SFC issues guidelines on Disclosure of Inside Information

On 22 June 2011, the SFC published a revised draft of the Guidelines on Disclosure of Inside Information (‘guidelines’).

The guidelines reflect public comments and the relevant text of the Legislative Council Brief on the Securities and Futures (Amendment) Bill 2011(‘brief’). The revised guidelines provide assistance on the interpretation and application of the relevant provisions as set out in the bill. The guidelines are intended to help listed corporations to comply with the proposed statutory obligations.

A copy of the revised guidelines and the brief are available using the applicable link.

FSA Announces Tough Measures for Investors in Lehman-backed Structured Products

by Karl Hindle – London UK

On 27th October, the Financial Services Authority (FSA) announced a series of wide-ranging and very tough measures in favour of investors who bought or relied upon Lehman-backed investments.

Lehman Brothers collapse signified the definite arrival of a major global financial crisis. It was not simply that a bank had failed but the far-reaching impact on global financial markets and the realisation that this was not an isolated event but systemic.

The link to the FSA announcement is here

The FSA has performed a review of marketing and distribution of structured products and not just those of Lehman Brothers, though it has paid special attention to them. This review found “significant advice failings” amongst most advisory firms recommending structured products for investors and also, “serious deficiencies” in marketing collateral used by plan managers.

Consequentially, the FSA is imposing strong measures to treat investors fairly.

These include:

• investors advised by three firms now in insolvency administration will be compensated by the Financial Services Compensation Scheme (FSCS); 
• all firms which provided advice on Lehman-backed structured products must follow an FSA complaint template and handling process to ensure fair investor treatment; 
• three further advisory firms are being subjected to enforcement action by the FSA, for providing unsuitable advice and ordering other advisers involved in providing unsuitable advice to pay financial compensation to affected investors; 
• for all other firms involved in advising and using Lehman-backed structured products, strict guidance has been issued on standards of conduct expected when using any structured product or advising on them;  and
• retroactive assessment of structured product sales is to be made by larger sellers and to assess how their standards compare to the measures which are being introduced by the FSA now.

Redress is to be made where appropriate and the FSA has stated it will be conducting follow-up assessments in 2010 to ensure compliance.

It should come as no surprise that 2010 will herald a raft of fine announcements, above and beyond the enforcement action which has already been taken. While Lehman Brothers is dead, the mess left behind is still being cleaned up but, as with any politically charged issue, someone is going to have to be seen to be "doing something" and someone is going to have to shoulder the financial blame.

As Dan Waters, the FSA's Director of Conduct Risk stated, “...we will not hesitate in taking action if firms do not take sufficient steps to respond to our concerns.”

You can find several documents of note which were published along with the announcement at the following links:

For the FSA review document - Quality of advice on structured investment products

For the complaint template and associated guidance

For the Plan Manager Review of non-Lehman-backed products

For additional information visit the Wider Implications website