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consequences of financial sector misconduct September 28, 2016

Posted by Bradley in : financial regulation , add a comment

John Chiang, California State Treasurer, announced sanctions against Wells Fargo for a period of one year from today including the suspension of investments by the Treasurer’s Office in all Wells Fargo securities, suspension of the use of Wells Fargo as a broker-dealer for purchasing of investments by his office and suspension of Wells Fargo as a managing underwriter on negotiated sales of California state bonds where the Treasurer appoints the underwriter. The letter announcing the sanctions to Wells Fargo states:

In the case of Wells Fargo, how can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who have placed their financial well-being in its care? I have a responsibility as a leader in the financial marketplace to take action aimed at helping you understand that integrity and trust matter.

Meanwhile the UK’s Financial Conduct Authority published a raft of consultation and other documents collected together under the rubric “new measures to maintain firms’ focus on culture”, including a Policy Statement on regulatory references, a Consultation Paper on Duty of Responsibility, a Consultation Paper on non-executive directors, a Discussion Paper on the legal function, a Consultation Paper on whistleblowing in foreign branches and a Consultation Paper on remuneration in CRD IV firms. The announcement notes that the Senior Managers’ and Certification Regime has been functioning for 6 months and today’s publications give information about the Regime and move to strengthen it.

asil international economic law interest group biennial conference September 28, 2016

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I am going to the ASIL International Economic Law Interest Group Biennial Conference this week. The program is here. I am going to be talking about Financial Stability, Regulation and Politics (August 2016).

what is international law? September 28, 2016

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I gave an orientation talk to our LLM students on this topic and have written up my notes: What is International Law?.

what hope of suing the troika over austerity? September 21, 2016

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In an article with the title Austerity-hit citizens allowed to sue troika, ECJ rules, which discusses the implications of the decision in Ledra Advertising v Commission and ECB (Judgment) [2016] EUECJ C-8/15 (20 September 2016), Nicole Sagener writes:

Green MEP Sven Giegold said it was a “breakthrough for the protection of fundamental rights”and announced that he would endeavour to support any citizens looking to seek compensation from the troika. Giegold added that people who have been affected in countries like Greece, Portugal, Ireland and Cyprus finally have legal means by which to have their cases heard.

The article does note some caveats expressed by Andreas Fischer-Lescano: it’s not a “blank check” and will only apply in “extreme cases.”
To me the decision is another example of the Court nodding in the direction of the protection of human rights while emphasizing that they are not absolute. The Court states (in para 70, but this is not new):

restrictions may be imposed on the exercise of the right to property, provided that the restrictions genuinely meet objectives of general interest and do not constitute, in relation to the aim pursued, a disproportionate and intolerable interference, impairing the very substance of the right guaranteed

The need to protect financial stability, the Court says, is an objective of general interest for the EU:

Indeed, financial services play a central role in the economy of the European Union. Banks and credit institutions are an essential source of funding for businesses that are active in the various markets. In addition, the banks are often interconnected and certain of their number operate internationally. That is why the failure of one or more banks is liable to spread rapidly to other banks, either in the Member State concerned or in other Member States. That is liable, in turn, to produce negative spill-over effects in other sectors of the economy…In view of the objective of ensuring the stability of the banking system in the euro area, and having regard to the imminent risk of financial losses to which depositors with the two banks concerned would have been exposed if the latter had failed, such measures do not constitute a disproportionate and intolerable interference impairing the very substance of the appellants’ right to property. Consequently, they cannot be regarded as unjustified restrictions on that right.

Imagining circumstances in which EU institutions stated they needed to take urgent action to protect financial stability and the court said that the action was an unjustified interference with fundamental rights is. I think, difficult.

um iclr article cited in the financial times September 14, 2016

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An article in the FT by Hudson Lockett, China extends tariff on EU potato starch imports refers to an article published in our International and Comparative Law Review (which is about the celebrate its 25th anniversary) by Adam Soliman.

juncker on the state of the eu September 14, 2016

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The EU’s landing page for the State of the Union 2016 seems pretty upbeat:

President Juncker today addressed the European Parliament in his annual State of the European Union speech. He highlighted: Europe must invest strongly in its youth, jobseekers, and start-ups. An ambitious Investment Plan for Africa — a lifeline for those who might risk dangerous journeys for a better life. We propose free wireless for every European village and city by 2020. Journalists, publishers and authors should be paid fairly for their work, wherever it’s made and shared. We will defend our borders with the new European Border and Coast Guard.

The speech itself begins with some entirely appropriate gloom:

I stood here a year ago and I told you that the State of our Union was not good. I told you that there is not enough Europe in this Union. And that there is not enough Union in this Union. I am not going to stand here today and tell you that everything is now fine. It is not. Let us all be very honest in our diagnosis. Our European Union is, at least in part, in an existential crisis…we should admit that we have many unresolved problems in Europe. There can be no doubt about this. From high unemployment and social inequality, to mountains of public debt, to the huge challenge of integrating refugees, to the very real threats to our security at home and abroad — every one of Europe’s Member States has been affected by the continuing crises of our times. We are even faced with the unhappy prospect of a member leaving our ranks

There’s a lot of uplifting material in the speech too, however, about European values (like fairness and solidarity). The “highlights” referred to above are in there but appear in a very different way from the list on the landing page, because they are bound up and embedded in this discussion of EU values. It’s a shame UK citizens weren’t given something like this speech to read as they prepared to vote in the referendum in June.

jacques delors on the future of the eu September 12, 2016

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Here is the full article, in which Delors endorses a Common statement by 177 European and national Civil Society Organisations and Trade Unions, and here is a Delors highlight:

In this time of crisis for European identity, it is essential for the EU to show that it is not paralysed but ready to act as a leading force in the many challenges we face: the fight against climate change, increasing inequality, the need to ensure sustainable and inclusive development, promoting human rights and ensuring that nobody is left behind.

Here’s the challenge set out in the Common Statement (which argues for working for better, rather than less, Europe):

We must all –leaders,media and individuals — actively and at every opportunity speak out and act against division, marginalisation of different groups in society and those that play on fears for their own political ends.

cambridge international symposium on economic crime (2016) – 2 September 12, 2016

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Lots of discussions of misconduct last week, with perspectives from around the world. News stories include: proposals to make employers responsible for preventing money-laundering, false accounting and fraud in the UK (Jeremy Wright speech here), the SFO’s emphasis on genuine co-operation when considering deferred prosecution agreements, the need for global co-operation on economic crime, and arguments for new approaches to economic crime due to the failure of existing approaches.

cambridge international symposium on economic crime (2016) September 1, 2016

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I went to the symposium last year, and I am going back next week. This year’s symposium title is “Economic Crime – where does the buck stop? Who is responsible – facilitators, controllers and or their advisers?” and I am on a panel on the question “What are the proper responsibilities of management for the wrongs of those they supervise?”. The full programme is here.