Our pick of key compliance stories this month
- Employee wins £426k in legal right to be boring
- PlayDapp hit with $300m security exploit
- Virgin Media faces Ofcom probe over compliance
- One in five firms don't do gender pay gap reporting
- FCA bans former London Capital & Finance director
- Berkshire firm fined for AML compliance failures
- Tradestation agrees to settle charges with the SEC
- Lime Trading fined $100k for untimely reporting
- Barclays VP sues bank for £230k over discrimination
- Big Tech low on time to meet compliance deadline
Employee wins £426k in legal right to be boring
An employee, referred to as Mr. T, was terminated from his position at consulting firm Cubik Partners. The grounds for dismissal were that he refused to participate in the company's team-building activities, which primarily involved partying and drinking after work hours.
The company cited his lack of participation as being "insufficient professionally." However, Mr T challenged his dismissal in court, arguing that he had the right to reject company policies that encouraged excessive behaviour. The court, during an employment hearing in France in late 2022, ruled in favour of Mr T, awarding him nearly half a million Euros in compensation.
The court documents revealed that the company events fostered an environment of excessive alcohol consumption, promiscuity, bullying, and other inappropriate behaviours, which Mr T objected to. This legal victory was dubbed the 'legal right to be boring', emphasising the importance of respecting employees' choices regarding participation in company activities.
PlayDapp hit with $300m security exploit
Elliptic, a blockchain analysis firm, disclosed that on 9 February, an unauthorised wallet exploited a vulnerability, resulting in the creation of 200 million PLA tokens valued at approximately $36.5 million. This breach is suspected to be linked to a compromised private key.
Subsequently, PlayDapp attempted to negotiate with the exploiter, offering a $1 million reward for the return of the stolen assets. However, negotiations broke down, leading the hacker to generate an additional 1.59 billion PLA tokens. These tokens, valued at approximately $290 million based on market rates at the time of the incidents, were then laundered through various cryptocurrency exchanges.
"The wallets associated with the exploiter have already been labelled in Elliptic’s tools – allowing exchanges and other service providers to identify whether they are receiving the proceeds of this hack"
With the original circulating supply of PLA tokens at 577 million, Elliptic highlights the potential challenge the exploiter might face in selling the newly minted 1.8 billion tokens at their pre-hack market value.
In light of the breach, PlayDapp revealed on X that they had paused the PLA smart contract. This action was taken to get ready for a potential token migration and snapshot, aiming to safeguard the assets of holders.
Virgin Media faces Ofcom probe over compliance
Ofcom is investigating Virgin Media due to worries about its adherence to regulations safeguarding vulnerable customers amid the shift from analogue to digital telephone landlines.
The probe focuses on Virgin Media's compliance with rules ensuring uninterrupted access to emergency services and fair treatment of vulnerable clients. The telecommunications industry is transitioning landline services to digital technology like Voice over Internet Protocol (VoIP), Digital Voice, or All-IP telephony.
Concerns arise about potential impacts on vulnerable individuals, particularly those using telecare alarm systems reliant on landlines for emergency assistance. While telecare systems can function with digital landlines, disruptions such as power outages or internet failures may cause failures, unlike copper phone lines that typically remain operational during such incidents.
“While telecoms companies like us have a crucial role to play in this switchover activity, it’s essential that telecare companies and local authorities also step up and meet their responsibilities to ensure everyone receives the support they need. We’re co-operating fully with the regulator’s investigation and will continue to work closely with the rest of the industry and other parties.”
Key takeaways:
- Ensure fair treatment of vulnerable customers - firms should prioritise the needs of vulnerable customers and take proactive measures to ensure they are not disadvantaged during technological transitions.
- Consider technological impacts - firms must carefully consider the technological impacts of transitioning services. While digital landlines offer advantages, such as cost-effectiveness and efficiency, potential disruptions like power outages or internet failures need to be addressed to prevent failures.
- Mitigate risks - it's crucial for firms to identify and mitigate risks associated with technological transitions. This may involve investing in backup systems or alternative solutions to ensure continuity of service, particularly for vulnerable clients reliant on specific technologies for their safety and well-being.
One in five firms don't do gender pay gap reporting
The latest findings from the CIPD's Pay, Performance, and Transparency 2024 report, backed by ADP, reveal concerning trends in gender pay gap reporting across the UK. A significant portion of employers, particularly among larger organisations, are not complying with government requirements regarding gender pay gap reporting.
Nearly a fifth of large employers admit to not conducting such reporting, while another 18% are unsure if their organisations have done so. Notably, smaller, large-scale employers are most likely to neglect reporting obligations.
The CIPD emphasises the importance of employers actively engaging in gender pay gap reporting to address workplace discrimination and inequality. This entails examining aspects such as recruitment, management, development, and reward systems to ensure fairness.
By gaining insight into these factors, companies can develop a narrative around their gender pay gap figures and formulate action plans to rectify disparities. Ultimately, proactive engagement with gender pay gap reporting is crucial for fostering a more equitable workplace environment.
FCA bans former London Capital & Finance director
The Financial Conduct Authority (FCA) has penalised Floris Jakobus Huisamen, a former director of London Capital & Finance (LCF), for violating financial promotion regulations. Huisamen has been fined £31,800 and barred from working in financial services.
An investigation by the FCA revealed that Huisamen, in his role overseeing compliance at LCF, negligently approved numerous financial promotions. These promotions misled thousands of investors who were marketed minibonds by LCF.
The promotions, authorised by Huisamen, painted an inaccurate and overly positive picture of the minibonds, failing to disclose significant risks such as hidden charges and the unsustainable nature of LCF's lending practices. This lack of transparency contributed to investors being misled about the true nature of the investments they were making.
“Mr Huisamen should have ensured LCF’s financial promotions were ‘fair, clear, and not misleading’. However, under him, the approval process became an ineffective tick-box exercise – as a result, thousands of investors were persuaded to invest on the basis of highly misleading statements.”
Key takeaways:
- Ensure transparency - firms should make sure that their marketing materials provide investors with a clear and accurate picture of the risks associated with their products.
- Adhere strictly to financial promotion regulations - complying with regulatory obligations set out by authorities like the FCA is vital. Any breaches can result in significant fines, legal penalties, and individuals being barred from working in the financial services industry.
- Prioritise investor protection - this should be at the forefront of firms' operations. Misleading investors through inaccurate or overly positive representations of financial products can have detrimental effects on individuals and erode trust in the financial services sector as a whole.
Berkshire firm fined for AML compliance failures
Fairbrother & Darlow, a law firm in Bracknell, was fined £16,000 by the Solicitors Regulation Authority (SRA) due to inadequate anti-money laundering (AML) controls spanning almost six years.
The SRA's review in 2020 revealed the firm lacked firm-wide risk assessment or AML policies and procedures, and several files had no client risk assessments. Despite a declaration of compliance in 2020, it wasn't until 2023 that Fairbrother & Darlow achieved compliance.
The SRA deemed this a serious breach, demonstrating a pattern of non-compliance and recklessness, which could harm public trust. The fine, 1.6% to 3.2% of annual domestic turnover, amounted to £16,052.80, with additional costs of £1,350. In mitigation, the SRA noted no significant harm, the firm's cooperation, and remedial actions.
Tradestation agrees to settle charges with the SEC
TradeStation, a subsidiary of Monex Group, will pay a $1.5 million penalty to the SEC without admitting or denying charges related to its digital asset operations. The SEC determined that TradeStation's crypto lending product was a security requiring registration, prompting TradeStation to cease the service in 2022.
Stacy Bogert of the SEC emphasised the importance of investor disclosure. Additionally, TradeStation agreed to pay a $1.5 million penalty to settle a separate investigation by the NASAA, focusing on its crypto interest-earning program.
“While we understand that investing in crypto asset securities may be alluring, investors must take the time to investigate a cryptocurrency-related investment before they hand over their money,”
Lime Trading fined $100k for untimely reporting
Lime Trading was fined $100,000 by the National Futures Association (NFA) for failing to submit required financial reports and notifications promptly to the US regulator, as well as for a lack of supervision.
The regulatory issues began in 2021 when Lime Trading filed segregation and secured statement computations late by three days and one day, respectively, citing a meeting and illness as reasons for the delays. In 2022, their daily segregation statement was also late, which Lime Trading attributed to a third-party consultant.
Subsequently, in 2023, Lime Trading submitted a month-end financial statement one day late and another financial report four days after the deadline. The NFA imposes a fee of $1,000 for each business day a financial filing is late, and Lime Trading had already paid $5,000 for its late filings.
Despite repeated warnings from both the NFA and the Commodity Futures Trading Commission (CFTC), Lime Trading continued to miss deadlines for financial reports, resulting in the $100,000 settlement with the NFA.
Key takeaways:
- Ensure adequate supervision - firms should establish robust internal controls and oversight mechanisms to monitor compliance activities.
- Heed warnings and sanctions from regulators - ignoring regulatory concerns can lead to escalated penalties and reputational damage.
- Execute proactive communication - if there are valid reasons for delays in regulatory filings, firms should communicate promptly with regulators, providing clear explanations and mitigating factors.
Barclays VP sues bank for £230k over discrimination
Nazia Lawrence, a Vice President at Barclays, has initiated legal proceedings against the bank, seeking £230,000 in damages. Lawrence, who has been with Barclays since 2015, alleges racial, religious, and sex discrimination as the basis for her denial of promotion.
Court documents revealed Lawrence's claims of being unfairly treated in comparison to her white male counterparts despite her expanded role and stellar performance. Despite voicing her concerns and receiving assurances of promotion, Lawrence's career progression remained stagnant while her white colleagues advanced.
As Lawrence formalised her grievances, her performance ratings declined, suggesting a troubling link between raising discrimination issues and professional repercussions. Barclays declined to comment on the lawsuit, emphasising non-disclosure. Lawrence's lawyer stressed the need for transparency, especially in the financial sector, to combat perceptions of discrimination.
Key takeaways:
- Address discrimination concerns promptly - firms must promptly address any concerns raised by employees regarding discrimination, whether it's related to race, religion, sex, or any other protected characteristic.
- Avoid retaliation - firms should ensure that employees who raise discrimination issues are not subjected to retaliation or adverse consequences. Any negative repercussions faced by employees after raising such concerns should be thoroughly investigated and addressed.
- Consider public perception - companies should consider the potential impact on their reputation and public perception when responding to discrimination allegations.
Big Tech low on time to meet compliance deadline
As of March 6, 2024, major Big Tech companies face a pivotal point with the European Union's Digital Markets Act (DMA) coming into effect. This legislation imposes strict requirements on designated digital platforms, aiming to foster fair competition, open up markets, and protect consumers' interests.
These platforms, including Alphabet (Google), Amazon, Apple, Facebook (Meta Platforms Inc.), Microsoft, and ByteDance, were identified as gatekeepers due to their significant market influence and potential to hinder competition and consumer welfare.
The DMA mandates these companies to comply with behavioural obligations and refrain from anti-competitive practices by the deadline. These obligations aim to reshape their business policies and potentially impact their operations significantly. The DMA's implementation is expected to benefit users of these platforms by promoting fairness and openness in digital markets.
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