been previously insured.

“Global Access improves transparency and control of local plans and vendors for multinational corporations at corporate and regional levels, and is fully compliant at a local-country level,” said Francis Coleman, director, International Consulting Group, Towers Watson. “It’s also easy to operate and offers centrally managed renewals.”