Concerning Conduct: Quarterly Cases - Q1 2024

A summary of recent cases concerning culture and conduct.

1. Global minimum tax for multinational companies starts.  
2. Battle for talent to sell alternatives to the wealthy.
3. Tui board backs delisting from London and shareholders agree.  
4. China launches new blue-chip stock index.  
5. Bet365 boss earns almost £300m in 2023.
6. Fake post sees Bitcoin up 2%, then down 3%. Real post re-establishes upward trend.
7. FCA set to gather detail on non-financial misconduct.
8. JPMorgan expresses worry around cyber.
9. Employment tribunal rules against FCA senior manager plea to work from home.
10. Bank of America warns staff who fail to return to the office.
11. Musk’s $56bn pay package improperly approved says Delaware court.
12. HSBC to disclose off-balance sheet emissions.
13. New director of UK SFO wants whistleblowers to be paid.
14. Calstrs urges private equity to share created wealth with workers.
15. LockBit cyber-criminal gang locked out by law enforcers.
16. Working from home gave the opportunity for insider trading in advance of M&A deal.
17. KPMG fined over audit of M&C Saatchi.
18. Worldcoin’s eyeball scanning blocked in Spain.
19. Banks clash with UK government plan to use frozen accounts to crackdown on economic crime.
20. HMRC ordered to reverse cuts to helpline services.
21. BlackRock’s Fink warns of looming pensions crisis.
22. Should the EU arms industry be considered sustainable?
23. Trafigura admits guilt over Brazil bribery.
24. Crypto storage company apologises over embarrassing sushi event.

Global minimum tax for multinational companies starts.

The start of 2024 saw global minimum tax for multinational companies go live – an effective tax rate of at least 15% on corporate profits. Interlocking rules mean that, if profit by a multinational is taxed below 15% in one country, other countries will be able to charge a top-up levy. The first wave applies to jurisdictions including the EU, UK, Norway, Australia, South Korea, Japan and Canada. The rules apply to multinationals with an annual turnover of more than €750m. Neither the US nor China have introduced legislation to be involved as yet.   

Battle for talent to sell alternatives to the wealthy.

Large asset managers are battling to hire staff to sell more complex investments as they move away from mutual funds and into alternative products. Firms are struggling to find sales staff who understand and have experience in products such as credit, private equity and real estate.

Tui board backs delisting from London and shareholders agree.

Europe’s largest tour operator, Tui, recommended its shareholders to vote to cancel its UK listing. Tui is currently listed in both London and Frankfurt and less than a quarter of the trading takes place in London. Just over 98% of those voting at Tui’s AGM approved the travel group’s plan to delist from London and retain just a single listing in Frankfurt. The vote follows similar decisions from Irish building materials group CRH and packaging company Smurfit Kappa. Others currently considering delisting from London include pollster YouGov and gambling group Flutter.

China launches new blue-chip stock index.

A new index – the CSI A50 index – was introduced by China’s Shanghai and Shenzhen stock exchanges. The new index is intended to better reflect those areas central to China’s economic transition, such as renewables and semi-conductor manufacturing, than the CSI 300 that favours financial companies.

Bet365 boss earns almost £300m in 2023.

Denise Coates, the CEO of private company Bet365, earned almost £300m in 2023 in pay and dividends. Her remuneration dwarfed that of listed FTSE 100 companies where the best paid CEO (at AstraZeneca) only earned £15m in 2022.   

Fake post sees Bitcoin up 2%, then down 3%. Real post re-establishes upward trend.

A fake post claiming that the US Securities and Exchange Commission (SEC) had approved a spot Bitcoin exchange traded fund saw the virtual currency’s price rise 2%, only to fall 3% when it was refuted by the regulator. The SEC then approved nine new funds and two conversions a few days later, and Bitcoin prices began to move upwards again. The funds included large, established players like BlackRock and Invesco, as well as digital focused participants like Valkyrie and Bitwise.

FCA set to gather detail on non-financial misconduct.

The UK’s Financial Conduct Authority (FCA) faced questions from a Treasury select committee surrounding “sexism in the City” and stated that it will be gathering data on the number of complaints of non-financial misconduct in the businesses it regulates, alongside the firms’ methods of detection and resolution. The regulator hopes to complete its analysis by the summer of 2024.    

JPMorgan expresses worry around cyber.

JPMorgan’s head of asset and wealth management, speaking at the Davos gathering, said the bank is spending $15bn on technology every year, employing 62,000 technologists. It was also revealed that the bank suffered 45bn hacking attempts every day – however, this was later corrected by the bank to say it included all activities monitored, whether malicious or not.

Employment tribunal rules against FCA senior manager plea to work from home.

A UK Employment Tribunal concluded that the FCA was within its rights in denying a manager’s wish to work from home full time. The tribunal judge highlighted how the office was a better environment for both “rapid discussion” and “non-verbal communication”.

Bank of America warns staff who fail to return to the office.

Bank of America has sent “letters of education” to staff who have not returned to the office. The text of the letters was reported to state: “Failure to follow the workplace excellence expectations applicable to your role within two weeks of this notification may result in further disciplinary action”.

Musk’s $56bn pay package improperly approved says Delaware court.

A Delaware court judge ruled that the $55.8bn remuneration package granted by Tesla to Elon Musk in 2018 should be rescinded. The judgement was based on improper approval of the board. The decision will be appealed, and it motivated Musk to declare “never incorporate your company in the state of Delaware” and that Tesla will “immediately” hold an investor vote to move its corporate registration to Texas.

HSBC to disclose off-balance sheet emissions.

Global bank HSBC is set to reveal so-called facilitated emissions in its annual report. Facilitated emissions are where the bank helps fossil fuel companies raise capital through equity, bond or credit facilities that do not sit on HSBC’s books. HSBC already reveals lending to such companies.

New director of UK SFO wants whistleblowers to be paid.

The new director of the UK’s Serious Fraud Office (SFO) wants to see the UK adopt the US model of rewarding whistleblowers with a proportion of the amount recovered by the government. The UK government is currently reviewing whistleblower laws, and it would require legislative change for the SFO to pay whistleblowers.

Calstrs urges private equity to share created wealth with workers.

The investment head of Calstrs, the California State Teachers' Retirement System pension fund, encouraged executives at private equity firms to “share the wealth” they create with workers at the companies they buy. Calstrs holds some $50bn invested in the private equity asset class. 

LockBit cyber-criminal gang locked out by law enforcers.

Ransomware group LockBit that has been involved in thousands of attacks on businesses, hospitals and schools in the last four years, was effectively shut down by law enforcement agencies including the FBI and the UK’s National Crime Agency.

Working from home gave the opportunity for insider trading in advance of M&A deal.

The husband of a BP mergers and acquisitions manager in the US overheard conversations whilst his wife worked at home and made $1.76m in illegal profits. The two worked at home in Texas in offices within 20 feet of each other, frequently overhearing and witnessing each other’s calls and video conferences. Tyler Loudon heard several conversations about BP’s takeover of TravelCenters of America and purchased 46,450 shares of TravelCenters stock without his wife’s knowledge before the deal was made public. The announcement of the takeover led to a 71% rise in the share price and Mr Loudon sold his shares. Mr Loudon confessed his activities to his wife after the Financial Industry Regulation Authority began asking questions, justifying his actions by saying he wanted to make enough money so that she did not have to work long hours anymore. His wife reported the trading to her superior at BP. Despite finding no evidence that she knowingly leaked the inside information, BP terminated her employment. She has subsequently moved out and initiated divorce proceedings. Mr Loudon was charged by the Securities and Exchange Commission and now faces disgorgement of profits and criminal charges. 

KPMG fined over audit of M&C Saatchi.

KPMG was fined £1.5m by the UK’s Financial Reporting Council for “serious failings” in its audit of advertising company M&C Saatchi in 2018. The initial fine of £2.25m was reduced to £1.5m for early admission. The partner on the audit was also fined nearly £50,000.

Worldcoin’s eyeball scanning blocked in Spain.

Worldcoin, the cryptocurrency project that offers digital tokens in return for eyeball scanning has been blocked by Spain’s data protection supervisory body. The regulator announced the ban citing particular concerns over information being gathered from minors.

Banks clash with UK government plan to use frozen accounts to crackdown on economic crime.

The UK government is proposing to introduce a new scheme that would enable banks to transfer trapped funds to government to help it counter financial crime. It is estimated around £220m is sitting in frozen accounts. Banks’ concerns revolve around the fact that the government expects them to retain the liabilities related to the transferred funds if depositors come forward.

HMRC ordered to reverse cuts to helpline services.

The UK chancellor Jeremy Hunt ordered the tax authority HMRC to immediately reverse its planned reductions in public helpline services. The changes would have seen the HMRC self-assessment helpline close between April and September each year before reopening between October and March.

BlackRock’s Fink warns of looming pensions crisis.

BlackRock CEO Larry Fink’s annual letter to chief executives and investors warned of a looming “retirement crisis”. Fink said, “we focus a tremendous amount of energy on helping people live longer lives, but not even a fraction of that effort is spent helping people afford those extra years”. He went on to opine that the retirement message from government and companies tells workers: “You’re on your own”.

Should the EU arms industry be considered sustainable?

The CEO of German tank-parts manufacturer Renk presented the argument that “ultimately a peaceful, democratic, free world is the fundamental of sustainability” and defence is “not in contradiction to ESG logic…. otherwise, nobody will take care of windmills and the energy transition”. European defence groups have been frustrated by EU regulators that determine activities that are considered sustainable, making it more difficult for excluded firms to raise finance.

Trafigura admits guilt over Brazil bribery.

Commodity trading house Trafigura pleaded guilty to US prosecutors over illegally bribing Brazilian officials to secure “improper advantage” on oil contracts with state-owned Petrobas between 2003 and 2014. Trafigura will pay $127m - $80.5m in fines and a further $46.5m in forfeited profits.

Crypto storage company apologises over embarrassing sushi event.

UK cryptocurrency company Copper, which stores digital assets for customers, apologised for a promotional party that saw sushi served from the bodies of scantily clad models. Copper admitted that “certain aspects of the event have caused offence” and said it will carry out an internal review of its event approval and sponsorship processes.