Hello and welcome back to the Fides Weekly Update. Check in here to find out what’s been happening in your industry this week. Scroll down to read our regular feature Movers & Shakers of the week.
1). FCA issues record fine to Goldman Sachs for MiFid reporting errors stretching a decade
Goldman Sachs in London has landed a £34.3m fine from the Financial Conduct Authority (FCA) for misreporting more than 220m transactions over a 10-year period.
The fine is the largest handed out by the UK’s financial watchdog for transaction-reporting failures under MiFid, topping the £27.6m fine UBS received earlier this month by the regulator for similar errors.
The FCA said on Thursday that the bank had failed to provide “accurate and timely reporting” on more than 213m transactions between November 2007 and March 2017. The bank then reported 6.6m transactions that it did not, in fact, have to. This is equivalent to about 15% of the total of Goldman’s transactions over the same period.
Specifically, the failings related to Goldman’s change management processes, its maintenance of the counterparty reference data used in its reporting and how it tested whether all the transactions it reported to the FCA were accurate and complete.
The FCA has been cracking down on sloppy reporting of data, which it uses to spot market abuse and financial crime. Goldman is now the 14th company the FCA has fined over Mifid reporting failures.
The regulator has also dished out penalties to UBS AG, Merrill Lynch International, Deutsche Bank AG, RBS, James Sharp & Co, Plus500UK, City Index, Société Générale, Commerzbank AG, Instinet Europe Limited, Getco Europe Limited, Credit Suisse, Barclays Capital Securities and Barclays Bank.
Goldman co-operated with the FCA and agreed to settle, qualifying for a 30 per cent discount on a fine that otherwise would have been £49m.
Tougher transaction reporting rules were introduced after the financial crisis in 2008 to prevent market abuse. Banks are meant to report details such as the product traded and information on the price, quantity and venue of the trade, the counterparty, and any client information.
The relevant Mifid rules were replaced by a tougher investor protection regime known as Mifid II in January 2018, which is intended to improve transparency.
The fine comes at an uncomfortable time for Goldman Sachs which was recently caught up in the Malaysian 1MDB corruption scandal.
Mark Steward, the FCA’s executive director of enforcement, said: “The failings in this case demonstrate a failure over an extended period to manage and test controls that are vitally important to the integrity of our markets.
“These were serious and prolonged failures.”
Former director of investigations at the FCA and current partner in Brown Rudnick’s global white collar crime and regulatory investigations group Jamie Symington added:
He added: “The FCA stresses in this latest case that it feels it has given the industry considerable support with getting transaction reporting right, and has explained its importance to market and firm surveillance.
“In recent years the FCA has invested heavily to develop market surveillance technology, but that is reliant on firms providing good quality data.”
2). DLA continues to face repercussions from major cyberattack
Having been crippled for almost two weeks by a ransomware attack that cut access to all phones and computers, DLA Piper is still dealing with the aftermath of the NotPetya outbreak. Two years on, the firm now looks to battle out a dispute with insurer Hiscox after DLA was denied a multimillion-dollar insurance claim.
Initial reports in The Times stated the reason DLA was denied the claim was due to an “act of war” exclusion clause. It has been identified that the June 2017 cyberattack was initiated in Ukraine, possibly by a Russian state entity, which could therefore be defined as a ‘warlike action’.
However, a Hiscox spokesperson has recently released a statement arguing different reasons for the dispute: “They don’t have the right cover. The dispute we are in with DLA Piper is about a cyber policy and has nothing to do with a war exclusion.”
As a result of the same ransomware outbreak, Cadbury owner Mondelez is also suing its insurer Zurich over its denied $100 million claim for damage. These cases will be the first serious legal disputes over how companies can recover the costs of a cyberattack, which will likely set precedents to come as the risk of cybercrime progressively rises.
Due to the rise of both the frequency and severity of cyberattacks on global organisations, insurers are building cyber-specific insurance policies, which has become a growing market over the last few years. Currently around 80 per cent of cyber insurance policies are held by US businesses, a market now worth up to $3bn.
The NotPetya attack on DLA Piper shined a spotlight on the vulnerabilities of global law firms’ IT systems and their susceptibility to cyberattacks. In response to this, GCHQ’s National Cyber Security Centre released a report outlining the key cyber threats to the UK legal sector. Citing phishing attacks, data breaches, ransomware attacks as the main threats specific to the legal sector, the report provides practical guidance on how to mitigate these risks as well as highlights the areas that are most ripe for exploitation.
3). Movers & Shakers
Proskauer global transactional practice takes another hit
Funds partner Andrew Shire departs Proskauer Rose’s London office to join Kirkland & Ellis. His departure comes a day after the firm lost a 20-strong transactions team to Kirkland, announced yesterday.
Taylor Wessing bolsters Polish outfit with team hire
Taylor Wessing has hired Corporate partner Andrzej Mikosz into the firm’s Warsaw office. He joins from K&L Gates, bringing with him counsel Jakub Pitera, who will join as a partner, along with two associates.
CC looks in-house to replenish PE team
Clifford Chance has added Toby Parkinson as a partner in its City office. He joins from real estate asset manager OMERS Infrastructure where he served as a legal director.
Ashurst expands construction disputes offering in the Middle East
Pinsent Masons partner Bill Smith departs the firm to join Ashurst’s Dubai office, sitting in the firm’s global dispute resolution practice.
Innovation and Technology