CUBE RegNews:
August 16^th

SEC settles with UK audit firm

The Securities and Exchange Commission (SEC) has filed charges against London audit firm Crowe UK LLP, its CEO Nigel Bostock, and senior auditor Matthew Stallabrass for alleged deficiencies in their audit of Akazoo Limited, a music streaming company. The parties have reached a settlement with the SEC. 

The SEC’s probe revealed Crowe issued an unqualified audit report for Akazoo’s 2018 financials. Following its public listing in 2019 it emerged that Akazoo’s reported $120 million revenue was grossly overstated, with minimal actual revenue. The SEC’s order claims Crowe presented a Public Company Accounting Oversight Board (PCAOB) standard audit, despite limited team familiarity with PCAOB standards.

The order also cites oversight lapses, such as inadequate due diligence on falsified agreements and misleading confirmations. The SEC alleges Crowe, Bostock, and Stallabrass displayed improper professional conduct. 

Nigel Bostock, the engagement partner, is charged with insufficient supervision and documentation, while Stallabrass, the engagement quality reviewer, is accused of an inadequate review. 

Crowe, Bostock, and Stallabrass, without admitting guilt, have settled. Penalties total $750,000, $25,000, and $10,000 respectively. They’ll cease violations, face censure, disgorge funds, withdraw PCAOB registration, and enhance client onboarding. Bostock and Stallabrass face SEC suspensions, eligible for reinstatement after five and two years respectively. 

FINRA August fines summary

FINRA has published its latest disciplinary summary for August 2023 covering a range of enforcement actions. Amongst those mentioned for violations are RBC Capital Markets, Credit Suisse Securities, and UnionBanc Investment Services LLC. The briefing also details the numerous individuals fined or barred by the regulator. 

Payment Systems Regulator issues CPs

The UK’s Payment Systems Regulator (PSR) has issued two new consultation papers. 

CP 23/6: APP fraud: Excess and maximum reimbursement level for FPS and CHAPS.

In June 2023, the PSR published Policy Statement 23/3 which clarified the PSR’s position in relation to the excess and the maximum level of reimbursement, in particular regarding:  

• Claim excess: Sending payment service providers (PSPs) may apply a claim excess under the new reimbursement requirement. This cannot be applied to vulnerable customers. 
• Minimum threshold: There is no separate minimum value threshold for authorized push payment (APP) fraud.  
• Maximum level of reimbursement: There is a maximum level of reimbursement for APP fraud claims (by value) under the new reimbursement requirement 

CP 23/6 is a consultation to help establish the values of the claim excess and maximum reimbursement limit that were agreed as part of Policy Statement 23/3. 

CP 23/7: APP fraud: The consumer standard of caution

Also as part of PS 23/3 was a general requirement that sending payment service providers (PSPs) should reimburse their consumers who had executed an authorized push payment (APP) subsequent to fraud or dishonesty. The PS confirmed there would be two exceptions to this general reimbursement obligation: 

• Where the consumer seeking reimbursement has acted fraudulently (‘first-party fraud’). 
• Where the consumer has acted with gross negligence (the ‘consumer standard of caution’). 

CP 23/7 confirms that the PSR will publish both a policy document on the consumer standard of caution and a guidance document. It includes drafts of both documents and seeks views on the approach. 

Both consultations close for comment on 12^th September. 

FCA invites PEP feedback

Following the recent disagreement between Nigel Farage and Coutts bank which led to the resignation of both the Coutts CEO, and NatWest Group CEO, the Financial Conduct Authority has issued a request to any politically exposed persons to provide feedback to them on the current regime, with a view to the FCA revising their guidance if necessary. The FCA is writing to “parliamentarians, chairs of the political parties and other UK PEPs (including senior civil servants and the senior ranks of the armed forces” to generate feedback and will report back on the completed review in June of 2024.