UK: the FSA's intrusive approach to regulation and corporate governance

Jon Pain, the Managing Director of Supervision at the Financial Services Authority, delivered a speech today in which he provided some interesting examples of the regulator's new, so-called "intensive", approach to regulation: see here. These included being "at the heart of the analysis and judgements being made by senior management" in mergers and acquisitions and actively encouraging changes in board membership. With regard to regulated firms' governance, Mr Pain observed:

... it is clear to us that the financial crisis exposed significant shortcomings in governance and management across numerous firms. And although poor governance was only one of many factors that contributed to the financial crisis, it was an important one. We are therefore looking closer at behaviour and culture in firms, particularly ensuring two key things: [1] that good culture and behaviours in firms is being driven by senior management; and [2] that good culture and behaviours are being reinforced by effective corporate governance and the role of the boards.

Through the crisis we have also seen examples where boards did not sufficiently challenge the executive or understand their firms’ business models and their inherent risks, and where boards did not simply receive the relevant management information to be able to carry out their important oversight role. Boards need to make sure they have the right people, asking the right questions, informed by the right information ... where this is not the case we will take action".

Europe: the AIFM directive

At a meeting of the Economic and Financial Affairs Council yesterday a mandate was agreed for negotiations with the European Parliament on the alternative investment fund managers directive. The purpose of the directive is twofold:

• to introduce a harmonised framework for monitoring and supervising the risks that alternative investment funds (e.g., hedge funds) pose to their investors, counterparties, other market participants and to financial stability
• allowing alternative investment fund managers to provide services and market EU funds throughout the EU single market, subject to compliance with strict requirements.

Further information about the agreed mandate is available here (pdf). The press conference can be watched here. On Monday, MEPs on the Economic and Monetary Affairs Committee agreed their position with regard to the proposed directive: see here. Interestingly, the MEPs agreed that naked short selling should be prohibited. Short selling is one of the matters currently being considered by the European Commission as part of its work on financial regulation.

UK: New post

This appeal concerns a claim by a beneficiary under a will for negligence against solicitors who, he claims, allowed his brother, also a beneficiary and then the administrator of the estate, to acquire and dispose of land which should have been part of the residuary estate. The claim was begun in a personal capacity, but it is now accepted that a claim that the solicitors owed a duty of care to beneficiaries would be difficult to sustain, and the claimant seeks to amend the proceedings to claim in a representative capacity on behalf of the estate. The events of which the claimant complains happened 13 or 14 years ago.

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