Greg Kilminster
Head of Product - Content
FCA fines ex-Wizz Air executive for unauthorised share trading and disclosure failures
The Financial Conduct Authority (FCA) has fined András Sebők, former chief supply chain officer at Wizz Air Holdings plc, £123,500 for breaching trading rules under the Market Abuse Regulation (MAR). Sebők traded company shares during restricted periods and failed to notify both Wizz Air and the FCA of his trades within the required timeframe.
Violations of trading and disclosure rules
Between April 2019 and November 2020, Sebők executed 115 trades in Wizz Air shares worth over £4 million, violating MAR Article 19 regulations. He traded during closed periods—specifically, the 30 days preceding the airline’s financial results announcements—and did not report the transactions within the three-day disclosure window mandated for persons discharging managerial responsibilities (PDMRs).
This case marks the FCA’s first penalty against a PDMR for trading during closed periods and its second for failing to disclose trades.
Safeguarding market integrity
The FCA emphasised the importance of transparency and compliance for senior executives, who have access to confidential and potentially price-sensitive information. Steve Smart, executive director of enforcement and market oversight at the FCA, stated: “Trust and transparency are vital to keeping our markets clean. Senior executives, like Mr Sebők, must report their trading and comply with the restrictions on trading during closed periods or they risk undermining the integrity of the market.”
Settlement reduces penalty
Sebők qualified for a 30% reduction in his fine by agreeing to settle the matter early, bringing the penalty to £123,500. The FCA release reminds PDMRs that trading restrictions and disclosure rules are critical measures to prevent market abuse and maintain investor confidence. The enforcement action highlights the regulator’s commitment to detecting and penalising misconduct at senior levels.
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ASIC urges financial advisers to prioritise client interests and improve standards
In a speech at the Financial Advice Association Australia (FAAA) Congress, ASIC Commissioner Alan Kirkland called on financial advisers to maintain high standards, prioritise client interests, and remain vigilant about product performance to improve outcomes for consumers. He outlined ASIC’s ongoing concerns with misconduct in the advice sector, particularly in relation to retirement savings, and highlighted key enforcement and compliance priorities for the coming year.
Reforms improve standards but issues persist
Kirkland acknowledged the effect of recent financial advice reforms, including the introduction of the best interests duty and tighter education requirements. “The reforms... have undoubtedly made it more likely that clients will receive advice that will advance their interests,” he said. However, ASIC continues to encounter examples where advice has led to “poor, if not devastating, outcomes for consumers.”
Highlighting the ongoing investigation into the Shield Master Fund, Kirkland described a pattern of conduct involving telemarketers recruiting clients, followed by advisers encouraging them to move retirement savings into high-risk investments. “Their precious retirement savings [are] invested in high-risk property or crypto investment schemes that are highly unlikely to align with the best interests of the consumers involved,” he said.
Focus on consumer outcomes and retirement savings
Kirkland reiterated ASIC’s strategic focus on improving consumer outcomes and safeguarding retirement savings. As part of its 2024-25 priorities, ASIC aims to target predatory sales practices, strengthen dispute resolution, and enhance compliance with legal obligations by advisers and financial entities. “Our 2025 enforcement priorities include misconduct exploiting superannuation savings and unscrupulous property investment schemes,” he said, adding that ASIC would make “full use of our enforcement tools” to address these issues.
Promoting good practices in financial advice
Commissioner Kirkland also shared examples of good practice, encouraging advisers to focus on three key areas:
- Centring advice on client interests: Advisers should ensure their recommendations are tailored to individual client circumstances, demonstrate professional judgment, and provide clear explanations for proposed strategies. He warned against conflicts of interest driven by standardised business models, stating, “It is essential advisers and their licensees ensure that conflicts of interest are managed.”
- Maintaining focus on product performance: Advisers must assess the ongoing performance of recommended investments to ensure suitability. Reflecting on ASIC’s recent report on superannuation choice products, Kirkland noted a lack of evidence that underperformance was being adequately addressed. He urged advisers and licensees to establish robust processes for identifying and managing underperforming investments.
- Demonstrating compliance with standards: Good record-keeping remains critical for advisers to show they meet required standards. Kirkland highlighted improvements in client advice files, noting that streamlined advice records under upcoming reforms would make broader client documentation more important than ever.
Supporting high standards amid change
Recognising the challenges posed by increasing demand for financial advice and evolving regulations, Kirkland assured the industry of ASIC’s commitment to collaboration. “We are committed to working with you to maintain the high standards your clients expect – and need – from you,” he concluded.
The speech stressed ASIC’s dual focus on enforcement and encouraging best practices to build consumer trust and strengthen the financial advice industry.
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APRA highlights gaps in climate risk management maturity
The Australian Prudential Regulation Authority (APRA) has published its 2024 Climate Risk Self-Assessment Survey Information Paper, assessing the climate risk practices of 149 regulated entities. The paper show progress in climate risk governance and management, particularly among larger entities, but also highlights areas requiring improvement, such as disclosure practices and the integration of risk management frameworks.
Larger entities improve, smaller entities lag
Larger banks, insurers, and superannuation trustees have increased their climate risk maturity since APRA’s 2022 survey, with banks showing the greatest improvement. However, average maturity scores for insurance and superannuation entities remained largely unchanged, and smaller entities continue to report lower overall maturity.
APRA noted that many smaller organisations lack the resources to fully integrate climate risk into their governance and operational practices. The findings underline the need for proportional approaches, ensuring smaller firms focus on material risks relevant to their operations.
Strengths in governance and risk management
Governance and strategy, alongside risk management, are identified as comparative strengths across industries. Most respondents reported that their boards oversee climate risks, but fewer than half consider climate factors in board appointments or ensure board members have environmental expertise. Similarly, only 37% of boards include members with climate or environmental, social, and governance (ESG) expertise.
Climate risk is increasingly integrated into risk management frameworks, with 63% of entities conducting scenario analyses. However, embedding climate considerations fully into risk management systems remains a challenge, particularly for smaller firms.
Decline in disclosure practices
Disclosure maturity, a strength in APRA’s 2022 survey, has declined across industries. Only 46% of entities disclosed their approach to managing climate risks in 2024. APRA attributed the drop to shifting standards and regulatory uncertainty, as entities reassess best practices.
The upcoming mandatory climate-related financial disclosure regime, set to begin in 2025, is expected to address this gap, pushing entities to align with new sustainability reporting standards under Australia’s evolving regulatory framework.
Emerging areas: transition plans and nature risks
The survey also explored emerging practices, such as nature risk management and climate transition planning. Around 30% of respondents have developed climate transition plans, with superannuation trustees leading the way, compared to just 15% of insurers. Nature risk remains largely unexplored, with fewer than 20% of entities having formal processes in place.
Next steps for regulatory alignment
APRA plans to strengthen its regulatory framework by incorporating climate risks into existing prudential standards for risk management. Consultation on these changes is set for 2025. The authority also aims to enhance supervisory capabilities, ensuring entities adopt robust, scalable climate risk practices.
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MAS highlights resilience of Singapore’s financial system amid global uncertainty
The Monetary Authority of Singapore (MAS) has released its Financial Stability Review 2024, detailing the country's ability to navigate heightened global risks. While challenges such as geopolitical tensions, trade disruptions, and elevated interest rates persist, the report emphasises Singapore’s strong financial buffers across corporate, household, and banking sectors.
Global backdrop remains uncertain
The global economic landscape is marked by elevated uncertainty due to geopolitical conflicts, persistent inflationary pressures, and volatile financial markets. Emerging markets face risks from potential currency and capital flow volatility, while advanced economies grapple with high debt levels and stretched asset valuations. MAS cautions that these vulnerabilities could lead to sharp asset repricing or disorderly market reactions to unexpected shocks.
Corporate and household sectors remain stable
Singapore's corporates and households have demonstrated resilience amid these challenges:
- Corporates: Despite elevated borrowing costs, firms maintained low leverage, robust liquidity, and stable debt maturity profiles. MAS stress tests indicated most corporates could withstand adverse shocks, though highly leveraged firms remain vulnerable.
- Households: Supported by strong balance sheets and continued wage growth, household leverage risk has moderated, and liquidity buffers remain healthy. Mortgage rates have eased, with 90% of borrowers already adjusted to higher interest rate environments.
Banking sector well-positioned
Singapore’s banking sector is well-capitalised, with robust liquidity and underwriting standards. However, MAS noted that a sharp deterioration in global conditions could pressure profitability and asset quality, particularly in sectors like commercial real estate.
Outlook and recommendations
The review urges corporates and households to maintain prudence, highlighting risks from potential inflationary shocks, geopolitical tensions, and trade disruptions. Policymakers reaffirmed their commitment to preserving financial stability, with a focus on targeted macroprudential measures and enhanced surveillance capabilities.
The report notes Singapore’s strong fundamentals but warns against complacency amid an increasingly volatile global environment.
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EU banks largely meet MREL targets
The European Banking Authority (EBA) has released its Q2 2024 dashboard on the minimum requirement for own funds and eligible liabilities (MREL), revealing that most EU banks have achieved compliance with the 1 January 2024 deadline under the Bank Recovery and Resolution Directive (BRRD).
Of the 339 banks assessed, 318 have met their MREL targets, while 21 banks in transition periods report a combined shortfall of €6.1bn, equivalent to 2.6% of their risk-weighted assets (RWAs).
This marks an improvement from the end of 2023, when 30 banks in a comparable sample were in transition with shortfalls. Transition periods have been granted under specific conditions, such as changes in resolution strategies or eligibility for extensions under BRRD provisions.
Manageable maturity-driven rollovers
Banks reported €220bn of MREL instruments due to become ineligible by June 2025 as their remaining maturity falls below one year. These instruments represent 18.6% of all MREL-eligible liabilities, excluding own funds, and the EBA described this rollover requirement as “manageable”.
Strategy preferences differ by bank size
Resolution strategies show notable divergence between smaller and larger institutions. Transfer strategies were selected in 61% of resolution decisions, reflecting their suitability for smaller banks. However, the bail-in approach covers 94% of RWAs, indicating its dominance among larger banks.
Further insights into MREL rollover needs and resolution planning will be detailed in the forthcoming EBA Autumn 2024 Risk Assessment Report.
Enhanced transparency and monitoring
For the first time, the dashboard includes a list of individual entities covered, improving transparency. Under its BRRD mandate, the EBA continues to oversee the establishment of MREL by authorities and the build-up of required resources by institutions.
The MREL framework ensures banks possess sufficient loss-absorbing capacity to facilitate the execution of their preferred resolution strategies in case of failure. Institutions that have completed their transition periods must disclose both their MREL requirements and available resources.
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FCA launches consultation to streamline rulebook
The Financial Conduct Authority (FCA) has launched a consultation proposing to transfer firm-facing requirements from the MiFID Org Regulation into its Handbook. The move aims to provide continuity for firms while creating opportunities to refine and simplify rules over time, aligning them with UK market needs. The consultation aligns with broader Treasury reforms to the UK’s MiFID framework announced during the Mansion House speech.
Some context
The MiFID Org Regulation establishes rules for market integrity and investor protection, including conduct standards, client categorisation, and systems and controls for investment firms. These rules currently apply directly to UK MiFID firms but have also been extended to certain non-MiFID entities. As part of post-Brexit regulatory reforms, the Treasury plans to repeal the MiFID Org Regulation, requiring the FCA to restate or replace these requirements within its Handbook.
This consultation follows earlier FCA efforts to gather feedback on simplifying its rules, including through the Consumer Duty Call for Input and other ongoing initiatives, such as revising disclosure frameworks and the advice guidance boundary.
Key takeaways
- Continuity and clarity: The FCA plans to maintain the substance of existing MiFID requirements in its Handbook to minimise disruption for firms and ensure continuity. Proposals include minor changes to simplify language and align with the FCA's drafting style.
- Long-term refinement: The FCA is soliciting views on potential future reforms to better tailor rules to UK-authorised firms and their clients, particularly where the Consumer Duty does not apply. This includes rationalising requirements for client categorisation, conduct, and organisational systems.
- Stakeholder engagement: The FCA invites feedback from a broad range of stakeholders, including authorised firms, industry groups, and consumer representatives, on simplifying and improving the regulatory framework.
- Collaborative approach: The FCA is coordinating with the Prudential Regulation Authority (PRA), the Financial Ombudsman Service, and the Treasury to ensure coherence across regulatory changes.
- Minimal disruption expected: No significant costs or changes are anticipated for firms as the proposals aim to restate, rather than alter, existing requirements.
Next steps
Feedback on the consultation, which is open until 28 February 2025 for general proposals and 28 March 2025 for discussion points, will inform the FCA’s final policy statement. Final rules will be published in line with the Treasury’s timetable for repealing the MiFID Org Regulation.
Click here to read the full RegInsight on CUBE's RegPlatform.