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European Edition
28th July 2021
Loosening of City rules may see Spac deals surge
London could see a surge in blank cheque company flotations after the Financial Conduct Authority (FCA) relaxed proposed rules on special purpose acquisition companies, or Spacs – entities that raise cash from investors through flotations and later find operating businesses to buy. Under previous rules, shares in Spacs were suspended when a target company was identified, effectively trapping investors and discouraging them from participating in the UK market.The City watchdog in April had proposed an easing of the rules, waiving the suspension rule if a Spac raised at least £200m from its float. The regulator has now cut this to £100m in its final version of the rules.  "The final rules aim to provide more flexibility to larger Spacs, provided they embed certain features that promote investor protection and the smooth operation of our markets," the FCA said in a statement. The FCA is also giving Spacs an extra six months to clinch a deal before needing to seek shareholder approval to extend their life.
Credit Suisse appoints chief risk officer
Credit Suisse has appointed Goldman Sachs banker David Wildermuth as the lender's new chief risk officer. He will replace Lara Warner, who left in April. Credit Suisse has been tightening up on risk management in the wake of scandals linked to finance firm Greensill Capital and family office Archegos Capital. Joachim Oechslin, Credit Suisse’s chief risk officer until 2019, took over responsibility for risk management when Ms Warner left. He will return to his role as strategic adviser to chief executive Thomas Gottstein when Mr Wildermuth steps in as risk chief.
Private equity firm puts all its employees on vacation
New York headquartered private equity firm Aquiline Capital Partners is putting all staff on vacation in a move that is intended to recognize the efforts made by employees in the high-stakes world of dealmaking and avoid burnout from the physical and mental pressures of the pandemic. Aquiline has more than $6bn in assets and over 60 employees in New York and at its  London office. All internal meetings have been cancelled for the week and staff have been instructed to refrain from phone calls, emails and chatroom messages. An employee will step in if a company owned by Aquiline has an emergency. Reuters notes that the public health emergency has precipitated increased awareness of Wall Street’s work-centred culture and its impact on health. Workers have been speaking out, and employers have been looking at ways to reward them and address the effects of stress. “It’s definitely unusual,” Doug Haynes, president of Council Advisors, a consulting firm that works with senior executives, said of Aquiline’s move.
FCA fires warning to platforms over IT outages
The FCA has warned investment platforms it will no longer tolerate outages during busy market periods and will ramp up its supervisory work to ensure platforms’ operational resilience. In a Dear CEO letter, the FCA said multiple investment platforms suffered systems outages on 9 November 2020, the day Joe Biden secured victory in the US presidential election, triggering record trading volumes. Although the FCA did not name specific platforms, Hargreaves Lansdown and AJ Bell suffered technical issues that prevented many clients trading on 9 November. The FCA said it will no longer accept information technology (IT) outages when the markets are particularly volatile, and investment platforms need to ensure they have contingency plans in place.
Call to extend Brexit support fund
The Federation of Small Businesses (FSB) has called on the Government to extend a £20m fund to support companies struggling with post-Brexit EU trading. The SME Brexit Support Fund was launched in February and encouraged firms that traded with the EU to claim up to £2,000 each to help pay for training and professional advice so “they can continue trading effectively with the EU.” HMRC said that the fund, which was administered by PwC and closed to new applicants on June 30th, had provided £6.8m in grants to 4,376 businesses. Around 15,000 firms had registered an interest in the scheme, with 5,414 applying for £8.5m in funding. In a recent report, the FSB said that “there is still high demand from small firms for advice and support as they adapt to changes to the UK-EU trade relationship.” Liam Smyth, director of trade facilitation at the British Chambers of Commerce, added that businesses had to “jump” through too many “hoops” to claim the support.
IMF forecasts 6% global growth
The International Monetary Fund (IMF) has upgraded its economic outlook for the world´s wealthy countries as vaccinations help them rebound from the pandemic – but has downgraded its forecast for poorer nations. Overall, the IMF expects the global economy to expand 6% this year – marking a sharp bounce-back from the 3.2% contraction recorded in 2020. However, while advanced economies are expected to see growth of 5.6% in 2021 – up from a forecast of 5.1% in April - emerging market and developing countries are now expected to post growth of 6.3%, down from April’s forecast of 6.7%. In the update to its World Economic Outlook, the IMF expressed concern that any major resurgence of inflation could drive central banks to raise interest rates, warning that this could threaten the global recovery. The report added that the IMF expects inflation to return to pre-pandemic levels in most countries in 2022. Among the forecast revisions for this year, the largest upgrade is for the UK to 7%. Britain is also predicted to have the joint fastest growth of the G7, together with the US.
Morrisons' shareholder will not support Fortress takeover bid
Silchester International, Morrisons' biggest shareholder, says "it is not inclined to support" the £6.3bn takeover bid by US firm Fortress Investment Group. The shareholder, which owns a 15.14% stake in Morrisons, said in a statement there was "little in the recommended offer that could not be achieved by the supermarket as a listed company." It said: "Silchester considers schemes of arrangement, with a 75% hurdle for shareholder acceptance and squeeze out, to be disadvantageous to public shareholders generally," adding "Silchester encourages Morrisons' board to allow more time to respond to other parties who might offer better value to Morrisons' public shareholders." Silchester highlighted the benefits of Morrison’s freehold assets, and cited the potential to leverage Morrison’s resilient vertical supply chain, which includes farms, 19 manufacturing sites and one fishing trawler.
Just Eat investor questions management
Cat Rock Capital, a major investor in Just Eat Takeaway, has urged the food delivery platform to explore a potential merger, saying management’s “deeply flawed” communication with investors has contributed to a 28% share price drop this year. The activist investor, which holds a 4.7% stake, said Just Eat is at risk of a hostile takeover bid well below market value and called for bosses to explore “strategic combinations with other global players.” Alex Captain, founder and managing partner of Cat Rock Capital, said that while it was pleased with the company’s operational performance under boss Jitse Groen, it was “deeply disappointed” by its handling of investor relations. The investor also said management had failed to defend the company from competitor attacks.
PwC sued for failing to spot alleged fraud
PwC has been sued by the administrators of racing car dealership JD Classics for allegedly failing to spot fraud resulting in losses of over £41m. Administrators from Alvarez & Marsal have accused PwC of being negligent in their handling of accounts between 2016 and 2017, arguing that the incorrect finances allowed JD Classics to build up costly liabilities.
HSBC accused of ‘blatant and indefensible’ forex fraud by ex-client
Lawyers for currency manager ECU Group have told the High Court that currency traders at HSBC made extra profits through activity which amounted to “blatant and indefensible” fraud.
Rio Tinto faces FCA probe
The Financial Conduct Authority (FCA) is conducting a probe into Rio Tinto and its $6.75bn underground copper project in Mongolia's Gobi Desert, looking into whether the mining firm breached listing rules in disclosures about the value of mine Oyu Tolgoi in 2018 and 2019. Oyu Tolgoi, one of the world's largest-known copper and gold deposits, is 34% owned by the Mongolian government, with the rest held by Turquoise Hill, in which Rio owns a 50.8% stake.
Audit of auditors leaves room for improvement
The FT looks at audit quality, suggesting that the Financial Reporting Council’s annual inspection “has read very similarly for the past five years” before considering the impact proposed reforms will have.
German insurers expect up to $6.5bn in storm claims
German insurance industry association GDV estimates that there will be up to €5.5bn ($6.5bn) in claims from storms that brought catastrophic flooding to parts of the country this month. Allianz, Germany's biggest insurer, gave its first damages estimate yesterday, saying it expects claims of more than €500m from storm Bernd. Allianz added that it had already received claims for about 10,000 homes and 3,000 vehicles and expects the figures to rise to 30,000 and 5,000 respectively.
FirstGroup chief executive steps down
The chief executive of bus and train operator FirstGroup is to step down. Matthew Gregory, who has been chief executive since 2018, will leave the position after the company’s annual shareholder meeting in September. FirstGroup’s chairman, David Martin, will become executive chairman until the company finds a permanent chief executive. Coast Capital Management, a hedge fund that owns about 15% of the group, issued a statement on Monday calling on Mr Gregory and two other directors to step down after failing to stop the sale of the transport operator's North American divisions for $3.1bn. The sale was approved by just over 60% of FirstGroup’s shareholders at a meeting in May but Coast had argued that the price was too low and had described it as a “terrible deal.” Mr Gregory said that his decision to step down was “unrelated to the calls for my resignation.”
Concerns over fire safety in modular buildings
The BBC looks at concerns raised over the fire safety of modular buildings, following two significant fires in Shetland - at the Fair Isle Bird Observatory in 2019, and at the Moorfield Hotel in 2020. Both buildings, less than 10 years old, were made from factory-built units shipped to Shetland by sea. Ian Abley, a technical designer with the Fire Protection Agency, said there could be issues of fires "getting into the cavity between the modules," and travelling "from one compartment to another through unseen spaces within the compartment walls and floors."
Vatican cardinal goes on trial in landmark financial corruption case
Cardinal Giovanni Becciu, once one of the most powerful men in the Vatican, has gone on trial for embezzlement and other alleged crimes, as a scandal that has posed one of the biggest tests of Pope Francis’s pontificate spilled out into the open. The case, focused on an ill-fated multimillion-pound Vatican investment in a luxury London property development, makes Giovanni Angelo Becciu the first cardinal to face trial for financial crimes in the Vatican’s criminal court. Becciu, who has had his legal immunity as a cardinal lifted by Pope Francis, is accused of abuse of office and embezzlement linked to his oversight of hundreds of millions of euros of Catholic charitable funds held in Swiss banks. He has denied wrongdoing and said he believes he is the victim of a conspiracy.

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