15 July 2014 by

Have the lessons been learnt from the swaps mis-selling scandal?…

With all the attention at Bully Banks, in Westminster and at the FCA seemingly focussed on ensuring a satisfactory resolution to the interest rate swap mis-selling scandal, a topical piece of legislation that was laid before the House of Commons on 25 June 2014 has apparently gone unnoticed.  The Financial Services and Markets Act 2000 (Excluded Activities and Prohibitions) Order 2014, parts of which come into force on 1 January 2015 and the remainder on 1 January 2019, sets out a number of activities that ring-fenced bodies (essentially deposit taking banks deemed too big to fail and therefore required to be separated from their investment banking arms) may not engage in – so called excluded activities.

What is of interest are the exceptions to the excluded activities.  These exceptions permit ring-fenced bodies to sell a narrow range of simple derivatives to their customers, including interest rate caps, swaps and swaptions and certain types of foreign exchange and commodity derivatives.  The policy behind this is clear – it enables ring-fenced bodies to provide basic risk-management services to many business customers, including small businesses.

But here is the rub.  The current mis-selling scandal involves the very same small businesses at which the Order is aimed.  And while some would argue that simple derivatives have a part to play in the day to day running of small businesses, there are others who say the complete opposite – and that, for example, the only interest rate risk management instrument suitable for a small business is an interest rate cap.  While we leave that debate to one side, it does seem to us odd, at the very least, that this new piece of legislation, endorsing as it does the sale of derivatives to small businesses, was passed without any discussion or reference to the mis-selling scandal that continues to swirl around us.  We hope that all interested parties sit up and take note of the fact that derivatives will continue to be sold to small businesses in the future and that the key will be to ensure that they are sold correctly and with full disclosure of all relevant risks.

27 June 2014 by

The Intellectual Property Act 2014 – change is coming…

Current UK patent and design law will change significantly with the implementation, later this year, of the Intellectual Property Act […]

11 July 2014 by

Lease Extensions and Enfranchisement just got a little easier!

Where a flat owner wants to exercise his or her right to a statutory lease extension or freehold purchase the […]

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