Subject of Decision Notice: Jon Frensham
Date of Notice: 29 March 2021
Overview: The FCA considers that Mr Frensham is not a fit and proper person and has decided to withdraw his approval to perform his current senior management functions and to make an order prohibiting him from performing any functions in relation to regulated activity.
Mr Frensham has referred the Decision Notice to the Upper Tribunal (the Tribunal) where he and the FCA will each present their cases. The Tribunal will then determine what, if any, is the appropriate action for the FCA to take, and will remit the matter to the FCA with such direction as the Tribunal considers appropriate for giving effect to its determination. The Tribunal’s decision will be made public on its website.
Accordingly, the action outlined in the Decision Notice is provisional and will have no effect pending the determination of the case by the Tribunal. At this stage, the facts and matters stated in the Decision Notice therefore reflect the FCA’s belief as to what occurred and how Mr Frensham’s behaviour is to be characterised.
In March 2017, Mr Frensham was convicted of attempting to meet a child following sexual grooming. He committed this offence whilst he was an approved person. Mr Frensham was sentenced to 22 months’ imprisonment, suspended for 18 months.
Given the nature and circumstances of his offence, the FCA considers that Mr Frensham is not a fit and proper person to perform any function in relation to any regulated activity carried on by any authorised or exempt persons or exempt professional persons. This is because he lacks the necessary integrity and reputation.
The FCA considers that, as a result of this, Mr Frensham poses a risk to consumers and to confidence in the financial system. Therefore, the FCA considers it is appropriate, in order to advance its statutory objectives (which include protecting consumers and the integrity of the UK financial system), to withdraw his approval to perform senior management functions and to impose a prohibition order on him.
Subject of Decision Notice: Nat West
Date of Notice: 16 March 2021
Overview: The FCA announced that it has commenced criminal proceedings against National Westminster Bank Plc (NatWest) in respect of offences under the Money Laundering Regulations 2007 (MLR 2007).
The FCA alleges that NatWest failed to adhere to the requirements of regulations 8(1), 8(3) and 14(1) of MLR 2007 between 11 November 2011 and 19 October 2016.
These regulations require the firm to determine, conduct and demonstrate risk sensitive due diligence and ongoing monitoring of its relationships with its customers for the purposes of preventing money laundering.
The case arises from the handling of funds deposited into accounts operated by a UK incorporated customer of NatWest. The FCA alleges that increasingly large cash deposits were made into the customer’s accounts. It is alleged that around £365 million was paid into the customer’s accounts, of which around £264 million was in cash.
It is alleged that NatWest’s systems and controls failed to adequately monitor and scrutinise this activity.
NatWest is scheduled to appear at Westminster Magistrates’ Court on 14 April 2021.
This is the first criminal prosecution under the MLR 2007 by the FCA and the first prosecution under the MLR against a bank.
No individuals are being charged as part of these proceedings.
Subject of Enforcement: Dolfin Financial (UK) Ltd
Date of Notice: 12 March 2021
Overview: The FCA imposed a number of restrictions on Dolfin Financial (UK) Ltd (Dolfin) stopping it from carrying on any regulated activities due to concerns about the way it conducts its business.
What does Dolfin do?
Dolfin is a wealth management firm. It provides wealth management services to retail and professional clients on a range of investment securities, such as shares, government and corporate bonds, and investment funds. The firm also provides Tier 1 investor visa services.
What restrictions have the FCA placed on Dolfin?
The restrictions will stop Dolfin from carrying on any regulated activity and prevent it from reducing the value of its assets, or any of the client money or custody assets it holds, without the consent of the FCA.
Why did the FCA place restrictions on Dolfin?
The FCA has identified a number of serious concerns around the way that Dolfin operates its business, including the firm’s Tier 1 investor visa business activities and financial crime controls.
The FCA has been working with Dolfin while it took steps to try and address these concerns, including imposing voluntary restrictions on its regulated activities on 24 December 2019, and commissioning a Skilled Persons Review.
However, following the conclusion of the Skilled Persons Review and developments that have taken place since, the FCA has determined that it is appropriate in the interests of protecting the integrity of the UK financial system to stop the firm from carrying out regulated activities and has imposed these restrictions.
How long will the restrictions remain in place?
Firms which are FCA authorised need to meet the threshold conditions. The FCA has imposed restrictions as it considers that the firm is not meeting those conditions.
It is currently uncertain how long it will be necessary for the restrictions to remain in force as this is subject to the FCA’s concerns being addressed by the firm.
Subject of Enforcement: Mr Adrian Geoffrey Horn
Date of Notice: 4 March 2021
Permanent prohibition from performing any regulated activities
Overview: The FCA has fined Mr Adrian Geoffrey Horn, formerly a market making trader at Stifel Nicolaus Europe Limited (‘Stifel’), GBP52,500 for market abuse and prohibited him from performing any functions in relation to regulated activity.
Following an investigation, the FCA found that Mr Horn, an experienced trader, engaged in market abuse by executing trades with himself in the share McKay Securities Plc (‘McKay’).
This practice known as ‘wash trading’ involved Mr Horn intentionally placing buy orders in McKay shares that traded with his existing sell orders (and vice versa). In total, Mr Horn executed 129 wash trades during the period 18 July 2018 to 22 May 2019. Mr Horn entered orders into the market in such a way as to try and avoid anyone detecting that he was wash trading.
Mark Steward, Executive Director of Enforcement and Market Oversight, said:
“Mr Horn’s manipulative trading was serious. Wash trading is a form of manipulation which undermines market efficiency and integrity.
‘The FCA has also developed ways to detect this type of manipulation as well as other forms of market abuse and, as this case demonstrates, we will take robust action against such abuse.”
McKay was a corporate client of Stifel. Mr Horn’s motive for executing the wash trades was to ensure that a minimum number of shares were traded in McKay each day, which he believed was a requirement to ensure that McKay remained in the FTSE All Share Index. Mr Horn thought that by assisting McKay to remain in the FTSE All Share Index he would benefit the relationship between Stifel and its client.
Through his wash trading Mr Horn gave false and misleading signals to the market as to demand for and supply of McKay shares. His actions resulted in other market participants seeing what they believed to be legitimate trades in McKay occurring. In addition, the wash trades artificially inflated end of day trading volumes reported to the market.
Mr Horn was aware of the risk that his actions might constitute market manipulation but recklessly went ahead with those actions anyway.
Mr Horn demonstrated a high level of cooperation during the investigation. In particular, he made significant admissions during an early interview with the FCA. As a result, Mr Horn’s financial penalty was reduced by 25%. In addition, Mr Horn received a further 30% settlement discount.
The FCA considers that the fine and the prohibition imposed reflect the serious nature of the breach set out in the Final Notice and should act as a deterrent to other market participants.
Original Notice: https://www.fca.org.uk/publication/final-notices/adrian-horn.pdf