Compliance Updater - June 2024

A summary of key compliance stories from around the globe in June.

1. Technical glitch hits some share prices on NYSE.
2. StanChart facing allegations of sanction-busting transactions linked to Iran.
3. Two Dutch trading firms fined €4.7m by Italian regulator.
4. US SEC oversteps rule-making powers regarding private funds.
5. UK FCA set to approve IPO overhaul.
6. US extends its bank sanctions against Kremlin facilitators.
7. Hedge fund made $760k profit after call with banker.
8. Terraform Labs to pay $4.5bn penalty.
9. UBS offers to pay 90% of funds invested with Greensill.
10. Swiss regulator orders HSBC to review PEP dealings.
11. Trafigura settles for $55m with CFTC over alleged trading abuses.
12. FATF removes Turkey and Jamaica from its “grey list”.

Technical glitch hits some share prices on NYSE.

A technical glitch impacted some shares on the New York Stock Exchange which were temporarily traded at steep discounts. Berkshire Hathaway ‘A’ shares fell from $621,000 to $185 and then rebounded. Barrick Gold traded at 25c compared to $17 beforehand. The NYSE said the issue had been resolved and the erroneous trades are to be cancelled.

StanChart facing allegations of sanction-busting transactions linked to Iran.

A forensic examination of spreadsheets provided to the US authorities has prompted whistleblowers to claim that international bank, Standard Chartered, broke sanctions. The whistleblowers claim that the bank was involved in more than half a million financial transactions between 2008 and 2013 linked to Iran.

Two Dutch trading firms fined €4.7m by Italian regulator.

Two Amsterdam-based high frequency trading firms – Optiver and Flow Traders – were fined a combined €4.7m and told to return €4.9m in profits by the Italian financial services regulator. The penalties arose because the two engaged in naked short selling without making the required disclosures. It appears that Optiver traded nearly 9.5m shares in oilfield engineer Saipem, 44.3% of its share capital over two days in July 2022. Flow Traders traded 7.2% of Saipem’s share capital on July 12th. Neither firm informed the regulator or the market and therefore violated transparency rules that short positions of more than 0.5% of a company’s share capital must be publicly disclosed. Optiver maintains that its positions were subject to a market maker’s exemption from disclosure.

US SEC oversteps rule-making powers regarding private funds.

An appeals court rejected the US Securities and Exchange Commission’s plans to force private fund managers to provide investors with detailed quarterly performance and expense reports and prevent side deals that might give better terms to some investors. In a significant push back on the SEC’s attempts to increase regulation in private markets, the appeals court found unanimously that it had exceeded its statutory authority.

UK FCA set to approve IPO overhaul.

The UK’s Financial Conduct Authority (FCA) is about to approve the biggest overhaul of the country’s listing regime in 40 years. With an announcement expected after the July 4th election, the FCA will announce combining the premium and standard listing segments along with relaxing rules to make it easier to list. The FCA does admit that the changes will mean accepting that there is a risk of more things going wrong.

US extends its bank sanctions against Kremlin facilitators.

The US expanded its secondary sanctions regime against foreign financial institutions transacting with sanctioned Russian entities. Previously covering about 1,200 sanctioned companies that were part of Russia’s defence sector, the regime was widened to cover more than 4,500 Russian entities that have already been sanctioned, even if it was for reasons other than direct support of the war in Ukraine.

Hedge fund made $760k profit after call with banker.

Hedge fund Segantii Capital Management made $760k of profit after shorting Canada Goose stock in 2018, after having been made aware of a block trade by a banker. According to the US Department of Justice, the hedge fund called a Morgan Stanley banker who alerted the fund to the imminent block trade. Subsequently the trader at Segantii was revealed to be Robert Gaggliardi (or “Gags”). Mr Gaggliardi subsequently joined Evolution Capital Management and is in dispute with Evolution over its failure to pay a sizeable bonus.

Terraform Labs to pay $4.5bn penalty.

Terraform Labs has agreed to pay $4.47bn to settle a case bought by the US Securities and Exchange Commission (SEC). Terraform Labs was facing accusations of arranging a cryptocurrency fraud that led to billions of dollars of losses for investors. Terraform will now be liquidated.

UBS offers to pay 90% of funds invested with Greensill.

In an attempt to draw a line under the scandal that it inherited when it rescued Credit Suisse, UBS has offered to pay 90% of the funds clients lost by investing with Greensill Capital.

Swiss regulator orders HSBC to review PEP dealings.

Finma, the Swiss financial services regulator, imposed a range of penalties on HSBC’s Swiss subsidiary regarding several transactions between 2002 and 2015 in which more than $300m was transferred between Lebanon and Switzerland. HSBC failed to notify about these transactions until 2020. Finma ordered HSBC to review its dealings with politically exposed persons and not to start any new relationships until the review is complete.

Trafigura settles for $55m with CFTC over alleged trading abuses.

Commodities house Trafigura agreed to pay $55m to settle with the Commodities and Futures Trading Commission over fraud and manipulation charges. The charges are alleged to have taken place between 2014 and 2020 and included trading whilst in possession of non-public information, manipulating a fuel oil benchmark and impeding whistleblower communications.

FATF removes Turkey and Jamaica from its “grey list”.

The Financial Action Task Force removed Turkey and Jamaica from its “grey list” of countries with shortcomings in their anti-money laundering and counterterrorism financing policies. Venezuela and Monaco were added to the list.