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The Financial Reporting Council (FRC) has fined PwC and EY millions of pounds for their audits of London Capital & Finance (LCF), a minibonds firm which took money from almost 12,000 investors before collapsing in 2019. PwC agreed to a £4.9m settlement, discounted from £7m, tied to failures over its audit of LCF’s 2016 financial statements. PwC auditor Jessica Miller was also given a £105,000 sanction. PwC resigned as LCF’s auditor in October 2017. The regulator criticised the firm for an adequate understanding of LCF’s business and internal controls along with insufficient professional scepticism. EY, which audited LCF’s final 2017 accounts, agreed to a £4.4m penalty, discounted from £7m, while auditor Neil Parker was fined £47,250 – the same failures were noted by the FRC. A smaller firm, Oliver Clive & Co (OCC), which was responsible for auditing LCF’s 2015 statements, was fined £42,000 and auditor Emma Benjamin told to pay £14,000. Jamie Symington, the FRC’s deputy executive counsel, said: “These breaches are made considerably more serious by the fact that all of the auditors knew they were auditing an expanding business which was engaged in selling unregulated financial products to retail investors, and that potential investors might place reliance on the clean audit opinions.”

 

Financial Times

The Daily Telegraph

The Times

The Guardian

China is suspected of hacking the UK Ministry of Defence in an attempt to target military personnel. A defence computer system containing personal details of military personnel has been compromised, and China is the leading suspect. The attack targeted a payroll system containing details of serving personnel and veterans, exposing names, bank details, and addresses. Defence officials are investigating the scale of the problem, but so far, no data loss has been detected. China has previously used LinkedIn to target ex-military personnel and recruited former RAF pilots.

 

Sky News

Bloomberg

The Times

London Evening Standard

Paris 2024 is preparing to face an unprecedented cybersecurity challenge as organisers expect immense pressure on the Games this summer. Organised crime, activists, and states pose the main threats during the Olympics and Paralympics. Paris 2024, in collaboration with the French national agency for information security (ANSSI), and cybersecurity companies Cisco and Eviden, are working to limit the impact of cyber attacks. Vincent Strubel, the director general of ANSSI, stated that while attacks cannot be prevented entirely, their impact on the Olympics must be minimised. Paris 2024 has conducted extensive preparation work, including stress testing its systems with "ethical hackers" and using artificial intelligence to triage threats. The Games will face an unprecedented level of threat, but Paris 2024 believes it is a step ahead of the attackers. The number of cybersecurity events is expected to increase tenfold compared to the Tokyo Games. The Games take place amid a complex global backdrop, including geopolitical conflicts.

 

Reuters

A ransomware group has carried out its threat against a Scottish health board and published a "large volume" of stolen data on the dark web. NHS Dumfries and Galloway was the subject of a cyber-attack in March and confirmed hackers were able to access a "significant quantity of data," including patient and staff-identifiable information. The cyber criminals later released a "proof pack" - which included confidential information on a small number of patients - and warned more would follow. In an update on Monday, the health board confirmed a "large volume of data" had been published.

 

Sky News

Marty Malinow, founder and CEO of advisory firm Parameter Climate, discusses the surge in demand for weather derivatives. Trading volumes for weather derivatives have increased by over 260% in 2023, with outstanding contracts currently 48% higher than a year ago. The market for weather derivatives is expected to be worth as much as $25bn. This growth is driven by rising climate volatility, supply-chain issues, inflation, and geopolitical factors. Weather derivatives provide a hedge against less severe but more common meteorological threats, such as excessive rainfall or hot summers. The demand for weather derivatives is also fueled by corporations recognizing their exposure to weather risks and the increasing pressure from regulators and stakeholders to address these risks. The weather derivatives market is expanding to cover more locations and industries, including energy suppliers and agriculture. Advances in meteorological science and technology are leading to the development of more sophisticated weather derivative products. Despite challenges such as basis risk and the short-term nature of weather derivatives, market players are optimistic about the future of the weather trading market.

 

Bloomberg

The UK's latest strategy for meeting its legally binding targets on reaching net zero emissions has been ruled unlawful by the High Court. Campaign groups Friends of the Earth, ClientEarth and the Good Law Project brought a judicial review of Britain's most recent climate plan, arguing that it gave too little information on the government's assessment of the risk of policies not being delivered. The High Court upheld four out of five grounds for legal challenge and ordered the government to produce a new plan within the next 12 months. The Department for Energy Security and Net Zero defended the UK's record on climate change and stated that the ruling contained no criticism of the detailed plans in place. 

 

Sky News

The Guardian

P&O Ferries CEO Peter Hebblethwaite accepted a six-figure bonus in 2023 just over a year after the company sacked hundreds of UK-based crew and replaced them with foreign agency workers, MPs heard on Tuesday. Hebblethwaite previously appeared in front of a joint transport and business committee in March 2022, at which time he said the lowest-paid agency worker would receive £5.15 an hour. However, an investigation by ITV News and the Guardian this March revealed some P&O seafarers were receiving an hourly rate as low as £4.87. The UK minimum wage is £11.44 an hour – but the rates do not apply to maritime workers employed by an overseas agency who work on foreign-registered ships in international waters. During his appearance in parliament, Hebblethwaite was asked by Liam Byrne MP: “Are you basically a modern-day pirate?...You seem to be robbing your staff blind.” Regarding his remuneration, Hebblethwaite said he earned a £325,000 basic salary and received an £183,000 bonus in April 2023. “I reflected on accepting that payment. But ultimately I did decide to accept it,” he said. “I do recognise it is not a decision that everybody would have made.”

 

Financial Times

The Times

The Guardian

Airports across the UK are having problems with their e-gates at passport control, leading to huge queues. Several airports have confirmed that the UK Border System is down nationwide. A London Gatwick spokesperson said: "Some passengers may experience delays at immigration due to a nationwide issue with UK Border Force e-gates. Our staff are working with UK Border Force - who operate passport control including the e-gates - to provide assistance to passengers where necessary."

 

Sky News

BBC News

Children under 13 may be banned from social media platforms as Ofcom introduces strict age checks to protect them from harm online. Social media companies like Facebook and Instagram will be required to implement robust checks, including the use of photo ID, to enforce age limits. The move could result in millions of children being removed from social media sites. Tech firms failing to comply with the new regime may face fines up to 10% of their global turnover. Michelle Donelan, the Secretary of State for Science, Innovation, and Technology, supports the measures, stating that they aim to shield children from age-inappropriate content and address the harmful effects of addictive features and damaging algorithms. Self-declaration of age will be banned, and social media companies will need to configure their algorithms to filter harmful content. The draft code will be presented to Parliament for approval next spring. Ofcom research shows that social media use increases with age, with 95% of 16 to 17-year-olds using it. The NSPCC welcomes the code as a step towards protecting children online.

 

The Daily Telegraph

The chief executive of the Financial Reporting Council (FRC), Richard Moriarty, stresses the need for regulation that benefits UK PLC as he explains how he aims to make the FRC a more strategic and relevant organisation. Moriarty, who took over from Jon Thompson last year, said: "I hope people will start to see the FRC as a more engaging, open, accessible, responsive organisation." He added, however, that this "doesn't mean we're always going to agree because that's the nature of regulation. It can never be a popularity contest, but I'm very keen that we're engaging." Speaking on the Following the Rules podcast, Moriarty also said he wanted to "establish a clear direction" for the FRC, following delays to legislation to bolster its powers.

 

City AM

Unfair banking practices, inadequate regulation, and barriers to accessing finance for smaller businesses are posing a risk to growth and innovation in the UK, according to a report by the House of Commons Treasury select committee. The report highlights the difficulties faced by SMEs seeking finance after the COVID-19 crisis and the energy shock linked to Russia's invasion of Ukraine. The committee recommends giving the Financial Conduct Authority powers to force banks to disclose the number of accounts they close and the reasons behind the decision. It also suggests giving the Financial Ombudsman Service new powers to address unfair requests for guarantees. The committee urges the government to crack down on debanking and raise the minimum notice period for bank account closures. The report warns that the Prudential Regulation Authority's plans to introduce Basel 3.1 could further tighten conditions for SMEs. Writing in the Telegraph, chair of the committee, Dame Harriett Baldwin, provides more detail, stressing that “banks must stop making a tough landscape for small businesses needlessly tougher.”

 

Financial Times

The Times

The Daily Telegraph

The Guardian

Relaxing rules around company listings will not attract more investors to the UK, the public sector pensions lobby group has warned. The Local Authority Pension Fund Forum (LAPFF) argues for tighter governance rules to protect investor interests and the UK economy. The LAPFF said it was very concerned by lobbying efforts from the Capital Markets Industry Taskforce, which claimed onerous rules were to blame for London’s loss of business, The LAPFF said this position was not evidence-based, balanced or credible. The CMIT, which is chaired by Julia Hoggett, the CEO of the London Stock Exchange (LSE), successfully lobbied the Financial Reporting Council last year against introducing changes to the Corporate Governance Code which would have increased reporting requirements on businesses. The LAPFF is now calling on the LSE to release any evidence it had regarding any link between the UK’s listing rules resulting in fewer listings or less investment.

 

Reuters

The Daily Telegraph

The Competition and Markets Authority (CMA) in the UK has blocked more mergers and acquisitions (M&A) deals than its European counterpart, the European Commission (EC), over the past five years. According to Linklaters, the average deal mortality rate in the UK was 57%, while in the EU it stood at 41%. Verity Egerton-Doyle, partner in Linklaters' antitrust and foreign investment team, highlighted that outcomes are “broadly aligned” between the watchdogs. But she said instances of divergence are increasing, particularly in the last year, with the CMA clearing two of the tech deals that the EC had blocked. “Neither of these were typical mergers of ‘horizontal' competitors,” she said. Simon Branigan, global head of Linklaters corporate division, also said deals are taking longer to close and becoming increasingly complex due, in part, to “antitrust regulators becoming much more interventionist and less predictable.”

 

City AM

The Financial Conduct Authority has fined and banned James Lewis, the former chief executive of brokerage Shard Capital, for providing incorrect information about clients' cash balances. 

 

Financial Times

Financial firms must avoid using AI trading strategies that amplify market instability, warns a member of the Bank of England's Financial Policy Committee. Jonathan Hall, an external member of the FPC and former investment banker, cautions against the use of 'deep trading agents' - AI-powered strategies that operate semi-autonomously and can collude with each other or be ill-equipped for market turmoil. Hall advises extensive testing and compliance with regulations before implementing AI models. He draws parallels with trading strategies from the 1990s that led to the collapse of the Long-Term Capital Management hedge fund. "If trading algorithms engage in non-compliant, harmful behaviour then the trading manager will be held responsible," says Hall.

 

Reuters

Official statisticians at the Office for National Statistics (ONS) have successfully increased response rates for a key labour market survey, which is crucial for rate-setters at the Bank of England (BOE). Liz McKeown, who oversees economic data production at the ONS, stated that response rates have improved significantly after implementing a recovery plan that included boosting monetary incentives and conducting face-to-face interviews. The BOE has been lacking reliable labour market figures for seven months since the flagship Labour Force Survey was suspended due to quality concerns. The improved data will help inform decisions on interest rate cuts. The ONS plans to introduce a transformed version of the survey in September to gather more accurate labour market data. The BOE has been relying on other indicators in the meantime, but economists and investors believe that the improved response rates may allow for rate cuts later this year. The ONS is also taking measures to ensure that the release of crucial data is not disrupted by potential industrial action at the official data agency.

 

Bloomberg

Investment by private equity and venture capital firms in UK businesses fell by close to £10bn last year on the back of higher interest rates. The British Private Equity and Venture Capital Association, a trade body, reported that investment dropped to £20.1bn, down from £29.7bn in 2022. The decline in investment has prompted the association to call for measures to bolster economic growth and attract inward investment. Labour's plan to abolish a tax loophole has put pressure on the industry, although there’s speculation the plans may be diluted. The private equity industry, heavily debt-funded, has been hit by higher interest rates and is finding it more difficult to raise fresh funds. "Private capital is a key partner for driving growth in every nation and region of the UK," said Michael Moore, CEO of the association, “but investment by the industry could be even greater with the right policy environment in place."

 

The Times

The boss of Ford’s European electric car business has warned that net zero targets could force the car giant to cut back sales of petrol cars in the UK, pushing up prices. Martin Sander urged ministers to make sure the zero emissions vehicle (ZEV) mandate was “in line with consumer demand” amid new figures showing a fall in electric vehicle sales. The Society of Motor Manufacturers and Traders has revised its forecast for EV sales from 24% of all cars registered to 19.8% this year, some distance behind the government’s 22% target set out in the ZEV mandate. Meanwhile, the UK, most US states, Israel and New Zealand are among the jurisdictions to have levied new taxes on electric vehicles as they attempt to fill the whole left by a drop in receipts from fuel duties.

 

Financial Times

Financial Times

The Daily Telegraph

The Times

More than 800,000 people in Europe and the US have been deceived into sharing card details and personal data with a vast network of fake online designer shops operated from China. The operation, described as one of the largest scams of its kind, involved the creation of 76,000 fake websites offering discounted goods from well-known brands. The websites, published in multiple languages, were designed to trick shoppers into providing their personal information and money. The investigation revealed that the network has been active since 2015, with over 1m orders processed and an estimated €50m attempted to be taken.

 

The Guardian

Brexit is cited as an example of the dangers of trade fragmentation, according to Gita Gopinath, deputy managing director of the International Monetary Fund (IMF). Speaking in California, Gopinath warned that imposing trade restrictions diminishes efficiency gains and reduces competition. She went on to admit that geopolitical rivalry meant it would be "difficult to achieve" a return to a multilateral, rules-based trading system.

 

The Times