Securities & INVESTMENT January 2013

REVIEWthe members’ magazine of the chartered institute for securities & investment cisi.org/sireview

Oh Canada How will Mark Carney fare as the new Bank of England chief? p20

Christopher Adams Predictions for the year ahead, p11

After the FLOOD Money market funds and the regulations that will change shadow banking page 12

CISI.indb 1 07/01/2013 10:15 CISI.indb 2 07/01/2013 10:15 Securities & Investment January 2013 REVIEW Editor Rob Haynes Commissioning Editor Hugo Cox Senior Designer 12 Angela Lyons Art Director Steven Gibbon Publisher David Poulton Production Director John Faulkner Managing Director Claire Oldfield Chief Executive Martin MacConnol Advertising Sales Yanina Stachura +44 20 7010 0945 [email protected] 16 Cover illustration Neil Webb for Debut Art Published on behalf of the Chartered Institute for Securities & Investment by Wardour, 5th Floor, Drury House 34–43 Russell Street London WC2B 5HA Telephone: +44 20 7010 0999 Fax: +44 20 7010 0900 www.wardour.co.uk 18 ISSN: 1357-7069

Communications Editor, Chartered Institute for Securities & Investment Contents Richard Mitchell 8 Eastcheap, London EC3M 1AE Features Members’ features Regulars Telephone: +44 20 7645 0749 12 building barriers 22 cpd: twin peaks 5 city view Email: [email protected] New regulation of money comes of age The Institute is continuing to market funds may transform George Littlejohn MCSI looks take a lead on ethical standards Editorial panel a central pillar of shadow at the new regulatory regime and integrity Peter Land, Chartered Brewin Dolphin FCSI, Chairman banking. Andy Davis explains 24 Suren Chellappah FCSI Sanford C Bernstein under scrutiny 6 upfront Moorad Choudhry FCSI Royal Bank of Scotland Can the Parliamentary 16 getting engaged News and views from Simon Culhane, Chartered Institute for Commission on Banking Chartered FCSI Securities & Investment How can shareholders assume members of the CISI, Scott Dobbie FCSI(Hon) Deutsche Bank Standards push bankers to a greater role in promoting including our regular back Mike Gould FCSI behave more ethically? Jeannette Lichner MCSI long-term decision-making story by Clay ‘Mudlark’ Harris Gregor Logan MCSI at the UK’s largest firms? Ian Paul Loughlin, Rathbone Investment 26 need to read Chartered MCSI Management Lewis investigates 11 first person Robert Merrifield FCSI Legal & General Catch up with this Christopher Adams makes Richard Mitchell Chartered Institute for month’s essential reading Securities & Investment 20 mark of respect some predictions for the Frank Reardon, JM Finn Chartered FCSI Under the stewardship of year ahead (the usual words Patricia Robertson, Westport Global central banker Mark Carney, 27 diary of caution apply) Chartered FCSI Jeremy Robinson, Charles Stanley Canada weathered the CISI events and new Chartered FCSI recent economic crisis better member admissions 18 profile: sir david tweedie Hamish Rowan-Hamilton TheCityUK Markus Ruetimann FCSI Schroder Investment than any other developed The President of the Institute Management nation. How will Carney fare 30 people: up in the air of Chartered Accountants Nimrod Schwarzmann FCSI Arjuna Sittampalam, Sage & Hermes as the new Governor of the Simon Harman, Chartered of Scotland shares his Chartered MCSI Bank of England? MCSI, on life as a pilot professional achievements Nigel Sydenham, BPP Professional Education Chartered FCSI Alan Yarrow, Chartered Institute for Chartered FCSI(Hon) Securities & Investment

Average audited circulation: 16,665 for period July 2010 – June 2011 © The Chartered Institute for Securities & Investment (CISI). All rights reserved. Reproduction in whole or part prohibited without prior permission of the CISI. The CISI and Wardour accept no responsibility for the views expressed by contributors to the Securities & Investment Review; or for unsolicited manuscripts, photographs or illustrations; or for errors in articles or advertisements in the Securities & Investment Review. The views expressed in the Securities & Investment Review are not necessarily those held by the CISI or its members.

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CISI.indb 3 07/01/2013 10:15 CISI.indb 4 07/01/2013 10:15 city view

cisi opinion Reinforcing standards for its members is a core objective for the CISI. In pursuit of this, the Institute continues to engage with professionals to promote financial integrity Best behaviour

no self-respecting business these (MCSI and FCSI) now requires new applicants continuing membership of the CISI and may days fails to publish a mission statement to obtain a grade-A result in IntegrityMatters, result in disciplinary action.” and the CISI is no exception. Through the Institute’s online ethics test, and existing The Code of Conduct, known as the Lord also being a charity, our key aims are repeated members to pass the Ethics & Integrity module George Principles in recognition of the in our charitable objectives. Consequently the of the Professional Refresher elearning contribution made to standards of integrity by phrase “to develop high ethical standards for tool. This requirement is irrespective of the the late Lord George FSI(Hon), is an important practitioners in securities and investments member’s role. high-level statement of intent. The CISI shares and to promote such standards in the UK In furtherance of our aim to encourage this code with the Worshipful Company of and overseas” should already be familiar ethical awareness, we shall be introducing International Bankers and the principles to readers, but we make no apology for a requirement from 1 April 2013 that UK recently received a valuable boost, being repeating it. candidates for CISI level-3 Certificate exams recommended by the Chairman of HSBC as However, these days it is not sufficient must have obtained a grade A or B pass in an appropriate standard for the City. simply to be aware of such aspirations, which IntegrityMatters as a prerequisite to sitting There has been criticism voiced at the all too easily can be reduced to platitudes. It the exam. This will highlight to new entrants lack of enthusiasm of professional bodies is necessary to demonstrate adherence to the for taking action against members who creed regularly and publicly, which is driven We aim to encourage have transgressed. While the charge is not not just by membership of a professional body, without foundation, changes to the regulatory but also, increasingly, as a requirement of ethical awareness landscape and the granting by the FSA regulators and an expectation of society. of accredited body status to a number of Many readers are affected by the to the industry at an early stage in their career, organisations, including the CISI, mean that requirements of the Retail Distribution Review, the importance of ethical behaviour. professional bodies are likely to be more which is now live. They have found themselves For our part, and in keeping with our assertive in pursuing transgressions. That does having to undertake one of the Institute’s charitable objectives, we shall be donating not mean that expulsion from membership several offerings designed to heighten the income from this new initiative to the will be the only outcome, since a graduated awareness of the need for integrity and to CISI Educational Trust, the Institute’s range of sanctions may be applied, but serious recognise ethical dilemmas, and think about education charity. transgression may result in such a result. That appropriate responses to them. However, we In considering the need for members to certainly is in line with the public mood and have argued consistently that there should adhere to the highest standards of ethical may well be reflected in the outcomes of the not be different demonstrable standards of behaviour, we should not overlook the fact Tyrie Commission, which is looking at the ethical awareness between different sections of that failure to do so will result in the member culture and standards of banking in the UK. financial services and are introducing a series being invited to attend a disciplinary hearing. Your Institute remains committed to helping of changes to our requirements in this respect. This is spelt out in the Institute Code of members to meet all these challenges and Readers will be aware that obtaining and Conduct as follows: “Material breach of the to play a full part in maintaining the high maintaining membership at CISI voting level code of conduct would be incompatible with standards expected of us. n

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CISI.indb 5 07/01/2013 10:15 Got a story to tell or a view The number of UK universities now working with the CISI at undergraduate and postgraduate level, providing opportunities to share? News and views from the CISI 22 for students to gain a professional qualification while studying. Upfront

qualifications CPD New diploma aimed at schools and colleges Active Learning webcasts CISI members can now log Active/ Structured learning CPD by taking Economics and Business Studies teacher, Nick a quiz after watching some CISI TV Seaward, Chartered FCSI, was asked by the Institute programmes. to devise a new syllabus that combines the best By scoring 80% or above in the elements of Business Studies with basic accountancy five-question quiz, members will techniques and relevant aspects of economics. Here earn Active Learning CPD for the Nick, who teaches at Kemnal Technology College event they have watched and will relevant webcast and press ‘Active in Sidcup, explains the thinking behind the development of the gain an extra 15 minutes of CPD for Learning Quiz’. Once you have Diploma in Finance, Risk & Investment. completing the test. Until now, CISI submitted your answers, you will TV programmes have counted as see your score. Your CPD log will The CISI has noted with (Cert FRDM), which will be taught “At GCSE level, the number of students in the UK achieving a Reflective/Structured Learning then be updated overnight. growing concern the decline in from September 2013. The pass in Business Studies is down by 34% since 2006, while under the CISI CPD scheme. For those affected by the Retail UK secondary schools offering Diploma is completed by Economics is up by 16%, but from a tiny base. Schools and parents The quiz will apply to new Active Distribution Review (RDR), taking subjects relevant to modern-day achieving both Certificates. have lost patience with the steady dumbing down of syllabus Learning webcasts, which are these tests will count towards the business and finance. The CISI is aligning the new content over the past 20 years. The school where – just two years clearly identifiable by the stamp structured learning requirements In response, it has launched Diploma with work experience ago – I was teaching two 30-strong classes of GCSE Business shown here. for CPD under the RDR. the new Diploma in Finance, opportunities for students Studies students now has none. To take the test, simply go to the Risk & Investment to help schools studying its qualifications, offering “The Russell Group of top universities has excluded Business ‘Links’ menu on the right of the For further information, and colleges to prepare students them access to vital practical Studies and Economics from its list of ‘facilitating’ A-level subjects programme after watching a visit cisi.org/cisitv for both university and the experience through support from most likely to help a student gain admission – even branding Business world of work. its education charity, the Studies as a ‘soft’ subject, along with Media Studies and Photography. The A-level equivalent Diploma Educational Trust. “More recently, the Department for Education has excluded both partnership comprises two certificates, which CISI Managing Director, Ruth subjects from its proposed list of English Baccalaureate Certificates, can be taken in any order, to suit Martin, said: “We are delighted to which, once introduced, will count towards the EBacc standard by the curriculum demands in each provide a new qualification, which all schools in England will be measured. Boost for Singapore students individual school. equivalent to an A-level, that “The CISI believes that there is a pressing need for a new subject Students from Temasek available in the market. One of the certificates, the helps young people enter this to continue the teaching of business and finance in UK secondary Polytechnic (TP) in Singapore CISI Chief Executive, Simon Introduction to Securities & industry, either as school leavers schools. The new Diploma in Finance, Risk & Investment represents can now attain two Culhane, Chartered FCSI, said: Investment (the CertISI) has been or after university. We are a return to first principles, requiring numeracy, analysis and – above internationally recognised CISI “Temasek Polytechnic graduates successfully delivered in schools confident that we will continue to all – academic rigour.” qualifications, thanks to a new will have the opportunity to for the past two years. Added to make a real difference to the partnership agreement. combine an academic award of this is the new Certificate in career choice for young people For further information visit cisi.org/dipfri The qualifications – the excellence from TP with a highly Finance, Risk & Decision Making now and in the future.” Investment Operations Certificate regarded, globally portable (IOC) and the International vocational award from the CISI. Certificate in Wealth Management This will offer students a distinct education (ICWM) – will be available to advantage in the jobs market.” students undertaking the Lee-Lim Sok Keow, Director, polytechnic’s Diploma in Financial School of Informatics & IT at TP UWE becomes CISI Centre of Excellence Business Informatics programme. said students would benefit The IOC is aimed at those from securing qualifications that The University of the West of England (UWE) for full CISI Membership (MCSI) and those working in operational and support are “highly relevant to the has been recognised as a CISI Centre of taking undergraduate degrees will be able to roles in financial services. The financial services industry and Excellence in finance teaching. secure Associate (ACSI) membership, subject to ICWM helps wealth managers and recognised internationally”. The agreement allows the university to: the content of the study programme. advisers to understand the range • submit its Masters programmes to be CISI Managing Director, Ruth Martin, said: of assets and investment products • The Institute of Financial Services considered for equivalence in respect of “We are delighted to be working with the UWE, (IFS) Malta has linked with the the CISI Diploma which clearly recognises that a professional CISI to offer its first-ever • be accredited for the delivery of courses qualification, undertaken as part of a challenging qualification at postgraduate leading to CISI exams and, if needed, to use and high-quality undergraduate programme, level with a specialisation in other Institute-accredited training providers can ensure a student gains a competitive edge wealth management. for selected papers in the jobs market.” Commencing on the island in • be eligible to submit undergraduate Professor Jon Tucker, Director of the Centre January 2013, the CISI’s Masters programmes for consideration for part or for Global Finance at the UWE, said: “We look in Wealth Management is full exemption in respect of CISI exams forward to our Masters students graduating with accredited by the Malta • develop undergraduate programmes, by both a UWE MSc Finance degree and the CISI Qualifications Council and CISI Managing Director, Ruth Martin, left, and Dr Jane Robert Cronin ACSI, CISI Director, Harrington, Dean of the Faculty of Business and Law at the embedding CISI units within them. Diploma, which will provide them with a firm Asia-Pacific and polytechnic Director approved by the Malta Financial UWE, sign the agreement UWE MSc Finance graduates will be eligible foundation for a career in finance.” Lee-Lim Sok Keow sign the agreement Services Authority.

6 January 2013 cisi.org

CISI.indb 6 07/01/2013 10:15 Got a story to tell or a view The number of UK universities now working with the CISI at undergraduate and postgraduate level, providing opportunities to share? News and views from the CISI 22 for students to gain a professional qualification while studying. ➳

CPD feedback

Your say New diploma aimed at schools and colleges Active Learning webcasts The S&IR is your CISI membership magazine and we want to hear your views. To get in touch, email [email protected], CISI members can now log Active/ leave a comment at cisi.org/sireview or follow @CISI on Twitter. Structured learning CPD by taking Economics and Business Studies teacher, Nick a quiz after watching some CISI TV Dear S&IR, Seaward, Chartered FCSI, was asked by the Institute programmes. I read with interest the CISI’s opinion (‘City View’, S&IR, to devise a new syllabus that combines the best By scoring 80% or above in the November/December 2012) that the US is guilty of elements of Business Studies with basic accountancy five-question quiz, members will “behaving like a bully” in imposing the Foreign Account Tax techniques and relevant aspects of economics. Here earn Active Learning CPD for the Compliance Act (FATCA). Nick, who teaches at Kemnal Technology College event they have watched and will relevant webcast and press ‘Active The CISI’s observations about the destructive consequences of in Sidcup, explains the thinking behind the development of the gain an extra 15 minutes of CPD for Learning Quiz’. Once you have FATCA have eluded most commentators. This ill-considered law, Diploma in Finance, Risk & Investment. completing the test. Until now, CISI submitted your answers, you will purportedly designed to catch tax cheats who hide their money TV programmes have counted as see your score. Your CPD log will abroad, is a bad deal for both the US and other countries. “At GCSE level, the number of students in the UK achieving a Reflective/Structured Learning then be updated overnight. Of particular note are the Institute’s comments that: pass in Business Studies is down by 34% since 2006, while under the CISI CPD scheme. For those affected by the Retail 1. simply dropping American clients will do little to insulate a Economics is up by 16%, but from a tiny base. Schools and parents The quiz will apply to new Active Distribution Review (RDR), taking non-US financial institution from significant costs and have lost patience with the steady dumbing down of syllabus Learning webcasts, which are these tests will count towards the responsibility imposed by FATCA in identifying US clients and content over the past 20 years. The school where – just two years clearly identifiable by the stamp structured learning requirements reporting them to the Internal Revenue Service (IRS) ago – I was teaching two 30-strong classes of GCSE Business shown here. for CPD under the RDR. 2. pursuant to an inter-governmental agreement (IGA) on FATCA Studies students now has none. To take the test, simply go to the between the US and the UK, “putting the costs on the UK is unfair “The Russell Group of top universities has excluded Business ‘Links’ menu on the right of the For further information, and our Government should have the courage to say so”. Studies and Economics from its list of ‘facilitating’ A-level subjects programme after watching a visit cisi.org/cisitv US firms, and Americans in general, are largely oblivious to the most likely to help a student gain admission – even branding Business costs FATCA would inflict on them. These include a dramatic Studies as a ‘soft’ subject, along with Media Studies and Photography. reduction in investment in the US – investors will simply take their “More recently, the Department for Education has excluded both partnership money elsewhere – and FATCA-like reporting requirements to subjects from its proposed list of English Baccalaureate Certificates, which US institutions, which operate under IGAs, will be subject. which, once introduced, will count towards the EBacc standard by Boost for Singapore students Conversely, it seems many foreign financial institutions (FFIs) which all schools in England will be measured. are their own worst enemies, having been sold on the idea that “The CISI believes that there is a pressing need for a new subject Students from Temasek available in the market. FATCA compliance is the only conceivable path. to continue the teaching of business and finance in UK secondary Polytechnic (TP) in Singapore CISI Chief Executive, Simon FATCA was enacted in 2010 under little scrutiny. Political schools. The new Diploma in Finance, Risk & Investment represents can now attain two Culhane, Chartered FCSI, said: resistance to it in the US is growing and this law needs to be a return to first principles, requiring numeracy, analysis and – above internationally recognised CISI “Temasek Polytechnic graduates stopped before it is fully implemented. all – academic rigour.” qualifications, thanks to a new will have the opportunity to Two priorities to force a repeal of the act are that: partnership agreement. combine an academic award of 1. foreign governments being cajoled by the US Treasury For further information visit cisi.org/dipfri The qualifications – the excellence from TP with a highly department to sign an IGA over FATCA – and effectively become Investment Operations Certificate regarded, globally portable a deputy of the IRS – need to say, “No” (IOC) and the International vocational award from the CISI. 2. both American and non-US firms need to stop acting as Certificate in Wealth Management This will offer students a distinct enablers and lobby to force a rethink. (ICWM) – will be available to advantage in the jobs market.” For further information, visit repealfatca.com, a website students undertaking the Lee-Lim Sok Keow, Director, dedicated to getting rid of this law. polytechnic’s Diploma in Financial School of Informatics & IT at TP UWE becomes CISI Centre of Excellence Business Informatics programme. said students would benefit James George Jatras, US government relations specialist, The IOC is aimed at those from securing qualifications that Washington DC, US for full CISI Membership (MCSI) and those working in operational and support are “highly relevant to the taking undergraduate degrees will be able to roles in financial services. The financial services industry and Dear S&IR, secure Associate (ACSI) membership, subject to ICWM helps wealth managers and recognised internationally”. The CISI’s Isle of Man branch recently held an the content of the study programme. advisers to understand the range educational seminar, titled ‘India – Growth to CISI Managing Director, Ruth Martin, said: of assets and investment products • The Institute of Financial Services Resume?’, with Deepak Lalwani OBE, Chartered “We are delighted to be working with the UWE, (IFS) Malta has linked with the FCSI as speaker and it proved a great success. It which clearly recognises that a professional CISI to offer its first-ever was attended by 40 local members and around qualification, undertaken as part of a challenging qualification at postgraduate Deepak Lalwani, half stayed on to network over a curry dinner. The and high-quality undergraduate programme, level with a specialisation in Chartered FCSI CISI holds a number of branch events like this and can ensure a student gains a competitive edge wealth management. I would urge all regional members to make sure that they are in the jobs market.” Commencing on the island in aware of the programme available to them locally. Professor Jon Tucker, Director of the Centre January 2013, the CISI’s Masters I would also like to thank Deepak, Director of Lalcap Ltd and for Global Finance at the UWE, said: “We look in Wealth Management is Consultant – India at stockbroker, WH Ireland, for an excellent event. forward to our Masters students graduating with accredited by the Malta both a UWE MSc Finance degree and the CISI Qualifications Council and Sue Preskey, Chartered FCSI, CISI Isle of Man branch President Robert Cronin ACSI, CISI Director, Diploma, which will provide them with a firm Asia-Pacific and polytechnic Director approved by the Malta Financial Turn to page 27 for a list of forthcoming branch events. foundation for a career in finance.” Lee-Lim Sok Keow sign the agreement Services Authority.

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CISI.indb 7 07/01/2013 10:15 news review 60-second interview CLAY ‘MUDLARK’ HARRIS As a member of the CISI’s National Advisory Council in Switzerland, Dr Jeannette Wibmer, Attorney-at-Law, helps guide the Institute’s Swiss work. Based in Zurich and Zug, she is a partner with law firm Badertscher Rechtsanwälte AG Alastair Majury ACSI, Senior Business Analyst (contract), Barclays

Has Switzerland been amount, Swiss banks accounted for 26.9% of also entered into fresh double taxation Alastair Majury ACSI is not one to importance of each step in a process – Q hit badly by the global the market share – making them the global treaty amendment negotiations for the sneer at ‘McJobs’. It is only recently, after “some of them you hate, but they all need financial crisis? market leaders. For structured products, implementation of a final withholding tax more than six years spent in financial to be done” – and how to organise With its long tradition of banking Switzerland is likewise number one globally that favours various countries, including services, that his time in the sector has different teams of people. He also and finance, Switzerland in market volume terms. In 2011, the Swiss the UK, Germany and France. To enhance exceeded the length of employment at his developed a strong work ethic that has has coped better than most financial sector had an aggregate inland income client security further, FINMA, the Swiss first employer – McDonald’s. served him well in the financial world. countries. There has been only a small amount of CHF59.4bn ($63.1bn), accounting for 10.3% Financial Market Supervisory Authority, Alastair now works as Senior At HSBC, Alastair worked as a market of consolidation in the Swiss banking and of the country’s annual GDP. That same year, has developed revised ‘Swiss Finish’ capital Business Analyst for Barclays in data administrator in an office that was a finance industry; most of it coming from partial the industry employed 195,834 people in adequacy requirement rules for banks and Glasgow. It is a contract position, as most legacy of the bank’s takeover of Bank of sales by foreign players who have a Swiss Switzerland and 180,269 abroad. insurance companies that go well beyond the of his roles have been since his first and Bermuda. Most of its clients were hedge presence. The Swiss financial centre is – since international Basel III standard. longest financial services job, with HSBC funds. He largely worked as a business the crisis and the turmoil within the eurozone What challenges is the industry Another area being addressed relates to Securities Services. That, for many, is the – more than ever perceived as the true ‘save Q attempting to tackle? independent asset managers who – with the nature of a back-office career in 2013. Alastair has a strong work haven’ for money seeking a home. Switzerland has taken a key step in changing exception of investment fund and pension fund Superficially, at least, there’s a contrast its appearance as a tax haven. This has been managers – are not subject to any prudential with the security and the structure of his ethic that serves him well How big a player is Switzerland in achieved by adopting the Organisation for supervision by FINMA, but only to the Swiss experience at McDonald’s, during which Q international financial services? Economic Co-operation and Development’s Anti-Money Laundering Act. This rather lenient he rose from crew member to analyst for the over-the-counter The global volume for cross-border private (OECD) standard on cross-border information regulatory supervision is planned to become administrative manager at its Stirling derivatives team and global market banking business hit $7.4tn in 2011. Of that exchange in tax matters. The nation has more stringent. drive-through restaurant. data department. When studying at the University of After nearly three years, however, he Glasgow for his first degree, in could see little prospect of making economics, Alastair travelled the 30 progress, so he took a year’s break to asia inspire miles back to Stirling each weekend to earn a post-graduate diploma in banking work shifts. During summer holidays, from the University of Stirling. he worked there full time. It was an opportunity not only to Stronger ties in India Next generation calling Overall, he spent six years at the enhance his qualifications in areas restaurant, while earning an MSc in specific to investment banking, but also The CISI and the Institute of Cost Accountants Would you like to be an inspiration to others local schools and you can earn information technology at the University to demonstrate to future prospective of India (ICAI) are to develop further their and help to develop some of the financial CPD hours for ‘Developing others’. of Stirling. Once he completed his employers his commitment to the sector. relationship in India, and to make the services stars of the future? If you would like the CISI to contact studies, Alastair continued working at Alastair returned to the job market as collaboration a global one. If you are based in the UK and work in you about speaking opportunities McDonald’s before changing direction a change analyst for Royal Bank of The ICAI is the premier accounting body in a financial services role, you can make a in the future, please email and moving into financial services. Scotland Change Services. In the role, he India, and the world’s second largest. difference to school, college and university [email protected], What did he learn at McDonald’s? The was an active intermediary between the

An MOU was signed in December 2011 with students who are studying related topics. stating your name, membership Wilson Luke Illustration: the aim of promoting CISI qualifications and Be a guest speaker at a university, or simply number, current job title and membership to ICAI members. In the coming attend a careers presentation at one of your career summary. cpd events year the two bodies will host a series of joint events, which will be open to ICAI members across their 92-office Indian network. online Generation Y and money Kevin Moore, Chartered MCSI, CISI Director BEST OF THE BLOGS of Global Business Development, said: “The young people – the clients CISI is looking forward to working more closely tinyurl.com/c4wg87e investors, companies and intermediaries, and creating and financial services with the ICAI to develop the relationship for 1One response to July 2012’s Kay Review concerning a culture that incentivises the right behaviour – may employees of the future – are. the benefit of the industry in India.” corporate governance maintained the report should fall by the wayside without adequate backing from By extension, this will provide Sanjay Gupta, Chairman, WTO and have focused more on the role of investment banks, politicians, regulatory authorities and the key players a valuable insight into what in the investment chain. International Affairs Committee of the ICAI, and not just on asset management. In his blog on the subject for Fundweb, Richard Saunders, Chief Executive the coming years hold for said: “The ICAI looks forward to creating more of the Investment Management Association, tinyurl.com/b4phtrc financial services, and for knowledge horizons with the CISI for the states: “Investment banks advising companies have 3For at least one blogger beating the environmental wealth management firms corporate fraternity.” an incentive to maximise corporate transactions drum, the Kay Review lacked bite when addressing the in particular. because they are generally only paid if the deals are link between sustainability concerns and the practice of The event will take place at completed. But asset managers operate on a different asset management. In the words of a post devoted to Cass Business School in the the Kay Review published on Forumforthefuture, “the basis: they are paid a percentage of the value of the From left, Stephanie Rochford, Sophie Robson City on the evening of Tuesday assets they manage. This firmly aligns their interests fundamental problem is that it doesn’t stress the and Harriet Lloyd-Dehler with those of their clients.” obvious link between long-term financial performance 29 January. It will be chaired by and sustainability issues.” The authors clearly were Stephanie Rochford of think-tank Harriet Lloyd-Dehler, Learning & tinyurl.com/c6uqvnt exercised: “By missing the opportunity to put key Z/Yen and Sophie Robson of the Development Manager, Charles 2For Charles Bowman, Chairman of the Audit and long-term issues such as the environment firmly on Centre for the Study of Financial Stanley, and will also feature Assurance Faculty of the Institute of Chartered agendas throughout the equity investing chain, the Innovation (CSFI) launch the first in a Jeannette Lichner MCSI, author of review doesn’t go as far as it could have done.” Accountants in England and Wales and Partner at new series of ‘CISI Essentials’ events. the recent CISI-supported book on PricewaterhouseCoopers, the many virtues of the Kay Review may be undone if Government backing of its See page 16 for more about corporate governance. This entertaining and informative personal finance, titled #yourmoney recommendations is not forthcoming. The key event will focus on a report edited solutions Kay proposes to fixing the financial Do you have a blog recommendation? by Sophie, Generation Y: the (Modern) Sanjay Gupta, Chairman, WTO and International Affairs For more information or to book a place, machine – on the themes of restoring trust between Send it to the Editor: [email protected] Committee, ICAI, pictured left, with Kevin Moore, Chartered World of Personal Finance, which please visit cisi.org/eventscal. Turn to pages 27 MCSI, CISI Director of Global Business Development probes how tuned in to finance and 28 for a listing of forthcoming CISI events.

8 January 2013 cisi.org

CISI.indb 8 07/01/2013 10:15 ➳ CLAY ‘MUDLARK’ HARRIS As a member of the CISI’s National Advisory Council in Switzerland, Dr Jeannette Wibmer, Attorney-at-Law, helps guide the Institute’s Swiss work. Based in Zurich and Zug, she is a partner with law firm Badertscher Rechtsanwälte AG Alastair Majury ACSI, Senior Business Analyst (contract), Barclays also entered into fresh double taxation Alastair Majury ACSI is not one to importance of each step in a process – business unit that specified its needs and treaty amendment negotiations for the sneer at ‘McJobs’. It is only recently, after “some of them you hate, but they all need the IT department. implementation of a final withholding tax more than six years spent in financial to be done” – and how to organise That first financial position was as a that favours various countries, including services, that his time in the sector has different teams of people. He also contractor, but the job was outsourced the UK, Germany and France. To enhance exceeded the length of employment at his developed a strong work ethic that has after a year, and he went on – again as client security further, FINMA, the Swiss first employer – McDonald’s. served him well in the financial world. a contractor – to manage and implement Financial Market Supervisory Authority, Alastair now works as Senior At HSBC, Alastair worked as a market an initiative for Citibank. During his stint Alastair Majury has developed revised ‘Swiss Finish’ capital Business Analyst for Barclays in data administrator in an office that was a as Project Manager, Alastair made sure adequacy requirement rules for banks and Glasgow. It is a contract position, as most legacy of the bank’s takeover of Bank of the work was completed on time. Senior Business insurance companies that go well beyond the of his roles have been since his first and Bermuda. Most of its clients were hedge Alastair then joined Barclays as a Analyst (contract), international Basel III standard. longest financial services job, with HSBC funds. He largely worked as a business senior business analyst, working on its Barclays Another area being addressed relates to Securities Services. That, for many, is the Project Gamma expansion programme. Do you have a independent asset managers who – with the nature of a back-office career in 2013. Alastair has a strong work When his part of the project was put back-office story? exception of investment fund and pension fund Superficially, at least, there’s a contrast on hold, he left at the beginning of 2012 to ethic that serves him well mudlarklives@ managers – are not subject to any prudential with the security and the structure of his travel in California for a month. “When hotmail.co.uk supervision by FINMA, but only to the Swiss experience at McDonald’s, during which I got back in February, it took me to until Anti-Money Laundering Act. This rather lenient he rose from crew member to analyst for the over-the-counter July to find a job,” he says. regulatory supervision is planned to become administrative manager at its Stirling derivatives team and global market The role, which Alastair still holds, more stringent. drive-through restaurant. data department. was again with Barclays on Project When studying at the University of After nearly three years, however, he Gamma – this time working on the Glasgow for his first degree, in could see little prospect of making creation of a central data warehouse. economics, Alastair travelled the 30 progress, so he took a year’s break to Planning a career is difficult in a less miles back to Stirling each weekend to earn a post-graduate diploma in banking predictable and more insecure job work shifts. During summer holidays, from the University of Stirling. market than enjoyed by some earlier he worked there full time. It was an opportunity not only to generations of professionals. Next generation calling Overall, he spent six years at the enhance his qualifications in areas Alastair acknowledges: “Our industry restaurant, while earning an MSc in specific to investment banking, but also as a whole is operating in a tough local schools and you can earn information technology at the University to demonstrate to future prospective environment, and the back office faces CPD hours for ‘Developing others’. of Stirling. Once he completed his employers his commitment to the sector. extra challenges and change because If you would like the CISI to contact studies, Alastair continued working at Alastair returned to the job market as of offshoring. But change brings you about speaking opportunities McDonald’s before changing direction a change analyst for Royal Bank of opportunities, so it’s important to in the future, please email and moving into financial services. Scotland Change Services. In the role, he keep your eyes open and grab any that [email protected], What did he learn at McDonald’s? The was an active intermediary between the come your way.”

stating your name, membership Wilson Luke Illustration: number, current job title and career summary. cpd events select benefits Generation Y and money Healthy body, healthy mind BEST OF THE BLOGS young people – the clients If you are looking to investors, companies and intermediaries, and creating and financial services get into shape in the a culture that incentivises the right behaviour – may employees of the future – are. New Year, let CISI fall by the wayside without adequate backing from By extension, this will provide Select Benefits help. politicians, regulatory authorities and the key players a valuable insight into what Get discounted in the investment chain. the coming years hold for corporate membership tinyurl.com/b4phtrc financial services, and for to a network of more 3For at least one blogger beating the environmental wealth management firms than 2,500 gyms run drum, the Kay Review lacked bite when addressing the in particular. by leading names link between sustainability concerns and the practice of The event will take place at such as Fitness First, asset management. In the words of a post devoted to Cass Business School in the DW Sports, Nuffield the Kay Review published on Forumforthefuture, “the From left, Stephanie Rochford, Sophie Robson City on the evening of Tuesday Health, David Lloyd fundamental problem is that it doesn’t stress the and Harriet Lloyd-Dehler obvious link between long-term financial performance 29 January. It will be chaired by and LA Fitness with an Incorpore membership. You will save at and sustainability issues.” The authors clearly were Stephanie Rochford of think-tank Harriet Lloyd-Dehler, Learning & least £50 and as much as £250 against the normal rate*. exercised: “By missing the opportunity to put key Z/Yen and Sophie Robson of the Development Manager, Charles long-term issues such as the environment firmly on Centre for the Study of Financial Stanley, and will also feature To find out more and to obtain your Incorpore gym pass, visit CISI Select agendas throughout the equity investing chain, the Innovation (CSFI) launch the first in a Jeannette Lichner MCSI, author of Benefits viacisi.org/memberlogin . You can use the online proximity report to find review doesn’t go as far as it could have done.” new series of ‘CISI Essentials’ events. the recent CISI-supported book on your nearest gym or health club. See page 16 for more about corporate governance. This entertaining and informative personal finance, titled #yourmoney event will focus on a report edited *Terms and conditions apply. See website for further details. Correct at time of going to print. Saving may be less if you are an existing member switching to the cheaper Do you have a blog recommendation? by Sophie, Generation Y: the (Modern) For more information or to book a place, membership at the same club. CISI Select Benefits is managed on behalf of CISI by Send it to the Editor: [email protected] World of Personal Finance, which please visit cisi.org/eventscal. Turn to pages 27 Parliament Hill Ltd, 3rd Floor, 127 Cheapside, London, EC2V 6BT. Neither are part of probes how tuned in to finance and 28 for a listing of forthcoming CISI events. the same group as a provider.

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CISI.indb 9 07/01/2013 10:15 news review Roland Bellegarde Executive Vice President for European Listing Business and Cash Trading at NYSE twitter Ask the experts… Euronext Support for Oxfam the French Financial Transaction tax Christmas may be over, but you can still support a CISI fundraising campaign in aid of Oxfam, What is it? contracts for difference (CFD), the market which ran over the festive season. The French Financial Transaction Tax (FTT), for which offers the buyer access to French The Institute pledged to donate £1 to Oxfam The year ahead which was introduced on 1 August 2012, is securities without actually owning the for every user who chose to follow the CISI on applicable to buyers of equities in French-listed underlying asset (and thereby avoiding the tax). Twitter in December. That offer has now been The financial services industry may face uncertain and companies with a market capital of more than extended into the New Year. volatile times, but that hasn’t stopped Christopher Adams €1bn. It is paid by the buyer of the securities, The political stance The CISI has also been helping Oxfam by from making a few predictions for 2013 rather than the seller, at a rate of 0.2% of the The tax, first suggested by former president collecting clothing and books for the charity, gross value of the transaction and the tax is Nicolas Sarkozy in January 2012, has been and its CPD & Networking team has been collected at the time of change at the level of implemented by the current head of state, volunteering at a donations warehouse. here are the big questions many Chinese investors, burnt the custodian. It is applicable to any size of Françoise Hollande, in the original spirit – to To support Oxfam, simply follow the Institute and answers for 2013. (The by the equity bubble in 2007. trade, whether it be for 20 or 20 million shares. tax without hampering the competitiveness on Twitter @CISI. If you are already an Institute usual caveats apply as the Yet the most recent data However, with derivatives and fixed-income of the French financial sector, which includes follower, then you can do your bit by suggesting margin for error is huge.) suggests the economic products being exempt, in its current format providing enough exemptions for this to @CISI to others. Finally, get involved with the slowdown may have run its the FTT essentially targets long trades on happen. It seems, however, that current Institute on Twitter and join in the conversation. Will the eurozone emerge from course: trade figures have equities. Interestingly, the tax is applicable discussions at the European level will aim for recession? Yes, but only in the pointed to a bounce, while to trades in American Depository Receipts a regime that does not just target buyers of #FollowCISIandHelpOxfam second half of the year. The manufacturing and retail sales (ADRs) for French companies listed on equities, but could extend to derivatives and single currency area, still in the have improved. Stronger US exchanges outside of France. In this situation fixed-income products, which may impact the grip of its sovereign debt crisis, demand will spur growth. it is up to the brokers trading in the relevant competitiveness of France as a financial sector. lunch fundraiser is struggling with the heavy companies to report the information about the If you look at the people paying the tax, it fiscal austerity administered to What does this mean for equity trades, which agreements between different tax seems to be end investors. The French market drive down huge national markets? The big tail risk authorities may aim to formalise in future. has a lot of asset managers, who are Charity curry deficits. That, and already weak remains a deterioration in the channelling the tax through their management demand, has stymied recovery eurozone debt crisis. However, Why was it introduced? fees. In effect, this is a tax that falls back on to Hot up the springtime by prospects, making it difficult the European Central Bank’s The initial statement of intent for the tax was to the investor. Currently the many exemptions enjoying the Lord Mayor’s Big for governments to generate the pledge to backstop the both curtail speculation and raise funds for add to this, although the situation may change Curry Lunch. The event will higher revenues needed to sovereign bond markets of France by charging the financial industry, a if there are fewer exemptions, especially if be held at the Guildhall in the reduce debt. Yet, there are signs nations such as Spain and Italy sector that politicians view as one of the causes other financial services or the liquidity City of London on Thursday of a pick-up in manufacturing (should they apply and meet of the financial crisis. At present, the tax provided by banks will be targeted. 18 April in aid of ABF The and, while even Germany could the conditions for a bailout), revenues go into France’s budget, and there is Soldiers’ Charity. slip briefly into recession in the combined with credible moves no special allocation for the money raised (like Beyond France In the past five years, the first quarter, the worst may towards a banking union, mean a possible bailout fund for future crises). It was Elsewhere in the European Union, ten member annual lunch has raised £860,000 soon be past. Assuming the that the worst-case scenario of initially expected that €1bn would be generated states (including Germany, Italy and Greece) in aid of current and former servicemen euro falls – and it should – then a euro break-up is unlikely. per year, although the actual figure looks likely are planning to introduce similar taxes that will and women, regulars and reservists, and European exports should That, plus the US Federal to be much smaller. From the latest figures, the target more products, including derivatives and their families who have been affected by the benefit from a recovery in Reserve’s continued asset total volume traded on the taxed securities fixed-income securities. conflicts in Afghanistan and Iraq. global demand. Do not expect a buying, has already supported appears to have lowered by some 10% to 15% Tickets are priced £95 and include a choice big rebound in Europe however. stocks in 2012. Equities will see since the introduction of the FTT. of curries, dessert, coffee, wine, beer and further gains in 2013 as Do you have a question about anything from tax to However, what is clear is that more synthetic virtual trading? mineral water. Will America topple over the consumer spirits in the US, products are being traded, particularly [email protected] fiscal cliff? Nearly. US where conditions are more For further information, visit bigcurry.org politicians will strike a deal, promising, improve. For all the but investors’ nerves could safety they offer, ultra-low well be shredded in the run-up yields on safe government quick quiz to what will be seen as a watery bonds will be less attractive. compromise over a budget that Emerging markets, sensitive Test your industry knowledge Q1. Bonds issued by organisations such as the World Bank, European Investment Bank averts much of the $600bn of to global prospects, will and Asian Development Bank are known as: automatic spending cuts prosper – as will the UK’s A) Treasury bonds B) Municipal bonds C) Supranational bonds D) Agency bonds and tax rises due to kick in resource-heavy FTSE 100. from January. At the time of Q2. Which ONE of the following is a principle for an Approved Person? going to press, talks between Does that mean Britain’s housing A) Manage conflicts of interest fairly using Chinese wallsB) Observe proper standards of market President Barack Obama market will take off? No, it conduct C) Communicate in a clear, fair and not misleading manner D) Arrange adequate and the Republicans were doesn’t. First, the post-crisis protection for clients’ assets continuing. Agreement will austerity drive in the UK still mean America avoids another has some way to run. Second, economic slump. Britain’s exposure to the Q3. Which ONE of the following criteria must be met by a company seeking eurozone through trade links Illustration: Cameron Law Cameron Illustration: admission to AIM? Will China suffer a hard landing? will mean anaemic domestic The S&IR’s Quick Quiz features questions from CISI A) Appoint a nominated adviser and broker B) Have a trading record of at least one year No. True, its economy has economic growth in 2013. elearning products, which are interactive revision aids C) Issue at least 5% of its shares to the public D) Have a market value exceeding £700,000 slowed for seven straight Third, the latest wave of to help candidates prepare for their exams. quarters and is likely to have banking job losses will keep Answers are on page 29. Q4. Which ONE of the following represents equity in a balance sheet? recorded its lowest annual activity in the south-east A) Current assets – current liabilities B) Fixed assets + current assets growth for a decade in 2012, subdued for much of the year, To order CISI elearning products, please call the Customer C) Fixed assets – current liabilities D) Share capital + reserves and the bad vibes have deterred while more public sector cuts Support Centre on +44 20 7645 0777 or visit cisi.org

10 January 2013 cisi.org

CISI.indb 10 07/01/2013 10:15 first person

twitter Support for Oxfam Christmas may be over, but you can still support a CISI fundraising campaign in aid of Oxfam, which ran over the festive season. The Institute pledged to donate £1 to Oxfam The year ahead for every user who chose to follow the CISI on Twitter in December. That offer has now been The financial services industry may face uncertain and extended into the New Year. volatile times, but that hasn’t stopped Christopher Adams The CISI has also been helping Oxfam by from making a few predictions for 2013 collecting clothing and books for the charity, and its CPD & Networking team has been volunteering at a donations warehouse. here are the big questions many Chinese investors, burnt To support Oxfam, simply follow the Institute and answers for 2013. (The by the equity bubble in 2007. The big tail risk on Twitter @CISI. If you are already an Institute usual caveats apply as the Yet the most recent data follower, then you can do your bit by suggesting margin for error is huge.) suggests the economic remains a deterioration in @CISI to others. Finally, get involved with the slowdown may have run its the eurozone debt crisis Institute on Twitter and join in the conversation. Will the eurozone emerge from course: trade figures have recession? Yes, but only in the pointed to a bounce, while #FollowCISIandHelpOxfam second half of the year. The manufacturing and retail sales will weigh on house prices single currency area, still in the have improved. Stronger US further north. All this matters, grip of its sovereign debt crisis, demand will spur growth. because confidence is crucial lunch fundraiser is struggling with the heavy for housing. The Halifax House fiscal austerity administered to What does this mean for equity Price Index shows property drive down huge national markets? The big tail risk prices were all but unchanged Charity curry deficits. That, and already weak remains a deterioration in the in the year to November 2012. demand, has stymied recovery eurozone debt crisis. However, Expect more of the same. Hot up the springtime by prospects, making it difficult the European Central Bank’s enjoying the Lord Mayor’s Big for governments to generate the pledge to backstop the And UK interest rates? There is Curry Lunch. The event will higher revenues needed to sovereign bond markets of little reason to believe the Bank be held at the Guildhall in the reduce debt. Yet, there are signs nations such as Spain and Italy of England will raise its City of London on Thursday of a pick-up in manufacturing (should they apply and meet benchmark interest rate from 18 April in aid of ABF The and, while even Germany could the conditions for a bailout), the historic low of 0.5%. If Soldiers’ Charity. slip briefly into recession in the combined with credible moves anything, the debate on In the past five years, the first quarter, the worst may towards a banking union, mean the Bank’s Monetary annual lunch has raised £860,000 soon be past. Assuming the that the worst-case scenario of Policy Committee for in aid of current and former servicemen euro falls – and it should – then a euro break-up is unlikely. the early part of 2013 and women, regulars and reservists, and European exports should That, plus the US Federal will be whether to their families who have been affected by the benefit from a recovery in Reserve’s continued asset launch another round conflicts in Afghanistan and Iraq. global demand. Do not expect a buying, has already supported of quantitative easing Tickets are priced £95 and include a choice big rebound in Europe however. stocks in 2012. Equities will see (QE), under which the of curries, dessert, coffee, wine, beer and further gains in 2013 as Bank has already mineral water. Will America topple over the consumer spirits in the US, bought £375bn in fiscal cliff? Nearly. US where conditions are more assets. With no sign For further information, visit bigcurry.org politicians will strike a deal, promising, improve. For all the that the Chancellor, but investors’ nerves could safety they offer, ultra-low George Osborne, is well be shredded in the run-up yields on safe government about to relax fiscal to what will be seen as a watery bonds will be less attractive. policy, and with the compromise over a budget that Emerging markets, sensitive UK economy at risk of Q1. Bonds issued by organisations such as the World Bank, European Investment Bank averts much of the $600bn of to global prospects, will another contraction, and Asian Development Bank are known as: automatic spending cuts prosper – as will the UK’s the odds on further A) Treasury bonds B) Municipal bonds C) Supranational bonds D) Agency bonds and tax rises due to kick in resource-heavy FTSE 100. QE have shortened. from January. At the time of Ultimately, QE alone Q2. Which ONE of the following is a principle for an Approved Person? going to press, talks between Does that mean Britain’s housing will not be enough. A) Manage conflicts of interest fairly using Chinese wallsB) Observe proper standards of market President Barack Obama market will take off? No, it Britain’s open conduct C) Communicate in a clear, fair and not misleading manner D) Arrange adequate and the Republicans were doesn’t. First, the post-crisis economy means it protection for clients’ assets continuing. Agreement will austerity drive in the UK still will need stronger mean America avoids another has some way to run. Second, European demand, economic slump. Britain’s exposure to the combined with a Q3. Which ONE of the following criteria must be met by a company seeking eurozone through trade links recovery in the US, admission to AIM? Will China suffer a hard landing? will mean anaemic domestic to avoid years of A) Appoint a nominated adviser and broker B) Have a trading record of at least one year No. True, its economy has economic growth in 2013. stagnation. n C) Issue at least 5% of its shares to the public D) Have a market value exceeding £700,000 slowed for seven straight Third, the latest wave of quarters and is likely to have banking job losses will keep Christopher Q4. Which ONE of the following represents equity in a balance sheet? recorded its lowest annual activity in the south-east Adams is the A) Current assets – current liabilities B) Fixed assets + current assets growth for a decade in 2012, subdued for much of the year, Financial Times’ C) Fixed assets – current liabilities D) Share capital + reserves and the bad vibes have deterred while more public sector cuts markets editor

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CISI.indb 11 07/01/2013 10:15 Building bARRIERS A slew of new regulation around money market funds threatens to transform a central pillar of the ‘shadow banking’ industry. Andy Davis explains

12 January 2013 cisi.org

CISI.indb 12 07/01/2013 10:16 cover story

it was arguably the biggest bank run in The shock to the financial system was “The sums are huge,” says Martin history, except that no banks were involved. immediate. When investors realised that cash O’Donovan, Deputy Policy and Technical Immediately after Lehman Brothers filed invested in MMFs could fall below its face Director at the Association of Corporate for bankruptcy in the US on 15 September value, and they might not be able to withdraw Treasurers (ACT), whose members are big 2008, panicking investors withdrew more it on demand, they dashed for the exits. users of MMFs. “So the disruption back in than $300bn from money market funds Sudden widespread withdrawals threatened 2008, when Reserve Primary got into (MMFs). These are investment vehicles that the entire financial system and the US problems, immediately flowed through into allow companies, institutions and, especially Treasury was forced to step in to guarantee a huge withdrawal of funding to banks. The in the US, retail investors to invest surplus the value of the fund’s assets. ripple effects were colossal.” They reached cash that can be redeemed on demand with no the UK, where, in early 2009, insurer penalty. The funds take this cash and buy very New rules Standard Life wrote down the value of its short-dated government bills and highly rated MMFs are a vast but little known part of £2.4bn Sterling Fund by 5%, due to problem Building bank and corporate debt that in normal times the financial system – funds in the US are holdings of mortgage-backed securities. will give a slightly better yield than the main estimated to have some $2.7tn under The sudden, powerful illustration of how alternative – a bank deposit account. management out of a global total of $4.7tn. destabilising a true run on MMFs could be to In common with its rivals, the Reserve Members of the UK-based Institutional the banking system and the wider economy barriers Primary Fund, the oldest MMF, had begun Money Market Funds Association (IMMFA) prompted immediate moves by regulators to the week of 15 September with a fixed net had €522bn under management as of 30 June improve oversight of the funds. Alongside asset value (NAV) of $1 per share. This fixed 2012 out of a European total of more than €1tn. well-publicised international efforts to NAV is totemic for investors in MMFs, A significant percentage of fund assets are regulate the banking system, similar measures signifying that if they pay $1 for a unit in a invested in short-term debt issued by banks, exist to control the so-called shadow banking fund, it can be redeemed for $1 at any time. so the sudden wave of redemptions after system, which includes MMFs. Not that week. Among its $65.5bn portfolio Reserve Primary ‘broke the buck’ meant a In May 2010, the first changes to the rules of high-quality, short-duration securities, huge potential loss of funding for the banking governing US MMFs were introduced. These Reserve Primary was holding $785m of debt system, which pointed to a large systemic risk. tightened up conditions on the assets they issued by Lehman’s that was now worthless. In many ways, this was the greatest risk that could hold and also stipulated that a The result was that the fund’s NAV fell Lehmans’ collapse precipitated: forced sales minimum 10% of any fund must have daily below $1 to 97 cents and its manager of securities by MMFs to meet redemptions liquidity to meet redemptions and 30% must suspended redemptions. that could trigger a run on the banks. have seven-day liquidity. In Europe, ➳

What are money market funds? MMFs first appeared in the US in 1971, when the a fixed value of $1 – the constant NAV. Under the In the US, retail investors have historically put Reserve Primary Fund was set up. These funds current rules, MMFs cannot hold any asset with a large sums into MMFs, although this is much less invest in a range of short-term debt securities maturity greater than 397 days and most of their common in the UK – even though UCITS funds issued by governments and government agencies, assets are of far shorter durations. There are strict can be marketed to retail investors. banks (certificates of deposit) and companies conditions on the credit rating of the assets that (commercial paper). There are three main types funds are allowed to buy. Unlike banks, MMFs do What are the risks? of fund: treasury funds that hold only government not employ leverage. Aside from the systemic threats that regulators bills, government funds that hold securities issued are now grappling with, investors in MMFs face by governments as well as other state agencies, Who invests in MMFs and why? a number of other risks. Although there is very and prime funds that can also hold bank and Governments, financial institutions, companies little interest-rate or inflation risk in MMFs commercial debt. These funds offer investors the and pension funds all use MMFs as a way to because the debt has such a short duration, right to withdraw their money on demand and manage their surplus cash. This can be invested there will be credit risk in prime funds because aim to provide a better rate of interest than an in the funds to create a return but is available on they hold bank and commercial paper that in equivalent bank deposit account. demand, for example to pay salaries or pensions. theory could default. There is also a degree MMFs are regulated under rules set out in In recent years, corporate treasurers have of liquidity risk – investors may not be able the US in 1983, while in Europe these funds are increasingly used MMFs to avoid putting all their to redeem their units immediately if there is a governed by the UCITS directives. Members of the money into the banking system, which some collective rush to sell and redemptions have UK-based IMMFA follow a code of practice that regard as too risky, given that their deposits to be suspended. Finally, investors face a has very similar provisions to the US rules. These are not insured. As an alternative, they use degree of counterparty risk, since they cannot are mutual or open-ended funds, meaning that MMFs to diversify their risks and gain exposure be certain that a stressed fund will be rescued investors buy units in them, which are priced at to a variety of borrowers. by its sponsor. Illustration: Neil Webb for Debut Art Debut for Webb Neil Illustration:

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CISI.indb 13 07/01/2013 10:16 cover story

IMMFA members now adhere to voluntary There was another feature of MMFs that sat warned of the contagion risks for sponsoring limits of 10% daily liquidity and 20% weekly. uneasily with regulators. Although the funds banks if the size of a required bailout At the time the new US rules were are notionally independent corporate entities, exhausted its own capital and triggered a introduced, Mary Schapiro, Chairman of many of them have large banks and insurers panic among retail customers. In Europe, the industry’s main regulator, the Securities as their sponsors. While sponsors are under says Susan Hindle Barone, IMMFA and Exchange Commission (SEC), called no legal obligation to rescue a fund in the Secretary General, “there’s a lot of discussion them “an important step – but just a first step” event of a problem, they have tended to step around right now about whether you in bringing greater regulatory oversight to in quietly when necessary to prevent damage should ban sponsor support”. The idea the MMF industry. to their own reputations. Research by the has backing from some MMF managers Federal Reserve Bank of Boston found that because it would make clear that investors Value judgments “at least 21 [US] prime money market mutual in these funds are responsible for evaluating Several issues about these funds continue the risks for themselves. to trouble regulators. First, they fear that Then, last August, after months of fixed, or constant, NAVs make MMFs more With regulations unclear, consultation, Mary Schapiro suddenly susceptible to runs when markets become the fixed NAV – one of the announced that the SEC would not publish stressed and the risk increases that the proposals for new regulations of MMFs asset value might fall below $1. So one few ‘knowns’ in the MMF because they did not have the support of proposal considered by the SEC was that a majority of her fellow commissioners. all MMFs should move to a variable NAV, industry – is at serious risk calculated daily by marking the value of their Fresh proposals portfolio to market. funds would have broken the buck, absent Since then, other regulators have moved Second, regulators are concerned that, a single identified support instance during swiftly to the forefront. In the US, Treasury unlike banks, MMFs do not have to hold the most recent financial crisis”. This can Secretary Tim Geithner proposed ‘gating’, a cushion of capital to meet sudden involve either the sponsor putting cash into under which redemptions could be temporarily withdrawals. A second proposal therefore the fund or buying impaired securities suspended to prevent runs, along with capital suggested that the funds could keep a fixed from it at face value. buffers, enhanced liquidity rules or liquidity NAV, but would also have to hold a minimum Last June, the European Systemic Risk fees on redemptions. In October 2012, the capital buffer and impose a 3% levy on Board (ESRB) said that “uncertainty about International Organization of Securities redemption proceeds for 30 days. This levy availability of support … may have fuelled Commissions, which was asked to put forward would be next in line to absorb losses if the runs” on MMFs because such support was recommendations by the Financial Stability capital buffer were exhausted. expected but not guaranteed. The ESRB also Board, made 15 suggestions. The most controversial of these was that “regulators should require, where workable, a conversion to floating/variable NAV”. Hindle Barone says the IMMFA also expects fresh regulatory proposals from the European authorities, probably via updates to the UCITS directives. The IMMFA is strongly opposed to any imposition of capital requirements, arguing that MMF managers make such slender margins that it would take years to accumulate a large enough cushion and that the need to hold so much capital would render the business inherently unprofitable. It also strongly opposes any move away from fixed NAVs, which all its member funds have. Hindle Barone says that the fixed NAV is important to investors in MMFs because in many jurisdictions it enables them to treat returns as income rather than capital gains. Equally, Martin O’Donovan at the ACT says corporate treasurers are “totally wedded” to the idea of fixed NAVs because it allows them to account for their holdings in MMFs as if they were cash – hence the reference to “cash and cash equivalents” on corporate balance sheets. Any change to the fixed-NAV regime would force companies to reclassify investments in MMFs as securities holdings. O’Donovan argues that treasurers should recognise that MMFs carry a degree of risk and that a NAV will, in practice, fluctuate, even if it is always stated as £1, €1 or $1. With the final shape of regulations still unclear, the fixed NAV – historically, one of the few ‘knowns’ in the MMF industry – remains at serious risk.

14 January 2013 cisi.org

CISI.indb 14 07/01/2013 10:16 CISI.indb 15 07/01/2013 10:16 Getting engaged E veryone seems to agree that shareholders should have a role in promoting long-term decision-making at the UK’s largest firms.H ow to achieve this is far more complicated, says Ian Lewis

the kay review, published in July 2012, on encouraging a longer-term approach by is the latest in a series of UK Government- institutional investors. commissioned reports to call for greater So much for the theory. “The Kay Review shareholder engagement to thereby encourage has provided an extremely good diagnosis, longer-term thinking in corporate strategy. but the problem is what you then do to change However, the financial community is divided things,” says Lindsay Tomlinson, former on how good, effective long-term strategies can Chairman and current Director of the National be best achieved. Association of Pension Funds (NAPF). The review, by leading UK economist John Kay, recommends several measures to achieve Stick… increased engagement to improve the long-term Kay’s suggestion to increase the emphasis of the performance of UK-quoted firms. Many focus Financial Reporting Council’s UK Stewardship Code on long-term decision-making would be a practical start, since UK-authorised asset The Kay Review managers must either comply with the code, or explain why they do not. Selected recommendations to promote Few are likely to avoid complying, says long-term shareholder engagement: Tomlinson: “There is now a general acceptance that the investment community as a whole • expand the Financial Reporting Council’s ought to be trying to act to improve the way UK Stewardship Code to include companies are run through stewardship.” Last year’s shareholder spring included strategic issues as well as questions But there are potential pitfalls in encouraging successful attempts by frustrated shareholders of corporate governance greater institutional shareholder involvement in to vote down unpopular remuneration packages • company directors, asset managers and long-term corporate strategy. The first concerns at the AGMs of some of the UK’s largest firms. asset holders should adopt Good Practice competence and willingness. The uprising has increased the readiness Statements that promote stewardship “Asset managers aren’t going to dictate the of shareholders to act and, as a result, the direction that a company is going to take – that’s willingness of companies to listen. “There and long-term decision-making for the board and management to decide,” says has always been a core of institutional asset • an investors’ forum should be established Liz Murrall, Director of Corporate Governance managers that engaged with companies, but the to facilitate collective engagement by and Reporting at the Investment Management shareholder spring arose as not all companies investors in UK companies Association (IMA). necessarily listened,” says the IMA’s Murrall. • companies should consult their major The second sticking point is that more She says the current political and media long-term investors about important engagement by short-term shareholders would focus on corporate governance has sharpened board appointments make matters worse. Or, in the words of the late interest in constructive dialogue on both American management guru Peter Drucker, in sides, with clients now demanding that • companies should seek to disengage his 1993 book Post-Capitalist Society: “Long-term asset managers become more engaged with from the process of managing results cannot be achieved by piling short-term companies. “The [investment] industry has short-term earnings expectations results on short-term results.” clearly shown that it can step up to the plate. and announcements In his report, Kay describes the havoc Pressure from clients will ensure it will continue • mandatory quarterly reporting obligations heaped on once-great UK conglomerates ICI to do so,” she adds. should be removed and GEC from financial strategies developed But structural difficulties in investment • asset management firms should in response to stock market pressure on management will make long-standing reform management to boost shorter-term returns. difficult. John C Bogle, founder of US-based structure managers’ pay to incentivise Indeed, even supposed long-term investors can fund manager Vanguard Group, believes that long-term performance through an get things wrong. Tomlinson believes that better the trend towards greater intermediation has interest in the fund. engagement by shareholders would have done made responsible shareholder engagement little to redirect the crash course of UK banks almost impossible. Talking of long-term To download a copy of the Kay Review, before the financial crisis. institutional investors, Bogle wrote in a recent visit tinyurl.com/blq9pv6 “Investors were whipped up with the same article for the Financial Times that “a profession fever everybody else had,” he notes. that focused on stewardship and investment

16 January 2013 cisi.org

CISI.indb 16 07/01/2013 10:16 shareholder activism

management has become a business focused share ownership in the UK: that shareholders an industry official and former investment on salesmanship. should be treated equally. banker, who wished not to be named. “Governance activism attracts attention Giving long-term shareholders more and controversy and has no marketing value. influence over management decisions at investee One nation governance? It probably has negative value, impeding the companies could draw criticism from both Improving shareholder engagement looks extra asset-gathering goals that money managers sides. Small groups of influential shareholders tough when you consider how much equity in hold pre-eminent.” may feel other short-term investors are getting UK-listed firms is held abroad. “If you want to a free ride on the back of their efforts to advise a have a decisive impact on the way companies are …or carrot? company. Meanwhile, short-term shareholders run, you need to get sovereign wealth funds and If Bogle is right, then changes to the UK – or those with smaller stakes – may feel they foreign investors on side, as well as the UK Stewardship Code won’t do much to shift are being cut out of decision-making, even investors,” says Tomlinson. That could be a the obstacles to better engagement. Financial though their opinions are equally valid. challenge, given differing investment cultures incentives might be an alternative. around the world. Sovereign wealth funds, for “You can’t rely on exhorting people to do He who pays the piper example, have traditionally been reluctant to more, or on codes of practice,” says Tom Kay recommends an investors’ forum engage in public pressure on firms’ management. Powdrill, Head of Communications at Pensions comprising leading asset managers to The truth is that overhauling corporate Investment Research Consultants (PIRC), co-ordinate strategies of engagement. But governance to provide a better platform for which advises a number of major clients in the PIRC believes the focus should be on asset the long-term health of large UK firms will be pensions industry on governance issues. owners, such as pension funds, rather than difficult. Even with rules, instead of guidelines, “We’ve been through this several times asset managers. The latter are often employed it will rely on changing attitudes to long-term before. If you really want to bring about by the very companies whose stock they invest collaboration on both sides of the fence. change, you’ve got to tilt the playing field quite in, and so may be reluctant to make a stand over “Everybody is looking for a single magic significantly, making it financially advantageous difficult issues. “We don’t think it will work bullet that will change things, but that’s to stick with a company for the long term.” if you build it around asset managers. Asset probably unlikely,” Tomlinson says. “You PIRC has mooted the idea of paying investors owners – principally pension funds – will have need to change the way people do things an extra dividend if they hold shares for a long to drive it,” says Powdrill. progressively over time. Investors have to think

y period, as well as restricting voting on mergers Co-ordinated efforts by shareholders also run more about the fact they are investing in jobs

e and acquisitions decisions to investors that have up against the problem of mutual suspicion. and livelihoods, while boards have to realise, as : G held shares for longer than a given time. But this “With any more than three, it’s unlikely to be they generally do now, that they are accountable h

P otott strikes at a fundamental principle at the heart of productive, because no one will be open,” says to these shareholders.”

17

CISI.indb 17 07/01/2013 10:16 Hugo Cox talks to Sir David Tweedie, President Scottish of the Institute of Chartered Accountants of Scotland

it is fair to say that few accountants enter the profession to put themselves in the protectorate limelight. But they found themselves centre stage during the financial crisis as the sector came under intense scrutiny. This was at its most severe in the immediate aftermath – with widespread incredulity that the world’s leading banks could have suffered such catastrophe just months after sailing through their annual audits. As the dust settled, the more substantive criticisms stuck, such as major audits being conducted by firms that also relied on the same clients for lucrative advisory work in tax and consulting. Regulators around the world have responded through legislation. The European Commission, for instance, is considering forcing companies to rotate their audit firms to limit the sort of cosy relationships that tempt auditors to sign off questionable practices. Segregation of auditing practices from non-auditing services, such as tax and consulting, is also a possibility. Beyond Europe there are widespread calls for greater scepticism in auditors’ scrutiny of company accounts. As head of the International Accounting Standards Board (IASB) until June 2011, Sir David Tweedie steered the profession first through its frenetic buffeting following the collapse of Lehman Brothers and then through

CV snapshot 2012 – Becomes President of the Institute of Chartered Accountants of Scotland 2001 – Becomes Chairman of the International Accounting Standards Board 1994 – Gains a knighthood 1990 – Joins the Accounting Standards Board as Chairman 1987 – Appointed National Technical Partner of KPMG Peat Marwick McLintock 1982 – Appointed National Research Partner at KMG Thomson McLintock 1978 – Joins the Institute of Chartered Accountants of Scotland as Technical Director 1972 – Becomes a Chartered Accountant 1969 – Completes a PhD in Management and Incomes Policy at the University of Edinburgh 1966 – Earns Bachelor of Commerce degree from the University of Edinburgh

18 January 2013 cisi.org

CISI.indb 18 07/01/2013 10:16 profile: sir david tweedie

Border reformist Despite defending the practice of the the steadier campaign for change fought by the The process turned the tables on the banks’ profession before and during the crisis, Sir European Commission and the Financial bullying lawyers. Since the taskforce was David believes current reporting practices Stability Board. In this, the Scotsman’s dry wit staffed by senior accountants, its decisions are inadequate. Much of the fault lies with the has provided more than one amusing moment. comprised a rival version of ‘accepted practice’. paucity of disclosure; he believes that the key When a combative interviewer from the BBC There was an appeal process, but Dearing’s World Service suggested that he should be held masterstroke was to heighten the personal to improvement is the audit report. personally liable for the financial crisis, he stakes for those involved. If the appeal judge To improve the standard pass-fail opinions surprised the interviewer by agreeing. ruled against the firm, both the legal costs and visible in the audit at the back of financial At the end of a long charge sheet for which he those of reissuing the accounts were borne by statements, there should be a list of the implausibly took responsibility – irresponsible the firm’s directors. key assumptions that the company has lending to American homebuyers, lax due “Ron Dearing was a genius: the lawyers used in preparing its accounts, he says. This diligence by rating agencies, inadequate advised dissenting firms that they would would provide auditors with the role of adding oversight by major financial regulators – the win on legal technicalities, in which case ruffled interviewer the Financial Times to the information that they have told the interjected: “For the would tear them apart,” company already. sake of our overseas There was not a single he says. Sir David points to an example given by the listeners, that was appeal in the period There was not a US Public Company Accounting Oversight Scottish irony.” single appeal in the Board. A major firm that had benefited from This combative that Sir David spent as period that Sir David TARP (the US government programme to resilience is part of Sir chaired the ASB. His purchase assets and equity from America’s David’s character. Yet Chairman of the ASB tenure, which earned it has likely been him a knighthood, saw troubled financial firms) saw annual audit strengthened by the fact that sticking to the a widespread tightening of standards following costs rise from $119m in 2008 to $193m principles of his profession has cost him in the scandals including that surrounding Robert a year later. But the audited accounts were past as he established himself at the heart of Maxwell. KPMG’s dogged traditionalist had virtually identical. “Where was all the extra KPMG’s London practice. won the battle. effort?” asks Sir David. “Ultimately it is “We used to have a saying: ‘If it was immoral investors who want to see it.” in Edinburgh, it was frowned upon in the In crisis How can regulators provide auditors with Midlands and it was considered damn good Sir David would battle again as the financial business in the City of London’,” he says. crisis raged, and detractors argued that the the confidence they need to be more vocal The substance of this aphorism was most practice of fair-value accounting – which about firms’ accounting assumptions and more visible to Sir David during the 1980s – a period involves estimating a current market price for ready to voice their concerns? The solution during which the battle with overbearing financial assets – was undervaluing bank assets for Sir David is to replace the current annual investment banks led him several times to and so entrenching the crisis. The European reappointment process with a guaranteed consider quitting the profession. These were Commission recommended a shift to cost tenure for the next agreed period for re- the City’s boom years, when bankers routinely accounting, which would replace tracking the tendering (ten years is the recommendation of squeezed accounting firms for creative schemes changing value of assets with simply recording to get assets off their balance sheets. In his their price when purchased. “The market the Financial Reporting Council (FRC) for UK words, the City had “got totally out of control”. would have imploded; all credibility in the companies listed in the FTSE 350). “The banks would take a new scheme to two profession would have been lost,” says Sir More granular reforms will also help. Sir of the eight major accounting firms to get it David. He dug in his heels, was briefly pilloried David is supportive of proponents of confidence accepted. At that point they would get the and then prevailed. accounting. The movement, which has attracted lawyers in, who would tell you that the scheme Now 68, you sense he has a few more fights praise from Andrew Haldane, Executive Director was now ‘accepted practice’ and you had to sign in him still. He shares his humour and for Financial Stability at the Bank of England, it off,” Tweedie adds. resilience, he says, with Paul Volcker. Volcker It was a “creeping crumple” as successive appointed Sir David to his ten-year stint as the advocates complementing the single numbers firms caved in to pressure from their first Chairman of the IASB in 2001. Sir David in company reports with numerical ranges. investment bankers. “You’ll never beat us,” said says Volcker, a leading economist who was Proponents suggest this would more accurately a banker at one point to Sir David, then Chairman of the US Federal Reserve until 2011, reflect the uncertainties contained in preparing National Technical Partner at KPMG. will be “totally unruffled” by current industry accounts and so bring risk-based auditing in criticism for the seemingly impractical Volcker line with the probabilistic measures Taking on the lawyers rule (designed to limit the proprietary trading characteristic of a more scientific approach. Hope came in the form of Sir Ron Dearing. operations of US banks). Commissioned by the government to undertake The focus of Sir David’s next act of dogged Directors and auditors, meanwhile, should a review of how accounting standards were set, resistance may be tax avoidance. In a recent provide more evidence to support their he recommended establishing the Accounting address posted on the website of the Institute judgments about the status of going concern. Standards Board (ASB). Sir David was of Chartered Accountants of Scotland (of In only two of the ten largest corporate appointed its first Chairman in 1991. Dearing which he became President in 2012) he bankruptcies following the financial crisis had also recommended the creation of the Financial compares the sacrifice of World War II bomber auditors expressed doubts in their reports. Reporting Review Panel (FRRP) to clear all crews to the “smart-Alec schemes [that] Again, with the FRC, Sir David believes that major firms’ accounts for unsatisfactory bring the profession into disrepute”, allowing interpretations of the standards. It comprised the very rich to avoid contributing to the considerations made by directors and reviewed representatives from major accounting firms, society those airmen died to protect. If he by auditors should cover both solvency and the UK’s largest companies and several lawyers. launches a campaign, tax avoiders can look liquidity, and should include a prudent view The FRRP would request that unsatisfactory forward to entertaining radio interviews as of future prospects. accounts be withdrawn and re-issued. well as tough action.

19

CISI.indb 19 07/01/2013 10:16 Mark of respect

Mark Carney, who will become the Bank of England’s new The upshot of Carney’s intervention is that Governor in July 2013, is lauded as the saviour of Canada. Is this its effects should outlast his tenure, unlike those of other once-lauded central bankers. true, and what will he bring to the UK? Dan Barnes investigates “I don’t think we will be rewriting the history books when he has gone, as happened with “only superhumans need apply,” system, meanwhile, was structurally more Federal Reserve Chairman, Alan Greenspan,” quipped Shadow Chancellor Ed Balls in April sound than its peers in the US or the UK. After concludes Wright. Canada’s household debt 2012 on the search for a new Bank of England the collapse of several small regional Canadian ratios may still be growing at 6%, he notes, but (BoE) chief. From some of the recent media banks in the 1980s, it was strengthened through these are well down from the 12% peak rate of coverage about Mark Carney, who since 2008 rigorous financial reforms. Risk was no less increase in 2011. has served as Governor of the Bank of Canada concentrated than in the UK – Canada’s largest (BoC), you would think the BoE has its man. five banks account for 87% of lending according Regulation please Certainly Canada weathered the financial to The Economist – and the market would have So much for monetary policy. The BoE is about crisis well by comparison with other major been even more concentrated had some banks to take charge of regulation, something that, as economies, despite being heavily exposed to the not been blocked from major mergers in the late Ed Balls pointed out, most central bankers in US. “Carney’s reputation has been significantly 1990s. The regulators also stepped in to control the developed world don’t have on their plate. enhanced by his oversight of the Canadian mushrooming balance sheets by requiring that Here, Carney’s investment-banking heritage economy and banking system prior to, and banks remained focused on domestic business – he spent 13 years at Goldman Sachs – may since, the financial crisis,” said Nick Bate, an and shoring up mortgage lending. garner him some barracking from the UK economist for Bank of America Merrill Lynch, So Carney inherited an economy and a press. Yet City firms will feel that he is a in a note issued on 27 November 2012. banking system in better shape at the start man they can work with and Carney is used to But a stronger economic system and a more of the crisis. Yet he made some good choices pressure: he reportedly endured a tirade from resilient banking sector were as important as during the storm, being praised by Wright J.P. Morgan CEO, Jamie Dimon, at the 2011 Carney’s stewardship, as Craig Wright, for a “pragmatic, flexible approach to monetary International Monetary Fund meeting in Chief Economist at the Royal Bank of Canada, policy with a twist of innovation”. Interest Washington over his emphasis on stricter admits: “Governor Carney’s challenge was rates were cut aggressively and, when more capital requirements for banks. significant as the challenge was around the stimulus was required, Carney innovated with His appointment at the Financial Services globe, but the fundamentals were much better a pledge of “conditional commitment” early in Board (FSB) as Chairman reflected his efforts in Canada’s case.” 2009 – keeping interest rates lower over a to lead the global regulatory agenda. In a speech A fiscal crisis in the 1990s had meant tight defined period as long as the economy in November 2011 he attributed his appointment interest rates and historically low inflation, performed in line with forecasts. (He looked to “the strong reputation of Canada’s financial which averaged 2% for 20 years. The banking at quantitative easing in 2009 but never system and the leading role that Canada has deemed it necessary.) played in helping to develop many of the most This kept government borrowing at an important international reforms”. affordable level. “Two-year yields came down Carney’s experience at the FSB will certainly Career highlights because the market had not been pricing in be useful. The role has required concerted as long a period of low rates,” says Avery efforts to nudge regulators around the world 2008 – Becomes Governor of the Shenfeld, Chief Economist at Canadian into tighter supervisions of their banks, for Bank of Canada Imperial Bank of Commerce. example through ensuring that they keep larger 2004 – Becomes Senior Associate Deputy While in the UK the BoE prevaricated over amounts of capital in reserve, in accordance Minister at the Canadian Department ailing banks – most notably Northern Rock – with the Basel III rules. Last November, the of Finance Carney, Shenfeld claims, grasped the nettle FSB published its second list of 29 systemically 2003 – Leaves Goldman Sachs to become (although the BoC has no direct supervisory important financial institutions – banks Deputy Governor of the Bank of role, it can make suggestions). “In part we didn’t considered sufficiently large and interconnected have [bank blow-ups] because we made tough that their failure could cripple the global Canada in August 2003 decisions in a timely fashion,” he told Reuters economy. He has now set his sights on the 1995 – Earns a doctorate in Economics on 11 December 2012. “systemically important non-bank financial from Oxford University Carney also focused intervention where it entities”, such as money market funds, the 1990 – Joins Goldman Sachs, the start of a was most needed. “We needed to contain regulation of which appears essential to 13-year career that saw him based household debt at the margin. So he pressed shoring up global financial stability (as in its London, Tokyo, New York and the Government to tighten rules on mortgage examined on pages 12-14). Toronto offices insurance to reduce the scale of mortgage Carney’s relationships with global regulators borrowing,” says Shenfeld. In Canada, all will prove valuable. The UK looks likely to be 1988 – R eceived a Bachelor’s degree in mortgages based on deposits that are less than sidelined when it comes to banking regulation Economics from Harvard University a fifth of the home’s value must be insured in Europe: it will almost certainly remain with the Government. outside of EU-wide banking regulation.

20 January 2013 cisi.org

CISI.indb 20 07/01/2013 10:16 CISI.indb 21

Pototth : Ge y serving and most valuable deputies. on the BoE was to deprive it of one of its longest unfortunate if Carney’s first unwitting impact tempted by other challenges and it would be Governor. A disappointed Tucker may be more was favourite to become the Bank’s next Financial Stability, who is a key asset. Tucker services of Paul Tucker, Deputy Governor for Economic Research at J.P. Morgan. institution,” says Malcolm Barr, Head of UK will oversee a change in the culture of the decisions. Responsibilities are changing and he would put it in a good position to make policy always promoted a diversity of views that is that its own internal structure has not which is accepted internally to varying degrees, that the BoE is autocratic. “The criticism, interest rates do not work. rather than interest rates, might be better if low December 2012 that adopting targets for GDP, it may be alarmed at his comments early in approach might take him beyond his remit, If the TSC has concerns that Carney’s activist body with huge power and no elected head. campaign for greater accountability at a Select Committee (TSC) continues to challenges from Parliament. The Treasury Government’s fiscal approach. mandate to sponsoring the present the Bank fulfils its inflation-targeting Governor, Sir Mervyn King, from the way BoE sings entirely to the tune of current His biggest challenge may be cultural. The Cultural show? rules and hold them to account.” identify those who drag their feet or bend the implementation of agreed reforms. We will increasingly focused on timely and consistent to raise their game. That is why the FSB is house in order is not enough. We need others during the last crisis that having our own union in August, Carney said: “Canada learned recovery,” he says. by the low interest rates needed to support this quell what looked to be a housing bubble driven made to mortgage insurance rules to try to advocate for some of the changes that were too, explains Shenfeld. “He has been an Carney has logged successful interventions, system to local regulators and market players. which points out weaknesses in the financial role. It publishes the regional regulators), but it plays a monitoring are supervised at a federal level by a series of regulation. The BoC is not a regulator (banks a twist of innovation” monetary policy with flexible approach to Carney has a “pragmatic, Carney will need to work hard to retain the Carney will also have to address the charge Its internal organisation is facing major Speaking to the Canadian Auto Workers Carney’s experience also touches on Financial System Review , thebank’s new governor 07/01/2013 10:16 21 With a new Bank of England Governor and a new regulatory regime, what is in store for Britain in this year of change? George Littlejohn MCSI provides his view Twin peaks comes of age

in october 2012, the UK’s FSA released inside the Bank and headed by Carney himself. has to have meaning.” Lobbying by the banking details of the approaches to be taken by two new The aim is to help sniff out early warning industry – which some have described as bodies, the Prudential Regulation Authority signals of an impending crisis, such as the “corrosive” – is intense. (PRA) and the Financial Conduct Authority excessive borrowing and risk-taking by banks Martin Wheatley, Managing Director of the (FCA). The new twin peaks model means that in 2007 that were missed. FSA and CEO-designate of the new FCA, with major investment firms, deposit takers and The new system still has powerful opponents. which CISI members will have most contact, insurers will have two groups of supervisors – FSA Chairman, Lord Turner, and Andrew speaks of the need “to restore the traditional one focusing on prudential matters (the PRA) Bailey, who will head the PRA, told the cross- values of banking: honesty, trust and putting the and one on conduct (the FCA). All other firms party Parliamentary Commission on Banking customer first. People sense that the culture in (for instance, those that are not dual regulated) Standards in November 2012 that they had seen banks has shifted. We all need to work together will be solely supervised by the FCA. “deep-set problems in the banking industry” to put this right. I want to work with [the Under the incoming Governor, Mark Carney, and warned of a “powerful banking lobby”. industry] to achieve a lasting and sustainable the Bank of England will have significantly Bailey said: “The PRA’s powers could increase restoration of what has been lost.” broader regulatory powers, wielded by a newly capital ratios and the idea has a lot of merit to The law that establishes the new regulatory formed Financial Policy Committee working it, but it is like nuclear warfare – the deterrent structure gives the FCA the strategic objective

Roles of the bodies in the new regulatory architecture

Bank of England Protecting and enhancing the stability of the financial system of FPC the United Kingdom, aiming to work with other relevant bodies Contributing to the Bank’s objective to protect and enhance financial stability including the Treasury, the PRA and the FCA. The Bank’s Special through identifying and taking action to remove or reduce systemic risks, with a view Resolution Unit is responsible for resolving failing banks using the to protecting and enhancing the resilience of the UK financial system special resolution regime

Subsidiary FPC powers of recommendation and direction to address systemic risk

PRA FCA Enhancing financial stability by promoting the Enhancing confidence in the UK financial system by facilitating efficiency and safety and soundness of PRA-authorised persons, choice in services, securing an appropriate degree of consumer protection, including minimising the impact of their failure and protecting and enhancing the integrity of the UK financial system

Prudential & conduct Prudential regulation Prudential regulation Conduct regulation regulation

Systemic infrastructure – central counterparties, Prudentially significant firms – deposit Investment firms & exchanges, other financial settlement systems and payment systems takers, insurance, some investment firms services providers – including IFAs, investment Source: HM Treasury, A New Approach to Financial exchanges, insurance brokers and fund managers Regulation: Building a Stronger System (February 2011)

22 OctoberJanuary 20132012 cisi.org

CISI.indb 22 07/01/2013 10:16 continuing professional development

New product challenges Dual regulation • Products will need to be tested before launch to ensuring that communications made is an old idea ensure they meet customer expectations. via such platforms (for example, Twitter or When the Centre for the Study • All products should be regularly monitored using Facebook) are compliant. of Financial Innovation (CSFI), a holistic range of management information to • Firms should conduct risk assessments to then a two-year-old new kid ensure they remain suitable and consistently ensure that existing products will not be seen on London’s finance block, deliver good customer outcomes. as taking advantage of customers, and can be published ‘Twin Peaks’: A Regulatory Structure for the • Firms will need to have robust controls to demonstrated to provide value and benefit. Dr Michael Taylor New Century in 1995, it did ensure that promotions are compliant yet • Firms should be able to show that their end-to- not quite match the cult status of David Lynch’s commercially effective and are in line with end sales process is not only compliant with television serial of the same namea few years the expectations of the FCA and the the letter of the rules, but is also designed and earlier. Now, though, 18 years later, with the approach of peer firms. Staff responsible operated in a way that minimises the risk of CSFI firmly established as a force in the world for approving promotions must have the customer detriment through appropriate controls of finance, the grand plan promulgated by Dr right capabilities and competence to ensure against inappropriate behaviours. Michael Taylor, the author of the report, has promotions are compliant. come of age in Britain and elsewhere. • The regulator has given little guidance on new Source: KPMG, Twin-peaks Regulation: Key Taylor, now at the Financial Stability Board media but firms will need to be proactive in Changes and Challenges (November 2012) (FSB) in Basel – whose Chairman, Mark Carney, will become Governor of the Bank of England in the summer – was then lecturing at London of making markets work well. It will also draw the line when returns are generated at an give it three operational objectives: to protect “unacceptable cost” to the customer – or “by Guildhall University. Taylor followed the CSFI consumers, to promote competition and to endangering the integrity of the wider market.” report two years later with a well-received book, enhance market integrity. Indeed, market integrity is the third pillar Regulatory Leviathan: Will Super-SIB Work? It On consumer protection, of the new FCA approach. Wheatley says: “To elaborated on his ideas about financial regulation Wheatley says the FCA will ensure that the relevant markets work well, and dwelt on the problems that a single regulator “proactively study the financial we will increase our focus on delivering good would cause in financial services. At the time, the marketplace and what it market conduct. When we do this we will regulatory establishment railed against the ideas delivers to consumers so that continue what has worked well at the FSA. But we can confidently assess and we will also look at a wider range of behaviour and the prophetic Taylor plumped for a career challenge the conduct of the that damages trust in the integrity of markets or abroad, latterly as a highly regarded adviser to Martin Wheatley firms we regulate. We will threatens consumer protection. The FCA will the Governor of the Central Bank of Bahrain and help to protect consumers by understanding have a renewed focus on wholesale conduct. now, for the past year, at the heart of financial their needs and learning as much as possible This is because we realise there is a connection stability in Switzerland. from them about the financial issues affecting between what happens in retail and wholesale their lives. This means more focus on how real markets – and the risks caused by poor people behave in the real world. It is looking at wholesale conduct can be passed between them. crucial to the success of twin peaks regulation the pressures that influence their decisions and “The failure to properly manage the often in the UK. Both agencies will be independent, behaviour when it comes to choosing financial inherent conflicts of interest in wholesale with each looking at a number of firms from a products and services.” markets is a root cause of risk to two of our different perspective. Making this effective The Financial Services Bill gives the FCA objectives – both market integrity and consumer will come down to co-ordination between them enhanced tools so it can deliver on this protection. To enhance trust and confidence to avoid unnecessarily increasing the workload promise – notably new powers of intervention in the integrity of markets, we will take a more of firms in dealing with both of them. Some over products and services to help ensure that assertive and interventionist approach to risks larger firms are considering having separate the products that firms offer meet the needs of caused by wholesale activities. If we need to, PRA and FCA teams. Another important consumers (see box, ‘New product challenges’). we will act to protect a wider range of client relationship will be with Europe. European These are already proving contentious in the relationships than at present.” legislation plays an increasingly important part industry, with the banks’ well-oiled lobbying in UK regulation, so part of the FCA’s role will machine attempting to maintain the status A new way of operating be to work to shape EU and global financial quo where it can. Staff at the FCA will be expected to grasp the key services conduct and regulation of markets. Its issues in the firms they deal with, not least by job will be to help ensure that policy drafted in Competition and integrity talking to the CEOs of firms, and not just heads Europe and at a global level works for UK For the first time, the FCA will have an active of compliance. Wheatley wants his people to consumers and firms. and specific objective on competition, with a find out “where the business is going, not simply view to improving efficiency and innovation. how it is complying with a set of rules.” Martin Wheatley will be speaking to CISI The FCA believes it will bring better-quality He says: “This needs boldness and curiosity, members across the UK, and the rest of the world products and more choice, while acting as but it also needs judgment. Conduct regulation by webcast, from London’s BT Tower on 14 a brake on charging – which it can cap. It is is different from prudential regulation – which March. For information, please visit cisi.org difficult, Wheatley believes, to make abnormal can be more of an analytical exercise. It is about profits in a competitive market, as other how people behave. This requires new skills, George Littlejohn MCSI is a entrants will always come into the industry, and it means that we will have to work hard to senior adviser at the CISI. adding to choice. attract and retain good-quality staff.” The FCA Competition is complex. The FCA says it will has informally made clear that it will assess not be “in the business of creating a climate firms’ business models and will intervene if it hostile to market growth, innovation or a considers them risky or even unviable. healthy return for shareholders.” But it will The FCA’s relationship with the PRA will be

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CISI.indb 23 07/01/2013 10:16 Under scrutiny

T he Parliamentary Commission on Banking Standards aims to identify the industry’s major failings. But can the investigation also help boost governance and encourage bankers to behave more ethically?

the tyrie commission, which was linked to the banking sector by many how I can treat customers unfairly,” as established by the Government in the wake of members of the public and, thus, deemed though a conscious decision is made. the LIBOR scandal, has a wide remit in terms guilty by association. Similar reactions have been heard in of the questions to which it seeks answers. The commission regularly publishes response to CISI initiatives promoting Consequently, it is unlikely that any concerns people’s submissions, including oral evidence, integrity, more so now that membership or queries will go unnoticed. As you might a review of which reveals some interesting increasingly requires a tangible expect, written responses to the commission demonstration of thought about the topic. have been plentiful, particularly from A discussion about whether a test, organisations that have been vocal in their In the new world of banking, particularly in multiple-choice format, can criticism of the banking industry. who are the bankers and seriously examine whether or not the Additionally, the commission has established candidate will act unethically misses the a number of sub-committees and is receiving what regulatory framework point. The test is not designed to make people plentiful oral evidence from many of those behave more ethically, but rather encourage involved, across the whole spectrum. should they be governed by? them to think more about the issue. It is understandable that readers might ask Fortunately, that is the spirit in which most why the S&IR, a publication produced for points. For example, a panel on consumers’ CISI members approach the Institute’s members of the securities and investment and SMEs’ experiences of dealing with banks IntegrityMatters test. industry, is concerning itself with possible discussed the FSA’s Treating Customers Many members have commented on how action within or against the banking industry. Fairly initiative. A senior banker said: “I do useful it is for them to be encouraged to The answer is simple: we are inextricably not come to work every morning thinking of consider whether their thoughts and ideas,

24 January 2013 cisi.org

CISI.indb 24 07/01/2013 10:16 grey matters

framework should they be governed by? One suggestion is that bankers should be restricted to significant influence functions (SIFs), but would that be enough? Those identified for manipulating LIBOR were, in the main, probably not SIFs, but they were significantly influential. Moreover, few of the sales forces implementing the various product missales were SIFs, but those setting their sales targets may have been. Debate over how bankers should be governed will continue for the foreseeable future. In the meantime, predating the Tyrie Commission, but highly relevant to its brief, is a proposal discussed at an Investing in Integrity event hosted by the Lord Mayor of the City of London in October 2012. It was suggested that, rather than starting from scratch, we should build on the existing structures of professional bodies that already exist, including the CISI and the Chartered Banker Institute. This has given rise to a proposal that all professional bodies, whose members are employed in the financial services industry, should be subject to an overarching independent body. This is somewhat comparable to the Financial Reporting Council (FRC) and its relationship to the accountancy bodies. If the proposal comes into effect, it is envisaged that the FRC will act as an appeal court in the disciplinary process of professional bodies. The FRC would be responsible for confirming or varying the sanctions – being ‘struck off’ the register, for example – imposed by those professional bodies on individuals. It would also: • main tain a public register of individuals who subscribe to an approved code of professional conduct and require them to meet relevant professional entry standards and ongoing competence standards • w ork with professional bodies and monitor the implementation and enforcement of the actions and typical behaviour are appropriate with the Financial Conduct Authority and codes of conduct in the environment in which they operate. existing authorisation programmes, including • moni tor how participating bodies handle Another subject raised frequently by approved persons and significant influence complaints that do not fall within the respondents to Tyrie is the need for greater functions, which sounds reminiscent of some jurisdiction of existing restorative bodies, involvement by professional bodies, with aspects of the Retail Distribution Review. such as the FSA and the Financial some suggesting that a new organisation for Surprisingly, Barclays also suggested the Ombudsman Service. Complaints raised by bankers may be required. But views on this formation of a Chartered Institute of Bankers, the public or industry-related bodies would are mixed, with Martin Taylor, former Chief overlooking the fact that the firm subscribes relate to individuals who fail to maintain Executive of Barclays, being cautious about to the Chartered Banker Institute Professional the required standards. the impact that professional bodies might Standards Board. This board has already The CISI advocates strongly the have. “You do not make a medical profession published an initial set of standards of independent-council approach, allied to the by calling all the quacks ‘doctors’,” he professional behaviour, which Barclays staff type of engagement with professional bodies commented, adding that such a step is not are required to meet. that is required under the Retail Distribution worth taking if done just for PR purposes. Many people making submissions have Review. As we have argued consistently, the Taylor’s view is at odds with that of his tried to determine whether banking can disparity in standards (not just qualifications) former employer, whose submission justifiably be called a profession – a question between retail and wholesale is not

y recommended a rigorously enforced code of that one well-known firm has answered with sustainable and the Tyrie Commission

e conduct that is backed up with a register of a resounding ‘no’. Therein lies one of the big provides an ideal opportunity for all parties : G banking professionals. This could be difficulties: in the new world of banking, who within our industry to take the file out of the h

P otott operated, Barclays suggests, in co-operation are the bankers and what regulatory drawer marked ‘too difficult’.

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CISI.indb 25 07/01/2013 10:16 books

workbook edition workbooks and elearning editions Need International Introduction to Investment Securities & Investment (Arabic) Advice Diploma This unit – the first to be translated into Arabic by the Derivatives: The aim of this to read CISI – provides an introduction to the world of financial unit is to provide those advising services for people working outside the UK. It looks at and/or dealing in derivatives The latest publications the economic environment and the participants in the with the knowledge and skills and study aids global financial services industry. The current edition of required for their job roles. supporting CISI the International Introduction to Securities & Investment (Arabic) workbook (which will apply to exams until 10 January 2014) covers: Securities: This unit will ensure that candidates qualifications • the financial services industry can apply the appropriate knowledge and • equities understanding of securities, markets and related • bonds functions and administration. • derivatives • investment funds FSA Regulation and Professional Integrity: The • regulation and ethics objective of this unit is to ensure that candidates • other financial products. can apply the appropriate knowledge and understanding of UK financial markets, regulation Price: £75 and ethics to financial planning, advice and management for retail customers. WORKBOOK AND ELEARNING EDITION workbook and elearning edition Investment Management: This is the appropriate Commodity Investment competence-based qualification targeted at Derivatives Management investment professionals engaged in managing The Certificate in Commodity – Certificate investments, dealing in/advising on securities or Derivatives is a globally portable Programme derivatives and undertaking activities as a broker qualification that addresses the The Certificate in Investment fund-adviser. needs of the modern international Management is the appropriate commodity derivatives market. competence-based qualification Investment, Risk & Taxation: The objective of It has been developed with representatives from targeted at investment professionals engaged in this unit is to ensure that candidates demonstrate leading global financial services firms, using input managing investments, dealing in/advising on the ability to apply the knowledge, theory and from major exchanges to provide employees securities or derivatives and undertaking activities practical techniques required in order to assess a advising and/or dealing in commodity derivatives as a broker fund-adviser. The current edition client’s current financial position and future on behalf of professional clients with the knowledge of the Investment Management workbook and requirements, make suitable investment and skills required for their job roles. The current corresponding elearning product (valid for exams recommendations, monitor performance and edition of the Commodity Derivatives workbook and from 22 March 2013) covers: respond appropriately to changing needs and corresponding elearning product (valid for exams • economics circumstances. from 22 March 2013) covers: • financial mathematics and statistics • underlying commodity markets • industry relations Price: £100 per subject for combined • exchange-traded commodities futures and options • asset classes and investment strategies workbook and elearning product • principles of exchange-traded commodities • financial markets futures and options • accounting • trading, hedging and investment strategies • portfolio management • special regulatory requirements. • performance measurement. Visit cisi.org/bookshop to purchase workbooks, publications and elearning Price: £100 for combined workbook and Price: £100 for combined workbook and products quickly and efficiently. elearning product elearning product

online tool External specialists Professional Refresher The CISI’s Professional Refresher elearning The CISI relies on industry practitioners to offer their knowledge and tool enables you to remain up to date with expertise to help create and maintain its exams, workbooks and regulatory issues and changes, maintain elearning products. There are several types of specialists: authors and compliance and demonstrate continuing reviewers for workbooks and elearning products, item (question) learning. The product now consists of more writers, item editors and exam panel members. All of them receive than 40 modules, including: several benefits to thank them for their involvement.

• anti-money laundering There are currently about 300 external specialists who have volunteered • corporate actions to assist the Institute’s qualifications team, but more are required. • financial crime The CISI would particularly welcome applications from specialists to • investment principles and risk assist with developing exams for Exchange-Traded Derivatives, • professional taxation Commodity Derivatives, Over-the-Counter Derivatives and Corporate • training and competence Finance Technical Foundations. • the UK regulatory structure. To register your interest, please contact Iain Worman on Price: Free for all CISI members, otherwise it costs £150 per user. +44 20 7645 0609, or download the application form available There are also tailored module packages available for individual firms. via: cisi.org/externalspecialists Visit cisi.org/refresher for further information.

26 January 2013 cisi.org

CISI.indb 26 07/01/2013 10:16 Diary Events to attend over the coming months ➳ Professional courses Interest groups Venue: London unless otherwise stated 28 january Bond Interest Group – Retail Bonds 22 january Advanced Leadership Skills for Investment Seniors† £500 London Stock Exchange Group, 10 Paternoster Square, London EC4 29 january Building a Client-Focused Professional Service for the New For full information or to book: [email protected] World† £500 31 january Anti-Money Laundering & Terrorist Financing Introductory Workshop† £500 Branch events 5 february Anti-Money Laundering & Terrorist Financing 15 january Bank of England Update Introductory Workshop† (Manchester) £500 Bristol & Bath: Brewin Dolphin, 4th floor, The Paragon, 6 february Investment Principles & Risk* (PCIAM, half day)* (Isle The Counterslip, Bristol of Man) £300 15 january The Economy and Risk Management† 6 february Investment Principles & Risk* (IAC) (Isle of Man) £500 Yorkshire: Aviva UK, Wellington Row, York 15 january Managing Your Career (joint event with CIOBS) 6/7 february Investment Principles and Risk* (LSE) (Isle of Man) £900 Scotland: Glasgow (TBC) 12/13 february Understanding Regulation & Compliance† £900 15 january Managing Your Career (joint event with CIOBS) 14 february Essentials of Supervision £500 Scotland: Morton Fraser, Quartermile Two, 2 Lister Square, Edinburgh 26 february Dealing with the Sanctions Regimes† £500 16 january The Corporate Bond Market† Guernsey: Old Government House Hotel, St Ann’s Place, St Peter Port 27 february Integrity & Trust in Financial Services† (half day) £300 22 january Can India Ever Turn the Corner?† 5 march SARs & Court Orders† £500 Jersey: The Royal Yacht, Weighbridge, St Helier 12 march Suitability & Appropriateness: Avoid Misselling† £500 25 januaryAnnual Dinner Guernsey: Beau Sejour Leisure Centre, Amherst, St Peter Port * This event fulfils the requirements for qualifications gap-fill between existing CISI exams and the new Retail Distribution Review exam standards (Jersey and Isle of Man only) 25 january Bank of England Update East Midlands & Lincoln: Brewin Dolphin, Two Colton Square, Leicester 7 february FATCA Update† Member and Fellow discounts Liverpool & North Wales: Deutsche Bank, Royal Liver Building, Pier Head, Liverpool Professional courses discount: Fellows 35%; Members 30%; Associates 20%. 7 february Annual Dinner The following discounts are applicable only to one workshop per year: Bristol, Bath & South Wales: SS Great Britain, Great Western Affiliates 30%; Students 20%. Dockyard, Gas Ferry Road, Bristol

To book: cisi.org [email protected] +44 20 7645 0777 12 february Capital Gains Tax† (joint event with ACCA) Yorkshire: DoubleTree by Hilton, Granary Wharf, 2 Wharf Approach, Leeds 28 february Annual Dinner London CPD events Northern Ireland: Ulster Reform Club, 4 Royal Avenue, Belfast 17 january Cybercrime, Cyberwar? To book: cisi.org/eventscal [email protected] +44 20 7645 0652 America Square Conference Centre, 1 America Square, 17 Crosswall, EC3 29 january Generation Y: The (Modern) World of Personal Finance Cass Business School, 106 Bunhill Row, EC1 Regional roadshows

14 february Bank Strategic Asset Liability and Liquidity Risk The CISI is running a series of roadshows which will help members Management – Derivatives and Fair Value Accounting† to remain fully compliant with requirements of the Retail Distribution America Square Conference Centre, 1 America Square, 17 Crosswall, EC3 Review, focusing on maintaining CPD in the new regime. 19 february Exercising Shareholder Rights – New Trends in 29 january Newcastle, Leeds, Liverpool Shareholder Activism 30 january London Morningstar UK, 1 Oliver’s Yard, 55-71 City Road, EC1 5 february Bournemouth 5 march The Coming Power of Moscow† BT Centre, 81 Newgate Street, EC1 12 february Belfast 13 february 7 march Trends in Board Remuneration Tunbridge Wells, London, Glasgow, Edinburgh BlackRock, Drapers Gardens, Throgmorton Avenue, EC2 26 february Manchester, Birmingham 7 march Frontiers of Finance† 27 february Bristol Willis, 51 Lime Street, EC3 28 february Exeter 12 march Founders Series: Hector McNeil, Boost ETP 18 march London Willis, 51 Lime Street, EC3 19 march Leicester (with video link to Lincoln) 14 march The New Face of UK Regulation Live webcast For further details: cisi.org/roadshows

For further information about London CPD events, visit cisi.org/events † This event meets annual CPD requirements for members affected by the Retail Distribution Review To book: cisi.org/eventscal +44 20 7645 0777

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CISI.indb 27 07/01/2013 10:16 diary

Professional forums annual dinners Members’ events Explorer addresses The CISI’s seven professional Operations forums are a key benefit to the 6 February: Operational Institute’s members. Aspects of Client Money sell-out crowd Covering the areas of compliance, Speakers: Christopher Bond, Islamic finance, corporate finance, Chartered MCSI, Senior Adviser, World-famous financial technology, operations, CISI; Robert Forbes, Chartered explorer Sir Ranulph risk and wealth management, these FCSI, Senior Manager, Back Office Fiennes was guest discussion groups meet regularly in Operations, Jupiter Asset speaker at the annual Management; Mike Williams, central London to debate current dinner of the CISI’s issues and hear presentations from Partner, and Andrew Hagan, South Coast branch, industry speakers. Manager, both Banking & Capital ahead of embarking Events are generally held at Markets Audit Group, Deloitte LLP midday with a light lunch provided on his most recent 6 March: Outsourcing: Does it Work? and time to network. These gruelling challenge. Speakers: Frank Reardon, sessions are free and open to Sir Ranulph, who is Chartered FCSI, Head of Fellows, Members, Associates and currently preparing Investment Administration, Affiliate members of the Institute. South Coast: Sir Ranulph Fiennes, left, to cross Antarctica in JM Finn & Co; Alistair Reid, Student members may attend one with South Coast branch President, Peter winter – described as J.P. Morgan; Chris Pickles, Head Bell, Chartered MCSI event of each forum annually. the coldest journey on of Industry Initiatives, Global earth – drew a sell-out audience of 150 guests at the event. Banking and Financial Markets, BT Forthcoming events: A charitable collection at the dinner, held at the RNLI Compliance College in Poole, raised more than £1,400 for the Global Risk 16 January: FSA Enforcement Action 24 January: Embedded and Natural Healthcare Trust. The UK-based charity runs a Against Senior Management and SIFs Independent Risk Functions: Are healthcare centre in South Africa that provides care and Speakers: Stephen Kingsley, Senior There Effectively Three Lines of support to vulnerable children, many of whom are Managing Director, Economic and Defence at Your Organisation? infected with HIV/AIDS. Financial Consulting, FTI Speakers: Sophie Dupre ACSI, Risk Consulting; Sara George, Partner, Manager; Robert Sherlock FCSI, Two other CISI Stephenson Harwood Senior Expertise Risk Manager, branches, Manchester 6 March: FCA / PRA Update – Latest AXA Investment Managers; Mark & District and West Practical Advice on Preparing for the Dougherty, Director of Risk and Country, also New Regime Internal Audit, Risk Reward Ltd recently held their Speakers: David Moland, Chartered 14 March: The Problems of Risk annual dinners. FCSI, Group Head of Compliance, Reporting and Governance The guest speaker Arbuthnot Latham & Co; Elizabeth Speakers: TBC at the Manchester & Hornby MCSI, Senior Associate, District event, which Eukleia Training; Simone Porter Wealth Management was attended by 85 ACSI, Managing Director, 15 January: Value Investing: How guests, was Barry International Compliance, Charles Long-Distance Runners Bring Home Cryer, comedy writer Manchester & District: Barry Cryer, right Schwab UK the Medals and performer. with Manchester & District branch President, Alan Budenberg, Chartered MCSI Speaker: Justin Lowes, Managing The dinner was Islamic Finance Director, Lowes Wealth held at the Lowry Hotel in Salford, Manchester, and guests 26 February: A Case Management for Rethinking Sharia donated £795 for MedEquip4Kids, which provides Audit? 7 February: The Wealth Manager medical equipment for hospitals and health teams to Speaker: Mohammed is Dead: Long Live the Virtual support children’s care. Mohammed Amin, Consultant Wealth Manager Amin Speaker: Nick Hungerford, CEO Some 75 guests Corporate Finance and Co-Founder, Nutmeg attended the West 22 January: Takeover Code: How are Country dinner at 13 March: The State of the Updates Being Approached? Somerset County Wealth Management: A Speaker: Tony Pullinger, Cricket Ground in Bottom-up View of this Deputy Director General, the Taunton, and were Top-down World Takeover Panel entertained by Speakers: Brandon professional speaker 5 March: Dispelling the Alchemy of Brandon Davies Davies, Non- Cash Shells and Reverse Takeover Executive Director, John Simonett. The Speaker: Adam Wilson, Head of Gatehouse Bank; Nicola Horlick, event featured a casino International, Daniel Stewart & Co CEO, Bramdean Asset and nearly £590 was raised in support of Management; Sebastian Dovey, West Country: John Simonett, right, Financial Technology Managing Partner, Scorpio with West Country branch president, Paul the local Musgrove 21 February: Establishing the Right Partnership Lewis, Chartered FCSI Park Hospital. Dialogue with Your Board on Financial Technology Risk Workshop To book on to an event, please email Speakers: Craig Kersey, Chartered [email protected], stating your membership The funds raised by each branch will be topped up by FCSI, Managing Director, Guildhall number. For more information, visit HM Revenue & Customs’ Gift Aid scheme. At each of the Ltd; Ian Sutherland, consultant cisi.org/pf dinners, guests were given an update about both branch activities and the latest developments within the CISI.

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CISI.indb 28 07/01/2013 10:16 members

Membership admissions and upgrades

MCSI Nancy Kilpatrick Neil Banks Janet Swift Securities and Anfaal Capital Kieron Launder Nicholas Banks Glyn Thomas Commodities Authority Awadhesh Jha Timothy Main Neil Bartin Warren Thompson Anssar Mohammed Ahmed Apax Partners Giles Christopher Neville Peter Besant Nicholas Toubkin Seylan Bank Thomas Martel Benedict Noah Robert Bhatnager Ian Turland Mangala Karunaratne Arbuthnot Latham Nicholas Orr Jonathan Bickerdike Peter Wagstaff Standard Chartered Linda Amili Clack Rupert Robinson James Biggart Stephen Wilson Scotia McLean Bank Insinger de Beaufort Kate Rogers Peter Blatchford EFG The Share Centre Claire Cripps Robert Rydon Lee Blissett Elli Kashanchi Graham Spooner Barclays William Stowell Nicholas Blogg Financial Services Authority Vital Investment Philip Attreed Charlotte Swing Rebecca Boardman Jonathan Henry Blankfield Timothy Jack Julian Bailey SG Hambros Andrew Booth Fisher Investments X Financial Solutions Michael Barrett Nicholas Greenaway Margaret Bradley Nicholas Skelton Alexander Orban Harvey Chapel Maureen Llewellyn Steven Brandreth Five Pillars Xcap Securities Michael Dardis William Quantrill Paul Bray Raja Mohamad Maiden Mark Freeman Jeremy Greenwood Andrea Steel Richard Brown Fleet Street Publications Others Sally Greenwood Smith & Williamson Mark Bryant Frank Hemsley Vrushali Bulbule Terry Gyorffy Alexandra Buchan Peter Calbraith Fleming Family & Partners Cheng-Kai Chang William Lane Sutterlüty Timothy Carr Andrew Hadley-Grave Mohamed Rihan Hajireen Sandra Middleton-Jones Peter Mennel Martin Carter Fraser Mackinley Samuel Hogg Nigel Mullan Udo Sutterlüty Andrew Christie Karen Ogilivie Aboobucker Lebbe Mohamed Kevin Nevard The Business Key Andrew Clark Gamma Consultants Azan Niall Pasco-McGregor Peter Walker Graham Clark Johanna Kirby Mohamed Nazmi Elizabeth Parker Other Max Cleveland General Insurance Corporation Olarewaju Oluwatobi Ola-Ojo Paul Pascoe Mohamed Zameel Mohamed Julia Cole-Turner of India Howard Scott James Pearson Fauzer Maeve Colley-Russell Balkrishna Variar Scott Phillips Amy Coppock Hartmann Capital Chartered FCSI Andrew Playle ACSI Jennifer Crowley Basil Petrides Brewin Dolphin Kartik Rawal Abu Dhabi Islamic Bank Ralf De Sa HB Markets Adam Jarvis Daniel Ross Mohamad Agha Diane Dennis James Osborne CQS Craig Salisbury Ayres Punchard Alan Ditton Henderson Rowe Rosalind Dalton Rebecca Shone Christopher Welsford Maura Dunling Finlay MacLennan Vestra Robert Stuzer Baillie Gifford Anna Edenborough Jupiter Robert Mean Nicholas Wolf Melissa Holmes Paul Emery David Blake Nicholas Wood Bank Insinger de Beaufort Neil Ferguson Mashreq Bank Chartered MCSI Barratt & Cooke Christopher Attfield-Kelley Ian Findlay Ahmad El Haj Hassan Brewin Dolphin Martin Sayles Beth Davies Ian Fleming Imran Qureshi Claire Adamson Cardale Barclays Mark Foster Moneycorp Markets Church House Jeremy Dufton Gerasimos Amorginos Paul Gallagher Tapiwa Pamberi Jeremy Wharton Cazenove Richard Joseph Brown Ivan Gallop National Bank of Abu Dhabi Daniel Stewart Edward Inglefield Ross Hemming Gary Gee Raed Abu Nahleh Owen Garnett Coutts William Krupski Anthony Gibbens Firas Najib Al Madi Enhance Group Andrew McMillan Christopher Russell Philip Giles Tahir Arshad Justin Simpson Credit Suisse Pavel Skachkov Erica Goodyer Omar Awad Investec Kenneth Chapman Mariana Tricolici Alastair Graham Rahul Chandnani Henry Flather Deutsche Bank Marc Vowell Nicholas Green Maha Hamdan James Wallace Henry Denver Oksana Yesina Richard Hallum Sandeep Jadwani Killik Neil Murray BDO Stoy Hayward Mark Humphrey Afif Khawly Shelain Lakhani Fleming Family & Partners Guy Powdrill Tony Jackson Hitesh Majithia Rathbone Caroline Jones-Davies Bentley Reid Martin Jaffrey Shabeer Musthafa MK Vincent Hawkes First International Jack Henderson Colin Jones Manjish Nair Madhavan David Kness Christopher Morris BNP Paribas Scott Kelley Lidija Ostojcic Raymond James Fyshe Horton Finney Louise Symons Nigel Kerin Ihab Ramadan El Shemi James Chandler Gurdeep Singh Liddar Nabil Yared Sean Knights Shreeja Soman RG Investment Capital GHC Capital Markets Brewin Dolphin Perry Littleboy NinetyEast Financial Anthony Gaughan Martin Vaughan Simon Bird Matthew Marsden Ashwanee Ramsurrun Investec Leana Prasher Alan Marshall Nordea This list includes membership Harry Lygoe Steven Price George Mattar Anna Callow admissions and upgrades from Investment Funds Direct Cazenove John Mullally Pictet 24 September to 22 October 2012 Andrew Hooper Samuel Harbord-Hamond Mark Noble Timothy Edmans Julius Baer Simon Reed Matthew Noyce Quilter Jason Wayne Gooch Centre of Excellence for Kevin O’Malley Graham O’Donoghue Kleinwort Benson Applied Research and Training Philip Organ Rathbone Thomas Freedman Mohammad Wasel Alachraf Shantha Pitigala Noelle Cazalis PBR Hasan Alshibi Evgeniy Pozin Neil Clark David Palairet Ahmad Bazarah John Price James Codrington RBC Hussein Ahmed El Sokkary Anthony Rawlinson Caroline O’Callaghan Yousif Banayoti Salah Eldin Shebib Alan Rodgers Tessa Pilkington Royal Bank of Scotland Cheviot Michelle Ryan RBC Ian Gibson Paul Hurrell Eleftherios Sachanidis Nicholas Jewer Schroders Clariden Leu Stewart Sanderson Redmayne-Bentley Nicholas Bence-Trower Jessica Husain David Sargent Jon Moody Elizabeth Boardman Ronnie Porter Daniel Saxby Rometsch & Moor Adam Cavalier Commercial Bank of Dubai James Sayers Tobias Rometsch John Clifton Basel Delly Hasan Paul Short Rowan Dartington Stuart Derrick Coutts Michael Snowdon Kevin Bowhay Robert Farago Benjamin Allen Julian Robert Soper Schroders Edward Hamilton-Ely Graham Andrade David Stangroom Pritosh Ranjan Graham Harrington Malcolm Ash James Stokoe Adrian Jones Gerald Bailey Philip Swallow

Answers to the quiz from page 10: 1:C, 2:B, 3:A, 4:D

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CISI.indb 29 07/01/2013 10:16 people

Simon with his Piper PA-32 light aircraft

Up in the air Simon Harman, Chartered MCSI, is flying high as a pilot, The great appeal of flying for Simon is the sense of freedom. “From Jersey, you can fly to despite the odd emergency. Lora Benson reports France in as little as 15 minutes, making it easily accessible for a day trip,” he says. His longest journey has been from the UK aviation has played instructor in the UK at the age of 17. He now to Spain, “which took a couple of stops but a big part in Simon Harman’s pilots business jets, frequently carrying was fun and also brought some great views life. He became an air cadet in celebrity passengers.” along the way”. his native Jersey at the age of Simon had to display determination again to Yet flying has not been without its hazardous 13 and completed his first solo qualify as a flying instructor. As a first step, he moments for Simon. On one occasion he and flight, in a motorised glider, at had to obtain a commercial pilot’s licence, his co-pilot were midway between Jersey and the age of 16. completing about 18 months of distance Dinard in France when they experienced an Simon Harman “I got the flying bug early learning, sitting numerous exams and engine malfunction. – even my first job, while still at school, was as undergoing an intensive flying course. “It involved making some difficult decisions a baggage handler at Jersey Airport,” he says. Simon continues: “I then had to pass a in terms of handling,” he recalls, “but the Nowadays, Simon is not only an month-long instructor rating course, which situation was helped by superb French air accomplished pilot in his own right, having was really intense. Basically, you are taught traffic controllers and also seeing a lifeboat en clocked up about 700 hours’ flying time and route, along with a helicopter! Not surprisingly, being the proud owner of a Piper PA-32 light after making it to land safely, we headed aircraft. He is also a flying instructor. “Even my first job, while still straight to the nearest bar.” Simon, Director of Philean Trust Company at school, was as a baggage Another flight from France to Jersey was hit Ltd in Jersey, says: “Flying planes is a dream by an electrical-systems failure. come true for me and I wanted to pass on the handler at Jersey Airport” Simon says: “This type of incident really enjoyment I had gained to others.” calls on your training and it is surprising how A passion for aviation saw Simon obtain his how to fly again so that you are able to instruct calm you can be when situations arise. I was private pilot’s licence (PPL) while still at school, someone else.” teaching at the time and remember my student with Jersey Aero Club. Where possible, Simon spends weekends looking rather intently ahead; perhaps he was “It involved about a year of work, sitting and evenings instructing. “Many of my pupils willing the land to get closer. Air traffic control seven exams in areas including communication, are complete beginners who have been given a held up some large jets to allow us to land aerodynamics and human performance, and flying lesson as a birthday present, but others using the wrong runway. When emergencies completing 45 hours of flight training. As I was are working towards their PPL, including a happen, it’s great to see fire crews waiting for studying for my school exams at the same time, work colleague, Samuel Barnes-Barrington. you on the ground.” it was tough but I was very determined. “The biggest constraint I face is time, but “An inspiration for me was that my older with Jersey being so small, the close location of Got an interesting hobby? Contact Lora Benson brother, David, had already secured his PPL work, home and the airport makes it fairly with your story at [email protected]. If it is before becoming the youngest ever flying manageable to juggle my commitments.” published, you will receive £25 of shopping vouchers.

30 January 2013 cisi.org

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