Archive for November, 2014

UK Securities Claims Update

Wednesday, November 26th, 2014

By Tristan Hall. Sedgwick London

At our financial lines seminar in London on 16 October, we considered the question of whether UK Securities claims are finally coming of age.  As part of that presentation, we reviewed the group action brought by investors against RBS and its directors and officers under Section 90 of the Financial Services and Markets Act 2000 (“FSMA”) regarding alleged misstatements made in a prospectus issued by RBS in connection with its rights issue in 2008.  The remedy afforded under Section 90 of FSMA is similar to that provided for under sections 11 and 12 (a) (2) of the Securities Act 1933 in the US.

It now seems likely that another high profile securities claim will be brought before the English Court as, on 25 November, it was reported that the law firm¹ representing one of the Claimant groups in the RBS case intends to file proceedings against Tesco and certain of its directors and senior management in connection with its recent announcement that the company had overstated its profit by £263 million.

It seems probable that the Tesco claim will proceed under Section 90A of FSMA, which covers misstatements or omissions in an issuer’s periodic financial disclosures or in information published to the market by means of a recognised information service.  The remedy afforded under Section 90A of FSMA is similar to that provided for under sections 10b and 18 of the Securities Exchange Act 1934 in the US.  Indeed, a putative class action already has been filed against Tesco and certain of its directors in New York federal court for and on behalf of purchasers of Tesco ADRs alleging violations of the Securities Exchange Act 1934.

Assuming the Tesco claim proceeds, then there will be two high profile claims before the English Courts that, for the first time, seek to test the remedies afforded to investors under FSMA.  The outcome of both claims will therefore be of significant interest to UK publicly traded companies, their directors and D&O insurers.

Another interesting feature of both claims is that they are being supported by litigation funding.  As we suggested at our seminar, the availability of litigation funding is likely to be a driver of UK securities litigation in the future.

 


 

¹ Stewarts Law – http://www.stewartslaw.com/tesco-to-face-legal-claim-from-shareholders-over-its-overstatement-of-profits.aspx

 

Banks Settle with U.K. Regulatory Authority Over Forex Manipulation

Wednesday, November 12th, 2014

Today it was announced that six banks settled with the U.K. Financial Conduct Authority and other regulators for a combined total of approximately $4.3 billion for their roles in the manipulation of the $5.3 trillion-a-day Forex market.  The six banks involved in the settlement include Citigroup, UBS, HSBC, Royal Bank of Scotland, JP Morgan and Bank of America.  While the settlement is larger than fines levied to date in connection with the Libor scandal, this may be just the beginning.  For example, Barclays was not part of these initial settlements and is reportedly still under investigation.  Further, the settlement does not include a settlement with many of the U.S. regulators that are conducting their own investigations, including criminal investigations by the U.S. Department of Justice which will likely involve individuals at the various banks.  The banks that settled today likely wanted to get ahead of the curve to limit their exposure as much as possible.  From the size of the fines, there must have been strong evidence against traders which resulted in the banks considering a settlement at this stage.  Additionally, the banks also face civil litigation in the U.S., which if successful could also present large exposures.  Click here to see an article from January 2014 authored by Sedgwick Chicago’s Jennifer Quinn Broda and Eric Scheiner on the regulatory scrutiny and potential insurance implications.

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