Policy and practice
France: New Financial Public Prosecutor’s office established
On 1 February 2014, the office of France’s Financial Public Prosecutor opened its doors for the first time. The new five-member team is headed by Eliane Houlette, former public prosecutor before the Paris Court of Appeal. The creation of this new specialised Public Prosecutor, which seeks to remedy insufficiencies in France’s implementation of the 2012 OECD Anti-Bribery Convention, has been fraught with difficulties, and questions are already being raised as to the new prosecutor’s ability to operate free of political influence. The most contentious point that remains concerns the exact scope of its nationwide competence, which coincides in part with that of the Inter-regional Specialised Jurisdiction in economical and financial matters (“JIRS”).
One thing about the Financial Public Prosecutor’s scope of competence is clear. It has been granted exclusive competence to investigate and pursue offences related to stock market activities, and it has already inherited 36 files in that capacity. For the rest, it shares concurrent jurisdiction with the JIRS regarding offences involving the corruption of public officials, tax fraud and any related money laundering activities. The selection criteria is the same for both prosecuting authorities: the “complexity” of the cases, due to the number of authors, accomplices or victims, or their geographical reach.
The first obstacle facing the Financial Prosecutor will be to establish its legitimacy as an autonomous body and secure the high-profile cases it has been created for – a daunting task, as the Paris Public Prosecutor has already announced that the JIRS there intends to continue fully to exercise its competence in economical and financial matters.
Luxembourg: The investigation powers of the Luxembourg financial services regulator (CSSF)
The Luxembourg financial services regulator Commission de Surveillance du Secteur Financier (“CSSF”) is responsible for the prudential supervision of credit institutions, professionals of the financial sector (investment firms, specialised PFS, support PFS), undertakings for collective investment, pension funds, SICARs, securitisation undertakings issuing securities to the public on a continuous basis, regulated markets and their operators, multilateral trading facilities, payment institutions and electronic money institutions. It also supervises the securities markets, including their operators.
The CSSF is empowered to require from companies under its supervision any useful information to fulfil its objectives. It is also vested with extensive investigation and expertise powers.
- Generally, in this context, the powers of the CSSF include the right to:
- access any document of any form and to require a copy of it;
- request information from any person and, if necessary, summon a person to a meeting to obtain more information;
- conduct investigations by means of on-site inspections with persons subject to its supervision or mandate experts to do so;
- adopt any necessary measure to ensure that persons subject to its supervision continue to comply with legislative requirements and its implementing measures.
The European Commission criticised the implementation in Luxembourg of the Directive on market abuse and in particular deemed the investigation powers of the CSSF insufficient in light of the requirements of the Directive. As a result, the Luxembourg legislator has adapted its regulations on short selling of financial instruments and on market abuse in order to strengthen the CSSF’s powers: the regulator is now empowered to carry out on-site inspections of any person suspected of violating the regulations it has to enforce and not just solely the persons or companies that are subject to its prudential authority.
However, these on-site inspections can not be pursued without express consent of the person concerned. If the approval is not granted, the regulator must seek a prior authorisation from the investigation magistrate (juge d’instruction) before it can carry out on-site inspections. The person subject to on-site inspection and his counsel can be present during the inspection. The investigation shall be notified to them the day before, as well as the inspection’s object and purpose. The investigation cannot be started before 6 a.m. or after 8 p.m., otherwise it would be void.
As regards the Alternative Investment Fund Managers legislation, the CSSF is empowered to carry out on-site inspections with or without prior announcement.
The CSSF may also be called upon by another Member State authority to cooperate in the context of an investigation and carry out on-site inspections in support of a foreign investigation.
Switzerland: Switzerland confirms its intention to participate in international information sharing
At the World Economic Forum in Davos which took place on 22-25 January 2014, the head of Swiss Federal Department of Finance, Eveline Widmer-Schlumpf, “confirmed Switzerland's willingness to play a constructive and active role in the development of a global standard for the automatic exchange of information" in relation to tax matters.
Switzerland signed the OECD Council of Europe Convention on Mutual Administrative Assistance in Tax Matters in October 2013. Once the terms of the convention are effective, Switzerland will be required to provide all kinds of mutual assistance in tax matters including exchange on request, spontaneous information sharing, tax examinations abroad and assistance in tax collection. Switzerland’s participation in the Convention has been heralded as a major step in tackling the hiding of illicit funds in Swiss bank accounts.
UK: Sentencing Council publishes new sentencing guidelines for corporate offenders convicted of fraud, bribery and money laundering
On 31 January 2014 the Sentencing Council published a new definitive guideline for financial offences (the “Guideline”) committed by corporate offenders. The Guideline contains sentencing rules applicable on conviction for offences of fraud, bribery and money laundering, including offences under various tax statutes and that of common law conspiracy. It will come into force on 1 October 2014 and apply to all corporate offenders who are sentenced on or after that date. The Guideline deals with matters of compensation, confiscation and the calculation of penal fines, which take into account both the culpability of the offender and the harm caused by the offending conduct. Other factors may increase or decrease the seriousness of the offence or reflect mitigation.
Given that deferred prosecution agreements will be available from 24 February 2014 (see our report below), corporates facing prosecution for financial crimes will be eager to see the potential sentences on conviction for such offences.
Linklaters has published a client note on the new Guideline giving fuller details of how potential fines will be calculated, available here.