Decision Notice
On , the Financial Conduct Authority issued a Decision Notice to Banque Havilland SA
DECISION NOTICE
Address:
5 Savile Row, London W1S
1.
ACTION
1.1.
For the reasons given in this Notice, the Authority has decided to impose on Banque
Havilland SA a financial penalty of £10,000,000 pursuant to section 206 of the Act.
2.
SUMMARY OF REASONS
2.1.
During the Relevant Period the Firm acted without integrity by creating and
disseminating a document, the Presentation, which contained obviously improper
advice for potential investors by recommending manipulative trading strategies,
including recommending conduct which could be a criminal offence, had it taken
place in the UK.
2.2.
The Presentation set out the Strategy. The Strategy comprised a multi-faceted
approach that included conduct aimed at creating a false or misleading impression
as to the market in, or the price of, Qatari bonds, with the objective of harming the
Banque Havilland SA has referred this Decision Notice to
the Upper Tribunal to determine what (if any) the
appropriate action is for the FCA to take, and remit the
matter to the FCA with such directions as the Upper
Tribunal considers appropriate.
David Rowland, exercising third party rights, has also
referred this Decision Notice to the Upper Tribunal which
will determine whether to dismiss that reference or remit
it to the FCA with a direction to reconsider and reach a
decision in accordance with the findings of the Upper
Tribunal.
Therefore, the findings outlined in this Decision Notice
are provisional in that they reflect the FCA’s belief as to
what occurred and how it considers the behaviour
described should be characterised. The Upper Tribunal’s
decision will be made public on its website.
economy of Qatar. Creating a false or misleading impression as to the market in,
or the price of, Qatari bonds would be an extremely serious matter and potentially
a criminal offence, if it were to take place in the UK (contrary to section 90 of the
Financial Services Act 2012). Section 1H of the Act provides that an offence
involving such misconduct amounts to “financial crime” for the purpose of the Act.
2.3.
The Strategy included regulated advice (pursuant to article 53 of the Regulated
Activities Order and section 22(1) of the Act) aimed at the UAE and/or other states
in the Middle East region because it advised those potential investors to transfer
their existing holdings of Qatari bonds into a “protected cell company” to “preserve
integrity” before manipulative trading intended to destabilise the Qatari economy
took place, which trading was to include the purchase of CDS and the sale and
purchase of Qatari bonds.
2.4.
The Firm intended to present the Strategy to representatives of the UAE and/or
other states in the Middle East region (whom the Firm considered might have
reasons to want to put economic pressure on Qatar) as a way of marketing its
services, and did provide a copy to an individual from an Abu Dhabi’s sovereign
wealth fund. Accordingly, the Firm breached Principle 1 (Integrity) of the
Authority’s Principles for Businesses.
2.5.
The Authority therefore has decided to impose on the Firm a financial penalty of
£10,000,000 pursuant to section 206 of the Act.
3.
DEFINITIONS
3.1.
The definitions below are used in this Notice:
“the Act” means the Financial Services and Markets Act 2000;
“the Authority” means the Financial Conduct Authority;
“CDS” means credit default swaps;
“COCON” means Code of Conduct in the Authority’s Handbook;
“Currency Peg” means a policy in which a national government sets a specific fixed
exchange rate for its currency with a foreign currency or a basket of currencies;
“DEPP” means the Decision Procedure and Penalties Manual, part of the Authority’s
Handbook of Rules and Guidance;
3
“EG” means the Authority’s Enforcement Guide set out in the Authority’s Handbook;
“the Financial Institution” means a financial institution being established through a
partnership of an Abu Dhabi sovereign wealth fund and the Rowland Family before,
and during, the Relevant Period. It was not a project of the Firm;
“the Firm” means Banque Havilland SA;
“Head Office” means the head office of the Firm in Luxembourg;
“Individual A” means the individual engaged by the Firm to market its services in
the UAE and the wider Middle East region;
“the Indian Article” means an article regarding the Presentation published by an
Indian media organisation called the Business Standard, entitled “Gulf Crisis may
affect Qatar’s security, India’s economic interests” on 12 October 2017;
“the Intercept” means a media organisation called The Intercept.com;
“the Intercept Article” means an article regarding the Presentation published by the
Intercept on 9 November 2017;
“London Branch” means the branch of the Firm based in London;
“MLRO” means Money Laundering Reporting Officer;
“PERG” means the Perimeter Guidance Manual in the Authority’s Handbook;
“the Presentation” means the document drafted by the Firm setting out a series of
steps which could be taken to harm the economy of Qatar, by using manipulative
trading practices aimed at creating a false or misleading impression as to the
market in or the price of Qatari bonds;
“PRIN” means the Principles for Businesses, part of the Authority’s Handbook of
Rules and Guidance;
“the Regulated Activities Order” or “the RAO” means the Financial Services and
Markets Act 2000 (Regulated Activities) Order 2001;
“the Relevant Period” means the period from 12 September 2017 to 13 November
2017;
“Mr Rowland” means Edmund Lloyd Rowland;
“the Rowland Family” means the family of David Rowland;
“the SFNH Document” means a document created by David Edward Weller on 14
September 2017 entitled “Setting Fire to the Neighbour’s House fund” setting out
details of a series of steps to devalue the Qatari Riyal by increasing and encouraging
selling pressure;
“the Strategy” means the series of steps as set out in the Presentation which could
be taken to harm the economy of Qatar by using manipulative trading practices
aimed at creating a false or misleading impression as to the market in or the price
of Qatari bonds;
“SYSC” means the Senior Management Arrangements, Systems and Controls
Sourcebook, part of the Authority’s Handbook of Rules and Guidance;
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber);
“UAE” means United Arab Emirates;
“Warning Notice” means the Warning Notice given to the Firm dated 14 October
2021; and
“Wash Trade” means a sale or purchase of an instrument where there is no change
in beneficial interest or market risk, or where the transfer of beneficial interest or
market risk is only between parties acting in concert or collusion, other than for
legitimate reasons.
4.
FACTS AND MATTERS
The Firm
4.1.
The Firm was established in 2009 by the Rowland Family and described itself,
during the Relevant Period, on its website “as being managed with the financial
conservatism which is the family’s hallmark”. The Firm’s head office is in
Luxembourg. It has various branch offices, including one in London. The Firm was
also described on its website as “an integral part of the [Rowland] Family’s interests
on both a professional and personal level”.
Key individuals
4.2.
The key individuals involved in this matter were all employed in the London Branch,
namely Edmund Lloyd Rowland, David Edward Weller and Vladimir Bolelyy. During
the Relevant Period:
4.2.1. Mr Rowland was approved by the Authority as Senior Manager Function 21
EEA Branch Senior Manager (“SMF21”) at the Firm. Those holding SMF21
are employees who have a significant responsibility for one or more
significant business units of a branch of an incoming EEA firm in the UK. Mr
Rowland was Chief Executive of the London Branch for almost three years
before stepping down in April 2017, after which he retained his SMF21
status. He was formally re-appointed as Chief Executive on 26 September
2017 (part way through the Relevant Period) and continued in this role until
his resignation on 13 December 2017.
4.2.2. Mr Weller was the Head of Asset Management at the London Branch and
was also approved by the Authority as an SMF21; he reported to Mr Rowland
and to the Firm’s Group Head of Asset Management.
4.2.3. Mr Bolelyy was employed by the Firm as a senior investment analyst and
was Mr Rowland’s assistant reporting directly to him.
4.3.
Throughout the Relevant Period, all three individuals were employed by and
received salary from the Firm only.
Marketing in the UAE
4.4.
On 18 April 2017, the Firm engaged the services of Individual A to provide
“consulting and professional assistance in developing Banque Havilland in the
United Arab Emirates”. This was defined as expanding “the undertaking of Banque
Havilland in the UAE and broader Middle East, with specific assistance in terms of
strategic marketing, local networking or anything else which will be agreed by the
Parties as useful to serve the present purpose”. Individual A was paid a monthly
fee of US $10,000 for these services. In addition to this consultancy role, Individual
A was also a special adviser to the Crown Prince of Abu Dhabi (the capital of the
The Qatar diplomatic crisis
4.5.
In June 2017, as was widely reported in the press, a Saudi-led coalition of Gulf
states (including the UAE) severed diplomatic relations with Qatar, citing Qatar’s
alleged support for terrorism as the main reason. The Qatari Riyal had a currency
peg with the US Dollar throughout the Relevant Period.
30 August 2017 meeting
4.6.
On 30 August 2017, at a meeting organised by Individual A, Mr Rowland and David
Rowland (Mr Rowland’s father and the ultimate controller of the Firm) met with a
senior representative of an Abu Dhabi sovereign wealth fund. Prior to that meeting,
on 27 August 2017, Mr Rowland had referred to the forthcoming meeting and stated
to a colleague: “they have another potential opportunity they want me to look at
also”. Mr Rowland told the Authority during an interview that at this meeting it was
made clear to him, in the absence of David Rowland, that the UAE sovereign wealth
fund’s representatives were concerned about the substantial exposure that Emirati
banks had in the interbank market to Qatar and particularly to the local banking
sector. This was due to the situation between Qatar and the UAE, and the
representatives’ fears that the stand-off would be significantly extended, as no
rapprochement seemed to be on the horizon. This was a reference to the political
tensions in that region, which had worsened since June 2017.
The Presentation
4.7.
At some point after the 30 August 2017 meeting and no later than 12 September
2017, Mr Rowland tasked Mr Bolelyy with preparing a written presentation as to
how economic pressure might be put on Qatar. Subsequently, on 12 September
2017 Mr Bolelyy sent himself an email recording the following matters in a number
of bullet points, all of which he then included in the first draft: “Bond exposure;
What natters [sic] is western view; Foreign reserves; Currency peg break; Cash to
pay for insurance; “Sanctions don’t work unless everyone is doing it”; Currency peg
pressure is effective when thought by everyone; Avoid jargon; Segregated vehicle”.
4.8.
The first draft of the document which became the Presentation, prepared by Mr
Bolelyy on 12 September 2017 in the form of slides, was named “Qatar
Opportunity” and proposed a series of steps with the purpose of devaluing the
Qatari Riyal and breaking its peg to the US Dollar.
13 September 2017 meeting
7
4.9.
On the following day, 13 September 2017, a meeting was convened at short notice
of various individuals in the London Branch; these individuals were Mr Rowland, Mr
Weller, Mr Bolelyy, another employee of the Firm and an individual not employed
by the Firm.
4.10. At the meeting, which appears to have lasted for about a quarter of an hour and
was subsequently described by Mr Weller subsequently as a brain-storming session,
Mr Rowland asked for ideas on how negatively to impact the Qatari economy by
undermining the value of the country’s currency. Mr Rowland explained that Saudi
Arabia, Abu Dhabi [sic] and Egypt were keen as nation states to persuade Qatar to
stop some of its funding activities. He further explained that the 3 countries had a
combined US $23 billion of Qatari assets that they were prepared to use to pressure
the Qatari Riyal. Mr Rowland went on to state that the potential economic interest
for the Rowland Family would come from being able to charge a small fee on the
assets which would be transferred to a vehicle arranged by the Rowland Family.
4.11. The Authority infers that the Firm intended that the Presentation would be
presented to representatives of the UAE and/or other states in the Middle East
region, which the Firm considered might have reasons to want to put economic
pressure on Qatar, in the hope it might lead to business for the Firm. Regardless
of whether the Strategy as set out in the Presentation was practicable or likely to
be accepted by such representatives, the Authority concludes that it was a way of
signalling to potential investors that the Firm was willing to countenance improper
market conduct, in order to advance its interests.
4.12. Following this meeting, none of the attendees raised any concerns with the Firm’s
MLRO or to any other senior manager. In addition, no concerns were raised to Head
Office or via the Firm’s whistle-blowing procedures.
Iterations of the Presentation
4.13. Later that day, 13 September 2017, Mr Bolelyy emailed the attendees of the earlier
meeting to request their “credible, high-level ideas re: a possible transaction
structure,” and asked that they “jot something coherent down” . He explained that
what he described as the “winning idea” would go into a presentation, the drafting
of which he would take care of, and that it would be shared and discussed at a
“high level”.
4.14. On 14 September 2017, Mr Bolelyy emailed a draft of the Presentation to Mr
Rowland and stated as follows: “Attached is a work in progress based on fragments
of information exchanged so far. As discussed yesterday, it will be useful for all of
us to sit down and nail down the basic skeleton. When can you do today?”.
4.15. This version of the Presentation included further details of the Strategy, specifically
regarding the stated aim of putting pressure on the Qatari Riyal to such an extent
that the Qatar National Bank would need to deploy significant portions of Qatar’s
foreign exchange reserves to maintain its value in relation to the US Dollar.
4.16. This version of the Presentation explicitly stated that “maintaining the [currency]
peg requires extensive use of central bank foreign exchange reserves. Existing
G$15bn [sic] of Qatari bonds represent close to 50% of all central bank reserves
available” and noted that “the selling pressure [generated by the Strategy] creates
upward pressure on the Qatari Riyal-US Dollar peg and forces Qatar National Bank
to defend it by decreasing available foreign exchange reserves”.
4.17. The Presentation envisaged the purchasing of Qatari bonds, deployment of long
CDS and long credit forwards with the express aim of negatively impacting the
value of the Qatari Riyal against the US Dollar.
4.18. Later on 14 September 2017, in response to Mr Bolelyy’s previous request for
contributions to what he described as ‘a possible transaction structure’, Mr Weller
emailed a document to Mr Bolelyy which contained his ideas. Mr Weller has
subsequently stated, that this document reflected what had been discussed
amongst the participants at the meeting on the previous day, together with some
research he had conducted through open sources on the internet. The document
was entitled “Setting Fire to the Neighbour’s House fund” (“the SFNH Document”)
and set out more details of the Strategy, namely, to devalue the Qatari Riyal by
increasing and encouraging selling pressure. The SFNH Document ended with a
cartoon depicting Qatar and the statement “Repeat as desired”. Mr Weller has
subsequently stated that at the time he did not regard the contents of the SFNH
Document as representing a serious proposal and that it was simply reflective of a
subject that Mr Rowland wished to explore.
4.19. The steps set out in the SFNH Document proposed to “[q]uietly pick up some Qatar
paper” or bonds “2026s and 2030s”, using “old school account painting” to “get
some ownership”, which would be used to “[c]ontrol the yield curve” by co-
operating parties “acting in concert”, trading back and forth at incrementally lower
prices. The final step in this stage would be to “dump” these holdings on the open
market, driving the bond “price further down and [to be then] picked back up [by]
the original seller”.
4.20. Following this, the plan was to “[e]stablish positions in Forwards on Riyal, options
where possible”, (…) “get long the CDS slowly with larger houses, just enough to
move the price to make it news worthy (sic)”.
4.21. Next, “[f]ire up the PR machine… to remind people there is [a] problem with
Qatar…”. A further increase of the CDS position was advised and then, “PR wave
two” stating that “despite the massive SWF [sovereign wealth fund] pressure is
building that could see Qatar having restricted access to Dollar… [and] credit rating
may be affected with the long-term future of the country now in doubt… Peg won’t
break, though credit markets will be looking shambolic…Once fire fully alight clear
out the [UAE Dirham] specs for a profit”.
4.22. Accordingly, the SFNH Document proposed a way in which the Qatari Riyal/ US
Dollar currency peg might be attacked. In summary, the SFNH Document
suggested a series of steps namely: (1) building up a portfolio of specific Qatari
debt without attracting attention by parties acting in concert in a series of Wash
Trades, (2) later dumping the position in order to create a false impression in the
market of a flight from Qatari debt, (3) opening a CDS position on the debt (bonds)
and then ‘dumping’ the said debt to drive the price down, (4) increasing and closing
the
CDS
position
in
order
to
add
negative
pressure
on
Qatari
assets/currency/economy, to profit from the manipulative bond trading, and
increasingly stressed markets, and (5) using a PR campaign deliberately magnifying
the false impression to increase selling of the Qatari Riyal or Qatari bond holdings
and encourage other market participants to do likewise.
4.23. In the evening of 14 September 2017, Mr Bolelyy took most of the content from
the SFNH Document and added it to the draft Presentation including the content
set out in the bullet points in the paragraph below.
4.24. Thereafter until 18 September 2017 Mr Bolelyy actively worked on the Presentation
which in its final form was entitled “Distressed Countries Fund” and set out in detail
the Strategy, which included the following:
•
“To preserve integrity of existing Qatari bond holdings, an in-situ transfer will
be arranged into a protected cell company”;
•
“Gear up to control the yield (and thus bond prices)” by purchasing “medium
and long-term Qatar paper”, as it “should favourably affect CDS pricing at later
stage”;
•
“Establish a crossing transaction arrangement whereby another affiliated party
sells the same bond holdings back to the original seller and thereby creates
additional downward pressure”;
•
“Purchase CDS on Qatar (…) to move the price sufficiently to make it
newsworthy”;
•
“Fire up the PR Machine to remind people there is a problem with Qatar”;
•
“Increase the positions”, by “buying additional CDS” to lead to “falling of bond
price, raising rates, and escalation in CDS premia”;
•
“Refresh the PR message to add more fuel to the fire”, as it will “focus on the
prospect of restricted access to US Dollar and now-doubtful stability of the
country”;
•
“FIFA Option…Qatar has committed to $200BN of spending for its hosting of
2022 World Cup…negative publicity can resurface around the original award of
the tournament…If Qatar now spends its reserves on protecting the currency
and domestic credit markets, there is less dry powder to fund the infrastructure
spending”.
4.25. The finalised Presentation therefore outlined how to impact the economy of Qatar
negatively through manipulative trading practices, including direct reference to
crossing transactions between two parties working in conjunction with the stated
aim of artificially driving down the price of Qatari government-backed bonds,
therefore weakening Qatar financially, in other words Wash Trades. The Strategy
included a coordinated PR strategy designed to increase the pressure placed upon
Qatar in addition to the existing sanctions and to force the Qatari government to
utilise its central bank foreign exchange reserves, to maintain the currency peg
between the Qatari Riyal and the US Dollar. As such, the Presentation clearly
contemplated manipulative trading which aimed to create a false or misleading
impression as to the market in or the price of Qatari bonds which, if conducted in
the UK, could amount to a criminal offence (contrary to section 90 of the Financial
Services Act 2012).
What then happened to the Presentation
4.26. On 18 September 2017, in preparation for a scheduled visit to Abu Dhabi by Mr
Rowland, David Rowland and Mr Bolelyy, Mr Bolelyy emailed a copy of the
Presentation to his personal email account and, at Mr Rowland’s request, printed
two copies for Mr Rowland to take with him to Abu Dhabi.
4.27. Following a request from Mr Rowland to send him a soft copy of “the Qatar
presentation in the morning”, Mr Bolelyy also emailed him the final version of the
Presentation at approximately 7pm on 18 September 2017. Mr Bolelyy informed Mr
Rowland that it was the latest version and the same as Mr Bolelyy had given him
that afternoon “for review”.
4.28. Mr Rowland immediately forwarded the Presentation to Individual A, with whom he
had had a meeting at the Firm’s London Branch five days’ earlier. He also forwarded
a copy of the Presentation to David Rowland.
4.29. Mr Rowland explained in interview with the Authority that he requested Mr Bolelyy
to print copies of the Presentation “because it was related to the UAE” and
confirmed that the Abu Dhabi trip was an opportunity potentially to discuss the
Presentation with senior individuals, including from an Abu Dhabi sovereign wealth
fund. During the trip, Mr Bolelyy provided a copy of the Presentation to an employee
of this Abu Dhabi’s sovereign wealth fund.
4.30. For an authorised firm to contemplate such a course of action (including
recommending conduct which could be a criminal offence if it took place in the UK),
intending it to be presented to potential investors, indicates a clear lack of integrity.
This is regardless of whether the Strategy set out in the Presentation was
achievable in reality (either by the Firm or by potential investors or recipients of
the Presentation).
Press reports and the Firm’s response
4.31. Mr Rowland, David Rowland and Mr Bolelyy visited Abu Dhabi from 21 to 25
September 2017. The Presentation was later reported in the media to have reached
the email inbox of the UAE Ambassador to the US between 18 September and 12
October 2017 and was said to have been stored under the heading “Rowland
Banque Havilland”. The UAE Ambassador to the US subsequently stated to the
Firm’s legal advisers in New York (through his own legal advisers) that he “did not
receive the Presentation”. The Presentation eventually became publicly available
on the internet (see below).
4.32. On 12 October 2017, as part of a pattern of sending press reports regarding Qatar
to the attendees of the 13 September 2017 meeting, Mr Weller discovered an article
by an Indian media organisation called the Business Standard, entitled “Gulf Crisis
may affect Qatar’s security, India’s economic interests” (“the Indian Article”).
4.33. The Indian Article referred to leaked or stolen emails from the Firm allegedly found
in the in-box of the UAE Ambassador to the US. The article claimed that these
emails revealed an “economic warfare strategy” which involved “setting up a
confidential commercial entity with sizeable size to buy certificate of deposits (CDs)
of Qatari banks, then selling the CDs back to original sellers at a lower price,
thereby reducing the market pricing. Negative global public relations campaign is
done, showing instability in Qatar as a key reason for this downward pressure on
CDs pricing. This will ultimately either force Qatar’s financial ministry to either
break the currency peg, or at least spend a lot of dollar reserves to maintain their
pricing when panic initiates global buyers to sell Qatari Riyal.” The article stated
that “David Rowland (…) could be serving UAE’s interests in the ongoing spat. He
is the man behind the meteoric rise of Banque Havilland…”.
4.34. At 12:35 on 12 October 2017, Mr Weller emailed a link to the Indian Article to Mr
Rowland, who had by then resumed his position as Chief Executive of the London
Branch. , Mr Rowland responded at 12.42pm with “made me laugh”.
4.35. At 3.02pm, Mr Weller sent a further email saying, “trending on Qatari Twitter as I
type” with an image from the social media site, Twitter, showing the following:
“#UAE targeted #Qatar’s Economy using…Rowland’s Banque Havilland amid
#GulfCrisis…”.
4.36. At 4.10pm David Rowland and Mr Rowland discussed the Indian Article on the
telephone. David Rowland asked Mr Rowland “What about that thing in the Indian
paper? How do you think that got there?” Mr Rowland responded “Probably, I
assume – probably a leak from their office I would imagine…. never been talked to
anyone else, so…don’t matter. Use it as a badge of honour when we go and see
them next time”. The Authority infers that “their office” refers to the office of the
Abu Dhabi’s Sovereign Wealth Fund, which had been provided with a copy of the
Presentation during the visit referred to at paragraph 4.31 above.
4.37. Neither Mr Weller nor Mr Rowland forwarded either of Mr Weller’s emails to the
Firm’s Compliance Officer, or to Head Office, or took any other steps to inform other
members of the Firm’s senior management, or the Authority, of the allegations on
that day. Head Office was in fact aware of the content of the Indian Article, yet no
steps were taken by it to check if there was any substance to the allegations.
Reliance by Head Office appears to have been placed at the time on the fact that
the Indian Article was published by a relatively unknown media source and that the
focus of the article was on David Rowland, who had been the subject of negative
press attention previously, and therefore the article was believed by the Firm’s
Head Office to lack credibility.
4.38. The next day, a journalist from a media organisation called The Intercept.com (“the
Intercept”) contacted the lawyer who represented the Firm in the US to obtain a
comment regarding the discovery of the Presentation in the mailbox of the UAE
Ambassador to the US. The journalist provided specific details of the Presentation
that would allow the Firm to discover it on their systems, stating that the Firm
should search for “‘Qatar Opportunity’ and ‘Distressed Countries Fund.’ The Mission
Statement includes: ‘Control the Yield curve, decide the future’”.
4.39. At 6.49pm David Rowland telephoned Mr Rowland. They discussed how their mobile
phones may have been hacked while they were in Abu Dhabi. Mr Rowland said “Yes,
if I was to guess. Nothing wrong, if you look at the two things they’ve got, there’s
nothing wrong with the two things, …There’s nothing in them”. The Authority
considers that this conversation indicates that Mr Rowland was aware of the
Presentation and its contents. David Rowland asked Mr Rowland what he was
intending to say to the Firm’s US lawyer. Mr Rowland said that his “plan” was to
say: "Banque Havilland S.A does not trade in bonds, securities, CDS or any
instruments of Qatar names and has no plans to. Banque Havilland is a prestigious
private banking group and will make no further comments on politically motivated
storylines”. David Rowland replied that he “like[d] that”. Mr Rowland later said to
his father that “our story just has to be its purely politically motivated because of
our, because of your friendship with the Crown Prince, leave it, that might bring us
a lot of points.”
4.40. The Firm’s response to the Intercept, as directed by Mr Rowland, to the Intercept
was as worded above.
4.41. However, the Firm took no steps to look for the Presentation on the Firm’s internal
systems or to investigate whether the allegations had any substance.
4.42. The journalist from the Intercept contacted the Firm’s US lawyer again on 18
October 2017 and informed him that he was aware that Mr Bolelyy was the author
of the document in the Intercept’s possession. The journalist also provided further
questions that he wanted the Firm to answer prior to moving forward with
publication of the story. These questions provided indications of the content of the
document, including: “Has the plan outlined in the “Distressed Countries Fund” [the
Presentation] document commenced? If so, when did it begin? If not, when is it
planned to begin, if at all? Is Banque-Havilland helping the UAE undermine the
economy of Qatar so that the UAE can gain diplomatic advantage?”
4.43. These further questions were shared with Mr Rowland by the Firm’s US lawyer, and
were forwarded to senior individuals at Head Office and also to David Rowland. The
Firm’s US lawyer suggested responding as follows: “Banque Havilland reaffirms that
it is not participating in and has never participated in any trading in the currency,
bonds or other derivatives of Qatar. The plans described in that document do not
include any participation by BH [Banque Havilland]”. As before, Mr Rowland took
no steps to identify the document on the Firm’s internal systems or to discuss the
document with the staff involved, despite the specific reference by the Intercept
journalist to Mr Bolelyy as the author of the document. In addition, the Firm failed
to notify the Authority that an article containing these allegations was going to be
published.
4.44. At 6.50pm, David Rowland and Mr Rowland further discussed the matter on the
telephone. Mr Rowland said that the Intercept had “obviously only got the
attachment”.
4.45. On 19 October 2017, David Rowland telephoned Mr Rowland at 1.30pm. They
discussed the [suspected] hacking of their mobile telephones. David Rowland said
“We can capitalise on this ….. and we don’t put any – don’t let’s put anything on
the Bank emails.” Mr Rowland agreed with David Rowland’s suggestion.
4.46. Mr Rowland and David Rowland then discussed taking Mr Bolelyy off the Firm’s
payroll as soon as they could and transferring him from the Firm to another
Rowland Family entity. David Rowland said “All we’ve got to do is play by the
fucking rules and we have, we’ve not broken any fucking laws”. Mr Rowland
responded by saying “No. The answer is if they ever write to you, you just say, all
you’ve got to say to them, is that the Bank was not involved in anything. But the
principal is asked of hedging strategies to protect their 15 billion dollar investment.
That’s all you’ve got to say”. David Rowland responded by saying that he liked that.
Mr Rowland further said that “We know that’s what you’re allowed to - and if you
look at the Presentation that’s all it says. This is how you protect the value of your
15 billion dollar investment. And then everyone will understand, even the jokers
down there”. David Rowland stated that “You can capitalise on all this shit”.
4.47. On 9 November 2017, the Intercept published the Intercept Article, stating that the
Presentation had been found in the inbox of the UAE Ambassador to the US and
providing copies of some of the Presentation slides. The article was titled “Leaked
Documents Expose Stunning Plan To Wage Financial War On Qatar (…)” and
explained that “economic warfare involved an attack on Qatar’s currency using
bond and derivatives manipulation….The outline, prepared by Banque Havilland,
(…) laid out a scheme to drive down the value of Qatar’s bond and increase the
cost of insuring them, with the ultimate goal of creating a currency crisis that would
drain the country’s cash reserves”.
4.48. The content of the pages featured in the Intercept Article were identical to the
Presentation as sent by Mr Rowland to Individual A and David Rowland on 18
September 2017. The Intercept Article identified Mr Bolelyy as the creator of the
Presentation, according to the metadata of the document obtained by the Intercept.
4.49. The publication of the Intercept Article led to the immediate resignation of Mr
Bolelyy on 9 November 2017, and an internal investigation was initiated by Head
Office on 13 November 2017.
4.50. The Firm, via Mr Rowland, in his capacity as Chief Executive of the London Branch,
contacted the Authority on 14 November 2017 by telephone, providing limited
information regarding the events referred to above and the involvement of the
Firm. This was followed up by an email from Mr Rowland to the Authority on 15
November 2017 noting what was said in the call, as follows: “1. An article
mentioning a junior analyst name [sic] for the creation of a non bank presentation.
2. A forensic investigation being held. 3. The groups [sic] regulator CSSF was
informed. 4. The PR firm the group uses has clarified the facts. 5. We will share the
findings of the investigation once complete subject to CSSF approval”.
4.51. On 13 December 2017 Mr Rowland resigned as an employee, Chief Executive of the
London Branch and member of the executive management of the Firm with
immediate effect, and Mr Weller left the Firm on 10 April 2018.
5.
FAILINGS
5.1.
The statutory and regulatory provisions relevant to this Notice are referred to in
5.2.
Principle 1 requires a firm to conduct its business with integrity. During the
Relevant Period, the Firm breached Principle 1 by creating and disseminating the
Presentation (for purposes that included marketing the Firm) which recommended
the Strategy that included engaging in obviously improper conduct.
5.3.
The Strategy set out a multi-faceted approach that included conduct aimed at
creating a false or misleading impression as to the market in, or the price of, Qatari
bonds, with the objective of harming the economy of Qatar. Creating a false or
misleading impression as to the market in, or the price of, Qatari bonds would be
an extremely serious matter and a criminal offence, if it were to take place in the
UK (contrary to section 90 of the Financial Services Act 2012). Section 1H of the
Act provides that an offence involving such misconduct amounts to “financial crime”
for the purpose of the Act.
5.4.
The Strategy included regulated advice (pursuant to article 53 of the Regulated
Activities Order and section 22(1) of the Act) aimed at the UAE and/or other states
in the Middle East region because it advised those potential investors to transfer
their existing holdings of Qatari bonds into a “protected cell company” to “preserve
integrity” before manipulative trading intended to destabilise the Qatari economy
took place, which trading was to include the purchase of CDSs and the sale and
purchase of Qatari bonds.
6.
SANCTION
Financial penalty
6.1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of
DEPP. DEPP 6.5A sets out the details of the five-step framework that applies in
respect of financial penalties imposed on firms.
Step 1: disgorgement
6.2.
Pursuant to DEPP 6.5A.1G, at Step 1 the Authority seeks to deprive a firm of the
financial benefit derived directly from the breach where it is practicable to quantify
this.
6.3.
The Authority has not identified any financial benefit that the Firm derived directly
from its breach.
6.4.
Step 1 is therefore £0.
Step 2: the seriousness of the breach
6.5.
Pursuant to DEPP 6.5A.2G, at Step 2 the Authority determines a figure that reflects
the seriousness of the breach. Where the amount of revenue generated by a firm
from a particular product line or business area is indicative of the harm or potential
harm that its breach may cause, that figure will be based on a percentage of the
firm’s revenue from the relevant products or business area.
6.6.
The Authority considers that the revenue generated by the Firm’s London Branch
is not an appropriate indicator of the harm or potential harm caused by its breach.
The Authority has not identified an alternative indicator of harm or potential harm
and so, pursuant to DEPP 6.5A.2G(13), has determined the appropriate Step 2
amount by taking into account those factors which are relevant to an assessment
of the level of seriousness of the breach.
6.7.
In assessing the seriousness level, the Authority has taken into account various
factors which reflect the impact and nature of the breach, and whether it was
committed deliberately or recklessly. DEPP 6.5A.2G(11) lists factors which are
likely to be considered ‘level 4 or 5 factors’. Of these, the Authority considers the
following factors to be relevant:
6.7.1.
the Firm failed to conduct its business with integrity by creating and
disseminating the Presentation to parties that might have an interest in
actioning it, with the expectation of profit;
6.7.2.
the breach actively encouraged the commission of financial crime
pursuant to section 1H of the Act; and
6.7.3.
the breach was committed by the Firm deliberately.
6.8.
DEPP 6.5A.2G(12) lists factors which are likely to be considered ‘level 1, 2 or 3
factors’. Of these, the Authority considers the following factor to be relevant:
6.8.1.
the Firm made no profit as a result of the breach.
6.9.
Taking all of these factors into account, the Authority considers the seriousness of
the breach to be level 5 and has determined that the appropriate Step 2 figure is
£10,000,000.
Step 3: mitigating and aggravating factors
6.10. Pursuant to DEPP 6.5A.3G, at Step 3 the Authority may increase or decrease the
amount of the financial penalty arrived at after Step 2, but not including any
amount to be disgorged as set out in Step 1, to take into account factors which
aggravate or mitigate the breach.
6.11. The Authority considers that there are no factors which aggravate or mitigate the
breach.
6.12. Step 3 is therefore £10,000,000.
Step 4: adjustment for deterrence
6.13. Pursuant to DEPP 6.5A.4G, if the Authority considers the figure arrived at after Step
3 is insufficient to deter the firm who committed the breach, or others, from
committing further or similar breaches, then the Authority may increase the
penalty.
6.14. The Authority considers that the Step 3 figure of £10,000,000 is sufficient in relation
to the breach to meet its objective of credible deterrence. The Authority has
therefore not increased the penalty at Step 4.
6.15. Step 4 is therefore £10,000,000.
Step 5: settlement discount
6.16. Pursuant to DEPP 6.5A.5G, if the Authority and the firm on whom a penalty is to be
imposed agree the amount of the financial penalty and other terms, DEPP 6.7
provides that the amount of the financial penalty which might otherwise have been
payable will be reduced to reflect the stage at which the Authority and the firm
reached agreement.
6.17. The Firm and the Authority did not reach an agreement so no discount applies to
the Step 4 figure. The Step 5 figure is therefore £10,000,000.
6.18. The Authority has therefore decided to impose a total financial penalty of
£10,000,000 on the Firm for breaching Principle 1.
7.
REPRESENTATIONS
7.1.
Annex B contains a brief summary of the key representations made by the Firm,
and by David Rowland as a third party, in response to the Warning Notice and how
they have been dealt with. In making the decision which gave rise to the obligation
to give this Notice, the Authority has taken account of all of the representations
made by the Firm and by David Rowland as a third party, whether or not set out in
Annex B.
8.
PROCEDURAL MATTERS
8.1.
This Notice is given to the Firm under section 208 and in accordance with section
388 of the Act.
Decision maker
8.2.
The decision which gave rise to the obligation to give this Notice was made by the
RDC. The RDC is a committee of the Authority which takes certain decisions on
behalf of the Authority. The members of the RDC are separate to the Authority staff
involved in conducting investigations and recommending action against firms and
individuals. Further information about the RDC can be found on the Authority’s
https://www.fca.org.uk/about/committees/regulatory-decisions-committee-rdc.
The Tribunal
8.3.
The Firm has the right to refer the matter to which this Notice relates to the
Tribunal. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, the Firm has 28 days from the date on which this Notice is
given to it to refer the matter to the Tribunal. A reference to the Tribunal is made
by way of a signed reference notice (Form FTC3) filed with a copy of this Notice.
The Tribunal’s contact details are: Upper Tribunal, Tax and Chancery Chamber,
Fifth Floor, Rolls Building, Fetter Lane, London EC4A 1NL (tel: 020 7612 9730;
email: fs@hmcts.gsi.gov.uk).
8.4.
Further information on the Tribunal, including guidance and the relevant forms to
complete, can be found on the HM Courts and Tribunal Service website:
8.5.
A copy of Form FTC3 must also be sent to the Authority at the same time as filing
a reference with the Tribunal. A copy should be sent to Victoria Chaloyard at the
Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.
8.6.
Once any such referral is determined by the Tribunal and subject to that
determination, or if the matter has not been referred to the Tribunal, the Authority
will issue a final notice about the implementation of that decision.
Access to evidence
8.7.
Section 394 of the Act applies to this Notice.
8.8.
The person to whom this Notice is given has the right to access:
(1)
the material upon which the Authority has relied in deciding to give this Notice; and
(2)
the secondary material which, in the opinion of the Authority, might undermine that
decision.
8.9.
A copy of this Notice is being given to David Rowland as a third party identified in
the reasons above and to whom in the opinion of the Authority the matter to which
those reasons relate is prejudicial. As a third party, David Rowland has similar rights
to those mentioned in paragraphs 8.3 and 8.8 above in relation to the matters
which identify him.
Confidentiality and publicity
8.10. This Notice may contain confidential information and should not be disclosed to a
third party (except for the purpose of obtaining advice on its contents). In
accordance with section 391 of the Act, a person to whom this Notice is given or
copied may not publish the Notice or any details concerning it unless the Authority
has published the Notice or those details.
8.11. However, the Authority must publish such information about the matter to which a
Decision Notice or Final Notice relates as it considers appropriate. The persons to
whom this Notice is given or copied should therefore be aware that the facts and
matters contained in this Notice may be made public.
Authority contacts
8.12. For more information concerning this matter generally, contact Victoria Chaloyard
at the Authority: direct line: 020 7066 3108/email: victoria.chaloyard@fca.org.uk.
Chair, Regulatory Decisions Committee
ANNEX A
1.
RELEVANT STATUTORY PROVISIONS
1.1.
The Authority’s operational objectives, set out in section 1B(3) of the Act, include
the integrity objective of protecting and enhancing the integrity of the UK financial
system, which includes it not being used for a purpose connected with financial
crime.
1.2.
Section 206(1) of the Act provides:
“If the appropriate regulator considers that an authorised person has contravened
a relevant requirement imposed on the person it may impose on him a penalty, in
respect of the contravention, of such amount as it considers appropriate.”
1.3.
Section 1H of the Act provides:
“(3) “Financial crime” includes any offence involving
(a)
fraud or dishonesty,
(b)
misconduct in, or misuse of information relating to, a financial
market.
(4)
“Offence” includes an act or omission which would be an offence if it had
taken place in the United Kingdom.”
1.4.
Section 90 of the Financial Services Act 2012 provides that:
“(1) a person (“P”) who does any act or engages in any course of conduct which
creates a false or misleading impression as to the market in or the price or value
of any relevant investments commits an offence if—
(a)
P intends to create the impression, and
(b)
the case falls within subsection (2) or (3) (or both).
(2)
The case falls within this subsection if P intends, by creating the impression,
to induce another person to acquire, dispose of, subscribe for or underwrite the
investments or to refrain from doing so or to exercise or refrain from exercising
any rights conferred by the investments.
(3)
The case falls within this subsection if—
(a)
P knows that the impression is false or misleading or is reckless as to
whether it is, and
(b)
P intends by creating the impression to produce any of the results in
subsection (4) or is aware that creating the impression is likely to produce
any of the results in that subsection.
(4)
Those results are—
(a)
the making of a gain for P or another, or
(b)
the causing of loss to another person or the exposing of another person
to the risk of loss.”
1.5
Article 53(1) of the Regulated Activities Order provided that advising a person is a
specified kind of activity if the advice is-
(a)
given to the person in his capacity as an investor or potential
investor, or in his capacity as agent for an investor or a potential investor;
and
(b)
advice on the merits of his doing any of the following (whether as
principal or agent)-
(i).
buying, selling, subscribing for or underwriting a particular
investment which is a security, structured deposit or a relevant
investment, or
(ii).
exercising any right conferred by such an investment to buy,
sell, subscribe for or underwrite such an investment.
1.6
Section 22(1) of the Act provides that an activity is a regulated activity for the
purpose of the Act if it is an activity of a specified kind which is carried on by way
of business and (a) relates to an investment of a specified kind.
2.
RELEVANT REGULATORY PROVISIONS
2.1.
In exercising its powers to impose a financial penalty, the Authority has had regard
to the relevant regulatory provisions published in the Authority’s Handbook. The
main provisions that the Authority considers relevant are set out below.
Principles for Businesses (PRIN)
2.2.
The Principles are a general statement of the fundamental obligations of firms
under the regulatory system and are set out in the Authority’s Handbook. They
derive their authority from the Authority’s rule-making powers set out in the Act.
2.3.
Principle 1 provides:
“A firm must conduct its business with integrity.”
Decision Procedure and Penalties Manual (“DEPP”)
2.4.
Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the
Authority’s statement of policy to the imposition and amount of financial penalties
under the Act. In particular, DEPP 6.5A sets out the five steps for penalties imposed
on firms in respect of conduct taking place on or after 6 March 2010.
The Enforcement Guide
2.5.
The Enforcement Guide sets out the Authority’s approach to exercising its main
enforcement powers under the Act.
2.6.
Chapter 7 of the Enforcement Guide sets out the Authority’s approach to exercising
its power to impose a financial a penalty.
ANNEX B: REPRESENTATIONS
1. A summary of the key representations made by the Firm and by the third party,
David Rowland, and the Authority’s conclusions in respect of them (in bold type),
is set out below.
The Firm’s Representations
The Regulated Advice issue
2. The Presentation was not regulated advice, pursuant to section 22 of the Act. By
section 22 of the Act, a “regulated activity” is, in summary: (1) a specified activity,
(2) relating to an investment of a specified kind, and which is (3) carried on by way
of business. Activities and investments are specified in the RAO. As the Presentation
was not a regulated activity, or an ancillary activity to a regulated activity, as a
matter of law, the Firm cannot be held liable for a breach of Principle 1 or, indeed,
any of the Principles for Businesses.
3. During the Relevant Period, under Article 53 (Advising on investments) of the RAO,
advising a person was a specified activity if the advice was (a) given to a person in
his capacity as an investor or potential investor, or in his capacity as agent for an
investor or potential investor; and (b) advice on the merits of the investor or
potential investor buying, selling, subscribing for or underwriting a particular
investment which is a security or a contractually based investment.
4. The requirements of Article 53 are therefore that: i. advice must be given; ii. the
advice must go to a person in their capacity as an investor or potential investor (or
an agent of the same); iii. the advice must be on the merits; and iv. the advice
must relate to a particular investment.
5. The Presentation was not given to anyone; and it was not intended to be given to
an investor or potential investor (or agent thereof).
6. Neither the Abu Dhabi sovereign wealth fund nor its senior representative were
investors, or potential investors, for these purposes and there was nothing to
suggest that the senior representative was acting as an agent for an investor or
potential investor. Mr Rowland stated that the UAE banking sector had exposure to
Qatari bonds, not the Abu Dhabi sovereign wealth fund or its senior representative.
The banks that the senior representative had in mind which might be interested in
receiving the Presentation were unnamed and unknown to Mr Rowland.
7. The Perimeter Guidance Manual (“PERG”) 8.29 provided guidance as to what
constituted investment advice. PERG 8.29.1 provided that advice “must relate to
the buying or selling of an investment – in other words, the pros or cons of doing
so”. The distinction between giving information and advising is between providing
“information for the purpose of enabling someone else to decide upon a course of
action and [advising] someone as to what course of action he should take”1. Advice
“requires an element of opinion on the part of the adviser. In effect, it is a
recommendation as to a course of action”2. Conveying mere information is not
regulated advice. The Presentation did not contain any recommendations or
encouragement to buy or sell investments, was not presented as being suitable for
any particular person and was not based on a consideration of the circumstances
of anyone in particular. Accordingly, it cannot be regulated advice within the
specific meaning of Article 53 of the RAO and PERG.
8. Regulated advice must relate to a “particular”, or a specific, investment. The
Authority’s guidance at PERG 2.7.15G provides that: “Giving a person generic
advice about specified investments (for example, invest in Japan rather than
Europe) is not a regulated activity….”. The Presentation did not contain advice in
relation to a “particular investment”.
9. As to the application of the Principles for Businesses, in the event that the
Presentation is not considered to be regulated advice, the preparation of the
Presentation, or the formulation of the Strategy contained therein, cannot have
been carried on “in connection with a regulated activity” [PRIN 3.2.1AR(3)3] (e.g.
arranging deals in investments or advising on investments). There was no
arranging. The Presentation contained a vague and general commercial proposition
that was never executed. Accordingly, the Firm’s activities could not be said to be
ancillary activities in relation to designated investment business.
Was the Presentation given?
1 Lord Hoffman in South Australia Asset Corp v York Montague [1996] 3 All E.R. 365 at 372j
2 PERG 5.8.8 G
3 PRIN 3.2.1AR: PRIN applies with respect to the carrying on of:
(1) regulated activities; (2) activities that constitute dealing in investments as principal, disregarding the
exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc); and (3) ancillary activities
in relation to designated investment business, home finance activity, credit-related regulated activity,
insurance mediation activity and accepting deposits.
10. As requested by Mr Rowland, Mr Bolelyy printed off two copies of the
Presentation to take on the trip to Abu Dhabi, so that it could be discussed
with a representative of an Abu Dhabi sovereign wealth fund. Mr Bolelyy
signed a statement, dated 15 November 2017, saying that during the visit
he had handed one single copy of the Presentation to a (named) senior
employee of an Abu Dhabi sovereign wealth fund. On 13 November 2017
Mr Rowland confirmed that Mr Bolelyy had said to him on 21 September
2017, that he had provided the Presentation to the senior employee. On
25 November 2017, Mr Rowland signed a statement saying that he was
made aware that Mr Bolelyy may have given the Presentation to a junior
employee at the same Abu Dhabi sovereign wealth fund.
11. Mr Bolelyy subsequently withdrew his statement that he had passed the
copy of the Presentation to the (named) senior employee. He then added
he may have given the Presentation to a junior employee. Mr Rowland
subsequently withdrew his statement.
12. Mr Rowland purported to explain why he did so. He said that he had had
no knowledge of Mr Bolelyy sharing the Presentation and he had assumed
that the investigation had already determined that he had. However, when
he later learnt that the senior employee of the Abu Dhabi sovereign wealth
fund had been in Brazil at the time of the trip to Abu Dhabi, he considered
he had been mistaken.
13. The Authority refers to the telephone call between Mr Rowland and David
Rowland on 12 October 2017. In this call, David Rowland asked Mr
Rowland how he thought the “thing in the Indian paper got there”. Mr
Rowland replied “probably, I assume – probably a leak from their office I
would imagine”. Mr Rowland then says he is aware that the content of the
Presentation had been discussed with “their” office. The Authority infers
that “their office” refers to the office of the Abu Dhabi sovereign wealth
fund, which had been provided with a copy of the Presentation during the
visit. Mr Rowland appeared to see publication of the Firm’s involvement as
“a badge of honour” with respect to the Abu Dhabi sovereign wealth fund.
14. Mr Rowland has stated that the Presentation (albeit in a different form)
was requested by the senior representative of the Abu Dhabi sovereign
wealth fund. Two copies of the Presentation were taken on the visit to Abu
Dhabi, so that it could be discussed with them. The Authority considers
that it is likely that Mr Bolelyy did in fact provide a copy of the Presentation
to a representative of the Abu Dhabi sovereign wealth fund (albeit not the
senior representative who was in Brazil at the time) and that Mr Rowland
knew that he had done so.
Was the Presentation given to the person in his capacity as an investor or
potential investor?
15. PERG 8.27.1G provides that advice must be given to or directed at
someone who either holds investments or is a prospective investor (or
their agent). PERG 8.27.5G provides that advice will still be covered by
Article 53(1) even though it may not be given to or directed at a particular
investor (for example, advice given in a periodical publication or on a
website). The expression ‘investor’ has a broad meaning and will include
institutional
or
professional
investors.
There
was,
therefore,
no
requirement that the person to whom the advice was given be an existing
client, or investor, or that there be an intention that the relationship would
continue after the advice was given. In addition, advice can still be
regulated if it was not specifically tailored for the person to whom it was
given.
16. The Authority considers the Presentation was given to an Abu Dhabi
sovereign wealth fund. The sovereign wealth fund is owned by the
government of Abu Dhabi (one of the seven Emirates of the UAE). The UAE
held Qatari bonds. The Strategy was aimed at the UAE, amongst others,
and it advised those investors to transfer their existing holdings of Qatari
bonds into a “protected cell company” to “preserve integrity”, before
manipulative trading intended to destabilise the Qatari economy took
place, which trading was to include the purchase of CDS and the sale and
purchase of Qatari bonds. The Abu Dhabi sovereign wealth fund was
therefore an investor, a potential investor and/or an agent of the UAE,
which was itself an investor or potential investor for the purpose of Article
53 of the RAO.
Did the Presentation include advice on the merits?
17. Article 53(b) requires the advice to be “on the merits” rather than mere
information. There are various elements to the difference between advice
and information. Advice must relate to the buying, holding or selling of an
investment, in other words, the pros or cons of doing so (PERG 8.29).
PERG 8.28 sets out what advice means, namely, requiring an element of
opinion on the part of the adviser, in effect, being a recommendation as to
a course of action. Regulated advice includes any communication with the
customer which, in the particular context in which it is given, goes beyond
the mere provision of information and is objectively likely to influence the
customer’s decision whether or not to buy or sell. Any significant element
of evaluation, value judgment or persuasion is likely to mean that advice
is being given.
18. The fact that advice was not implemented (or even could not be
implemented) should not stop it from being advice. Incompetence does
not turn advice into mere information.
19. The Authority has considered the contents of the Presentation, namely,
Establish the Execution Strategy (Stage 1); Gear Up to Control the Yield
Curve (Stage 2); and Public Relations Machine and Position Increase
(Stage 3).
20. Stage 1 advised the recipient of the Presentation on the steps needed to
preserve the integrity of their existing Qatari bond holdings and arranging
an in-situ transfer into a protected cell company. This involved, inter alia,
the creation of a sizeable, strong and standalone entity which could be
viewed as a smaller counterpart to central bank reserve holdings, with the
Qatari bond holdings serving as collateral. Stage 1 also advised the
recipient of the Presentation to assess global market conditions for the
Qatari Riyal and CDS to establish the execution strategy. This involved,
inter alia, determining available liquidity, supply and pricing. It also
involved identifying appropriate instruments such as currency forwards,
currency options and bond CDS.
21. Stage 2 advised the recipient of the Presentation as to the reasons behind
the recommendation to purchase medium and long-term Qatari paper and
CDS. It was indicated in the Presentation that this would, inter alia, allow
the participant to control the yield curve (and thus bond prices) and should
favourably affect CDS pricing at a later stage.
22. Stage 3 advised the recipient of the Presentation to utilise a public
relations message and to increase positions, by simultaneously hitting all
second-tier bank CDS lines and by increasing existing positions with larger
banks and buying additional CDS, leading to falling bond prices, rising
rates and the escalation of CDS premia.
23. In light of the above, the Authority considers that the Presentation
contains a significant element of evaluation, value judgement and
persuasion.
It
goes
beyond
the
mere
provision
of
information.
Accordingly, it should be considered to be “advice on the merits”.
Did the advice relate to a “particular”, or a specific, investment?
24. PERG
8.26
provides
examples
of
generic
advice
and
particular
investments. The current PERG 8.28.5G states that “A key question is
whether an impartial observer, having due regard to the regulatory regime
and guidance, context, timing and what passed between the parties, would
conclude that what the adviser says could reasonably have been
understood by the customer as being advice”4.
25. The advice in the Presentation relates to: (i) transferring the UAE’s holding
of Qatari bonds into a protected cell company and using the bonds as
collateral (“the Protected Cell Company”); (ii) buying medium and long-
term Qatari paper (i.e. bonds); wash-trading with an affiliated party;
buying CDS on Qatar “to move the price” of the bonds; and buying
additional CDS to drive down bond prices/increase CDS premia, all with
the ultimate aim of causing Qatar to deploy substantial resources to
support the value of its currency (“the Underlying Investment”).
26. The Protected Cell Company was clearly intended to be a preliminary
arrangement intended to support the Strategy, which involved the transfer
of existing bond holdings. Accordingly, it identifies the securities to be
transferred (i.e. all the investor’s existing holdings of Qatari paper). As
such, the Authority considers it to have been advice in relation to a specific
investment.
4 PERG 8.28.5G came into force on 23.02.2018 after the end of the Relevant Period, but notwithstanding this,
context must still have been relevant.
27. The advice regarding the Underlying Investment should be seen in context
and in light of what passed between/was known by the parties, namely
that: (i) the Firm and the recipient of the advice were aware that the UAE
was holding significant amounts of Qatari paper (i.e. bonds); (ii) the
purpose of the Strategy was to manipulate the market price of the Qatari
Riyal for the benefit of the UAE and the detriment of Qatar; and (iii) the
recipient of the advice was aware of the quantity of the Qatari paper held.
28. The proposal to enter into CDS was to be underpinned by the Qatari paper
and the context makes it clear that the transactions were to be based on
the bond holdings. Accordingly, the investment referred to in the
Presentation would have been clear to both parties, and the advice about
the Underlying Investment should therefore be considered to be advice in
relation to a specific investment.
29. The Authority considers that both parts of the advice as set out in the
Presentation, namely the advice regarding the Protected Cell Company and
the Underlying Investment, are sufficiently specific or “particular” for the
purpose of Article 53(b)(i) of the RAO.
Application of the Principles for Businesses to ancillary activities
30. The Firm has raised the issue as to whether, if the Authority concluded
that all or significant parts of the Presentation were unregulated, the
Principles for Businesses would nonetheless apply to the unregulated
part(s).
31. Since the Authority has found that the entirety of the Presentation was
regulated advice, it is not necessary for it to determine this issue.
However, in light of the Firm’s submissions the Authority makes the
following observations.
32. If unregulated activities are “ancillary activities in relation to designated
investment business”, this would constitute an alternative basis upon
which the Principles for Businesses could apply to a Firm (PRIN
3.2.1AR(3)). “Ancillary activity” is defined in the Handbook Glossary as:
“an activity which is not a regulated activity but which is: (a) carried on in
connection with a regulated activity; or (b) held out as being for the
purposes of a regulated activity”. This scenario may have occurred if, for
example, the Authority had found that the advice regarding the Protected
Cell Company was regulated advice and the advice regarding the
Underlying Investment was not (or vice-versa).
33. Had this been the case, the Authority considers that there would have been
a sufficient connection between the regulated business and the assumed
ancillary (unregulated) activity, and that the “ancillary” activity had a
subsidiary, supporting function in relation to the regulated activity. The
Authority notes that it would be difficult, if not impossible, to untangle the
two connected parts of the overall Strategy and the regulated activity
cannot, on the facts, be said to have been insignificant. Accordingly, the
Authority considers that the unregulated activity would have met the
criteria set out in PRIN 3.2.1AR(3), as it was carried on in connection with
a regulated activity.
The Presentation as “Bank Business”
34. The Presentation was not created or sent by any person doing an act for and on
behalf of the Firm. It was not created or shared by way of “Bank Business”. Unless
the Presentation was demonstrated to be, on the facts, Bank Business the Firm
cannot commit a breach of Principle 1 and incur a financial penalty. The Firm
provided a number of reasons, to be considered in the round, as to why the
Presentation should not be considered to be Bank Business (or facts which
undermined the Authority’s case that it was Bank Business). These are as follows.
The reasons for the creation of the Presentation
35. The Presentation arose out of a request from Mr Rowland to Mr Bolelyy. Mr
Rowland, whilst still a member of the Board in Luxembourg and drawing a modest
salary, was not working for the Firm at the time he tasked Mr Bolelyy to produce
this document and had stood down as Chief Executive of the London Branch on 24
May 2017. Drawing a modest salary from the Firm throughout the Relevant Period
is not a reliable indicator as to whether his work was restricted to Bank Business
at the time.
36. Mr Rowland was heavily engaged in another project with an Abu Dhabi sovereign
wealth fund at the time, seeking to establish the Financial Institution with it which
was not a project of the Firm. The Abu Dhabi sovereign wealth fund was not a
client, or prospective client, of the Firm but a business partner of Mr Rowland in his
separate business project to establish the Financial Institution.
37. The genesis of the document was a meeting on 30 August 2017 (referred to at
paragraph 4.6) (“the August Meeting”) and the purpose of that meeting was to
discuss the Financial Institution. The meeting was not attended by anyone who was
actively working for the Firm at the time. It was attended by Mr Rowland and David
Rowland and potential business partners of the Financial Institution. David Rowland
had not been involved in the management of the Firm, nor had he attended
meetings of the Board. David Rowland confirmed this in his representations as a
third party. Mr Rowland, meanwhile, had been spending his time on the project to
set up the Financial Institution.
38. David Rowland and Individual A were sent the Presentation, not because of their
connections to the Firm but because of their connections to the Rowland Family’s
other business interests, namely the setting up of the Financial Institution in which
they were both involved. Individual A helped to facilitate other business projects
outside of the Firm. When Individual A received the Presentation from Mr Rowland
it cannot be assumed that he received it in his capacity of a consultant to the Firm;
there is no direct evidence of the capacity in which he was acting when he received
the document. The Presentation was sent to Individual A’s personal email address,
rather than his dedicated Firm email address.
39. Neither the Abu Dhabi sovereign wealth fund nor its senior representative were
clients or prospective clients of the Firm. They were prospective business partners
of Mr Rowland with respect to the Financial Institution. There is no evidence that
the Firm was involved in marketing in the Middle East, or to Middle Eastern clients,
at the time. There was a representative office in the UAE for expatriates. The Firm
had no Emirati clients but it did have a small number of Middle Eastern clients.
Further, the idea that there was a collateral benefit to the Firm and that made the
Presentation a Firm project is simply not credible.
40. Mr Rowland was an SMF 21 (EEA Branch Manager) of the Firm during the
Relevant Period and thereafter, up to 15 December 2017. Mr Rowland
remained a Board Member of the Firm and continued to be influential in
the London Branch. Mr Rowland was described, by another senior member
of staff as still being the “Boss” even after he formally stood down as the
Chief Executive. Although he may not have been spending all his time
working on the Firm’s matters during the Relevant Period (for example
when he was working on the Financial Institution project), this did not
preclude him from spending some of his time working on matters relating
to the Firm.
41. In the same way, meetings with representatives of an Abu Dhabi sovereign
wealth fund, to discuss, inter alia, the Financial Institution project, do not
preclude discussions occurring on other matters, including matters which
were Bank Business. The Financial Institution was not yet set up and
operating during the Relevant Period: at that point it was still just a
project, rather than being an existing entity capable of providing the
regulated services which the Firm was in the business of providing.
42. Prior to the August Meeting Mr Rowland had mentioned the meeting to a
colleague and stated: “I am now seeing [the senior representative] in
London on Wednesday so will finalise all [the Financial Institution] issues
with him then, they have another potential opportunity they want me to
look at also”. The Authority notes that the Presentation was entitled “the
Qatar Opportunity” and infers that the other “potential opportunity”
referred to by the senior representative concerned Qatar. Discussions at
the August Meeting regarding the Financial Institution did not preclude
discussions on other matters which could be taken forward as Bank
Business. Such matters include the Presentation.
43. Working on the proposed establishment of the Financial Institution did not
preclude Mr Rowland, or indeed anyone else, from separately working on
Bank Business.
44. David Rowland was the Honorary President of the Firm; Individual A was
paid $10,000 per month by the Firm to “develop [the Firm] in the UAE”
and would have had an interest in any marketing by the Firm in the region.
Mr Rowland was aware of Individual A’s role within the Firm and had been
asked by Individual A for a copy of the Presentation, before it was sent to
him on 18 September 2017. The Authority considers that Individual A
must have been aware that it was being prepared, in advance of the
Presentation being sent to him. The Authority notes that Individual A had
met Mr Rowland in the London Office on 13 September 2017 and close to
the time of Mr Rowland’s meeting with Mr Weller, Mr Bolelyy, another
employee of the Firm and an individual not employed by the Firm, referred
to at paragraphs 4.9 and 4.10. The Authority infers the Presentation was
sent to Individual A in his capacity as a consultant to the Firm.
The implausibility of the Strategy
45. The content of the Presentation suggests it was not a document prepared for and
on behalf of the Firm. The Firm provides private banking and services to
institutional clients; it was/is unable to trade the products described in the
Presentation and it did not have the means to trade in the volumes that could have
moved the markets or interest curve in relation to the Qatari Riyal. The Firm did
not trade, and has never traded, the Qatari Riyal and the currency had never been
opened on the Firm’s trading system. For the Qatari Riyal to be traded, new
corresponding banking relationships would have had to have been established or
new Qatari accounts would have had to have been opened with the Firm’s existing
cash correspondent banks. No such steps were ever taken. The size and scale of
the operation made the conduct outlined in the Presentation way beyond the
resources of the Firm.
46. The Presentation was not reviewed by the Firm’s centralised risk and compliance
systems and was never subject to the Firm’s product approval process. If the
Presentation had been a project of the Firm it would have been analysed by the
Firm’s centralised risk and compliance functions in Luxembourg and it would have
been subject to new product approval by the management committees (risk
committee and authorised management committee) before being submitted to the
Board of Directors for final approval. This did not happen.
47. The notion that the Presentation was a marketing document is undermined by the
contents of the Presentation itself, which is wholly unrealistic and amateur. It is the
antithesis of marketing to demonstrate “amateur incompetence” and it is further
the antithesis of good marketing for the Firm to advance an illegal trading strategy.
There was no branding of Banque Havilland anywhere within the Presentation. The
Presentation was simply sent as a draft to two people, David Rowland and
Individual A. It was not disseminated. The fact that it was a draft document in itself
undermines any suggestion that it was intended as a marketing document or for
wider distribution.
48. The Presentation refers to an execution strategy and implies that further
advice would be required. Even if the execution of the entire Strategy was
beyond the resources and competence of the Firm, it could still have been
involved, for example in sourcing the further advice required. The
Authority also notes that Mr Rowland had indicated, in the meeting on 13
September 2017, referred to at paragraphs 4.9 and 4.10, that the
economic interest for the Rowland Family would come from potentially
being able to charge a small fee on the assets put into the holding vehicle
which appears to be the Protected Cell Company referred to in the
Presentation.
49. The Presentation was so obviously improper that it would have made no
sense for Mr Rowland to have sent it to the Firm’s compliance function or
to the Board of Directors for approval.
50. Furthermore, it is not surprising in the circumstances that there was no
explicit Firm branding on the Presentation; it was not a conventional
marketing document but one which was designed to be a clear indicator
that the Firm (and therefore the Rowland Family) were supportive of the
UAE in its economic conflict with Qatar. During telephone calls between Mr
Rowland and David Rowland, Mr Rowland referred to the Presentation as
a “badge of honour when we go and see them” [i.e. the Abu Dhabi
sovereign wealth fund] (paragraph 4.36); and David Rowland said that
“we can capitalise on this” (paragraph 4.45).
Resources involved (human and non-human)
51. Mr Bolelyy was tasked by Mr Rowland with producing a presentation. Although
exclusively on the Firm’s payroll, Mr Bolelyy was in essence Mr Rowland’s personal
assistant rather than the “analyst” which his official job title at the Firm suggested.
Mr Rowland would use him as such, not differentiating between tasks which were
Bank Business and those which were not. Mr Bolelyy was not certified by the Firm
for the purpose of the Authority’s Senior Managers and Certification Regime
(SMCR).
52. Non-Bank Business and other business of the Rowland Family was conducted from
the Firm’s premises. The set-up in the London Branch was sufficiently fluid to
enable Mr Rowland to conduct non-Bank Business from the Firm’s London premises.
Mr Rowland’s resignation from the Chief Executive role simply meant that his use
of the Firm’s resources for personal projects became even more transparent. The
London office was used by Mr Rowland as a private office and the Firm’s physical
and human assets could be, and were, used by him to further and advance his
wider business interests outside of those of the Firm.
53. The use of the Firm’s email systems and the use of the Firm’s systems for
preparation of the Presentation does not support the Authority’s view that it was
indicative of the document being prepared on behalf of the Firm. People working
on the Financial Institution project used their Firm email addresses; the
Presentation was created by Mr Bolelyy using a template from the documents used
with respect to the Financial Institution project; and the Presentation was not
stored on the Firm’s main IT system but in a personal folder to which only Mr
Bolelyy had access, contrary to the policy of the Firm. A Firm document should not
be stored in a personal folder. It should be stored in a part of the Firm’s server that
was accessible to others.
54. The trip that Mr Rowland and Mr Bolelyy embarked upon to Abu Dhabi had nothing
to do with the Firm. The trip was organised and arranged through the Personal
Assistant to the family office, and not through the Firm. The itinerary for the trip
shows that there was no Bank Business involved in the trip at all. No-one who went
on the trip to Abu Dhabi went in their capacity as representatives of the Firm. The
Firm was not aware of, nor did it authorise, the trip for the purposes of the Firm’s
business. The expenses associated with the trip were not claimed from the Firm
nor paid by the Firm. None of the persons Mr Rowland intended to meet on the trip
were clients, or prospective clients, of the Firm.
55. Mr Bolelyy was not a “personal assistant” for the purpose of COCON
1.1.2R(6)(r)5. Working for Mr Rowland on personal, or non-Firm matters,
did not preclude him from working for the Firm on Bank Business. Mr
Bolelyy’s salary was exclusively paid by the Firm; he did not receive an
income from Mr Rowland, or the Rowland Family, directly.
56. There was no clear separation between Rowland Family interests and the
Firm's interests so far as work carried out at the London Branch was
concerned. The Authority does not consider it appropriate for the Firm to
rely on this failure, to argue now that the assistance and expertise which
Mr Rowland needed from the Firm’s employees for the creation of the
Presentation meant that the Presentation was not Bank Business. The
5 COCON 1.1 Application: COCON 1.1.2R(6): Persons to whom COCON applies
Authority notes that this assistance and expertise were not available to Mr
Rowland outside the Firm.
57. The Presentation was created in the Firm’s London Office premises, using
the Firm’s IT systems, and was disseminated from Mr Rowland’s Firm
email account. Mr Bolelyy’s email to self, dated 12 September 2017
(referred to in paragraph 4.7), was sent by him to and from his email
address at the Firm. In the Authority’s view, the clearly inappropriate
nature of the Presentation makes it likely that Mr Bolelyy would not have
filed it in the usual place within the Firm’s IT systems, where it would have
been accessible to other employees of the Firm not involved in assisting
with the preparation of the Presentation.
58. The administrative arrangements for the trip to Abu Dhabi in September
2017 do not indicate as to whether the purpose of the trip was solely for
Mr Rowland (and others) to discuss the setting up of the Financial
Institution. The Rowland Family had multiple and parallel business
operations, including the Firm. Discussions on setting up the Financial
Institution did not preclude discussions on other matters which were Bank
Business.
Dissemination of the Presentation
59. The Presentation was not received by the UAE Ambassador. The Ambassador’s
lawyers stated in written legal correspondence (produced around 16 June 2021)
that the Ambassador did not receive the Presentation, nor did he communicate with
any representative of the Firm concerning the Presentation or its underlying subject
matter. David Rowland also confirmed this in his representations on the Warning
Notice as a third party.
60. The Presentation was simply sent in draft to two people, David Rowland and
Individual A. There is no credible evidence that it was given to anyone else, only
David Rowland and Individual A. The Presentation was not disseminated within the
ordinary dictionary meaning of the word. The fact that it was a draft document,
and marked “draft”, in itself undermines any suggestion that it was intended as a
marketing document. Documents marked "draft" are not for wider distribution.
61. The Authority notes that the Presentation was reported to have been found
in the UAE Ambassador’s Outlook Tasks under the name of “Rowland
Banque Havilland”, appearing to indicate the origin of, or at least the
Firm’s connection with, the Presentation. The Authority makes no findings
as to why it was reported that the Presentation was found in the UAE
Ambassador’s Outlook Tasks.
62. In the circumstances set out above, the Authority considers that it is
appropriate to state that the Presentation was “disseminated” (within the
ordinary dictionary meaning of the word). In addition to Mr Rowland
sending the Presentation externally by email (i.e. outside the Firm’s email
systems), it was given by Mr Bolelyy to a representative of an Abu Dhabi
sovereign wealth fund (and was subsequently reported to have been found
on the UAE Ambassador’s computer system).
Views of relevant persons
63. Other employees, including those on whom the Authority relies with respect to
other aspects of their evidence and are treated as reliable witnesses, considered
that the Presentation was not a project of the Firm.
64. An individual not employed by the Firm was at the meeting on 13 September 2017
and subsequently involved in the Presentation’s production (referred to in
paragraph 4.9). The Authority has asserted that the presence of Firm staff
suggested it was a Firm project but does not engage in the issue as to whether the
involvement of non-Firm staff suggests it was not.
65. Events after the UAE trip confirm that the Presentation was not Bank Business.
When the articles and rumours started to appear online, the evidence is clear that
Mr Rowland, David Rowland and other Rowland Family members all viewed it as a
Rowland Family issue rather than a Firm one, albeit one which had reputational
consequences for the Firm due to the family association. It was not escalated by
Mr Rowland to the Firm until the publication of the Intercept Article.
66. The Firm’s actions following publication of the Intercept Article support its position
that the Presentation was not Bank Business in that they demonstrate that such a
document would never have been produced on behalf of the Firm: the Luxembourg
Regulator, CSSF, was notified the day after the article was published and the
Authority was notified on 14 November 2017. The Firm engaged lawyers in the UK
and Luxembourg, and disciplinary action was taken against Mr Rowland, Mr Weller
and Mr Bolelyy. The report was subsequently volunteered by the Firm to the CSSF
and to the Authority (through the CSSF).
67. Employees’ views (particularly those with very limited involvement in the
matter) as to whether the Presentation was Bank Business or Rowland
Family business, are of limited relevance. The assessment as to whether
the Presentation was Bank Business or not is an objective one, taking into
account all the circumstances and evidence. One person who was not
employed by the Firm was involved in the Presentation’s production;
however, his input appears to have been limited to advising on football
matters (i.e. not on financial services) and the preparation of the slide
regarding the “FIFA Option” referenced at paragraph 4.24. All other
personnel involved in the Presentation’s production, and in relation to the
financial services content (as opposed to the football content) were
employed by, and received a salary exclusively from, the Firm during the
Relevant Period. Receiving assistance from a person not employed by the
Firm, for a limited part of the Presentation, does not in the Authority’s view
change the nature of the document as a whole.
68. The Authority has taken into account actions by the Firm subsequent to
the publication of the Intercept Article, including that the Firm’s senior
management in Luxembourg acted promptly by making regulatory
notifications and instructing lawyers to prepare an internal report, which
was provided to the Authority via the CSSF; however, it does not consider
that these actions support the Firm’s contention that the Presentation was
not Bank Business.
Attribution as a matter of law
69. It is only Mr Rowland’s actions which could, as a matter of law, be attributed to the
Firm, Mr Weller and Mr Bolelyy not being sufficiently senior.
70. The Authority considers that Mr Rowland was directly responsible, and
personally culpable, for the misconduct referred to in this Notice. As such,
his misconduct can properly be attributed to the Firm as a matter of law,
and is not an issue in dispute. It is therefore not necessary for the
Authority to consider whether the actions of Mr Weller and/or Mr Bolelyy
are, in themselves, attributable to the Firm.
71. Even if the Authority concluded, as a matter of evidence, that Mr Rowland had
lacked integrity it is not obliged to attribute that lack of integrity onto the Firm if it
considers that such a finding would be disproportionate and inconsistent with the
regulatory objectives of the Authority.
72. There has not been an allegation that the Firm has lacked integrity at an
organisational level. A lack of integrity is the most serious allegation which may be
made against a financial institution. It is unprecedented. The Firm has tried to do
the right thing following discovery of the issues, including making prompt
notifications to the regulators, ordering a detailed forensic investigation and
removing the individuals involved from the Firm. The Firm has admitted that its
corporate governance within the London Branch failed, and its systems and controls
have been significantly improved. The actions of the Firm are not the actions of an
organisation that lacks integrity. It is not necessary to taint the Firm with a finding
based on the actions of a single individual.
73. It is likely that a Principle 1 (integrity) finding would cause disproportionate harm
to the Firm. Banking is a business based largely on trust; an integrity finding poses
a real threat to the continued viability of the Firm.
74. The Authority has not asserted that the Firm has lacked integrity at an
organisational level nor that it currently lacks integrity.
75. The misconduct committed by Mr Rowland, Mr Weller and Mr Bolelyy, in
respect of which the Authority concludes all three to have lacked integrity,
was particularly serious. Mr Rowland’s misconduct is attributable to the
Firm. The Authority has noted, inter alia, the governance changes and the
Firm’s actions on discovery of the breach and has taken these into account
when assessing the proportionality of a conclusion of lack of integrity. The
Authority has noted its criminal prosecution of National Westminster Bank
plc6
and taken into account the Firm’s view that this matter is
unprecedented. Notwithstanding these matters, the Authority considers
that it is reasonable and proportionate to conclude that the Firm lacked
6 National Westminster Bank plc was fined £264,772,619.95 on 13 December 2021
integrity with respect to one aspect of its business during the Relevant
Period.
Enforcement’s unfair approach to the case
76. The Firm has a number of concerns with the conduct and the approach to the
investigation of the Authority’s Enforcement case team (”Enforcement”).
Accordingly, this has been unfair to the Firm.
77. Enforcement has not conducted its own thorough investigation of the underlying
facts and matters. It has simply relied on the report commissioned by the Firm
(“the Project Gulf Report”), carried out a limited number of interviews, and reached
a different conclusion as to whether the Presentation was created for and on behalf
of the Firm. Enforcement decided not to interview obviously relevant witnesses who
should have been interviewed (for example, the individual not employed by the
Firm referred to in paragraphs 4.9 and 4.10). Reasonable lines of enquiry were not
followed. Rather than obtaining all relevant evidence, seeing where the evidence
leads and reaching an appropriate conclusion, Enforcement has chosen not to do
this, and continued with their initial false case theory and factual narrative.
78. The decision to give the Firm this Notice was made on behalf of the
Authority by the RDC. As is explained in paragraph 8.2 of the Decision
Notice, the RDC is a committee of the Authority which takes certain
decisions on behalf of the Authority, and its members are separate to the
Authority staff involved in conducting investigations and recommending
action against firms and individuals. The RDC has decided to give this
Notice on the basis of the evidence before it regarding the conduct of the
Firm.
79. The RDC noted the reasons provided by Enforcement for not interviewing
other individuals and considers that this was reasonable in all the
circumstances. Accordingly, it does not consider that Enforcement’s
approach to the case has resulted in the Firm being treated unfairly.
80. The submissions made by the Firm, as to the nature and conduct of the
investigation, have been duly considered by the RDC but it considers that
they do not undermine the evidence on which the decision is based.
Systems and Controls in the London Office
81. The Firm accepts that weaknesses in the Firm’s systems and controls within the
London office enabled non-Bank Business to be undertaken from its London
premises and enabled Mr Rowland, utilising the Firm’s human and physical
resources, to pursue his own business interests separate to those of the Firm from
those premises. In failing to prevent non-Bank Business being conducted from the
London Office, the Firm accepts that it failed to conduct its business from the
London Office with due skill, care and diligence in breach of Principle 2 (a firm must
conduct its business with due skill, care and diligence).
82. The Authority has noted that the Firm has accepted it has breached
Principle 2. The Authority considers that the Firm’s failures go further than
a breach of Principle 2 and are more appropriately classified as a breach
of Principle 1 (integrity).
Step 2: seriousness and relevant revenue
83. The relevant revenue in this case is the revenue of the London Branch (which the
Firm asserts is consistent with DEPP 6.5A.2) and not the revenue of the Firm
outside of the operation of the London Branch. The relevant revenue of the London
Branch from 1 April 2017 to 31 March 2018 was £4,374,473. This should be the
figure utilised at Step 2.
84. Relevant revenue has not been utilised, as it was considered by Enforcement that
relevant revenue is not an appropriate indicator of the harm, or the potential harm,
caused by the breach. This approach wrongly separates the need for the penalty to
be commensurate with the Firm’s resources.
85. Because the relevant revenue figure calculated in the usual way produces a Step 2
figure which Enforcement considers does not appropriately reflect the Firm’s
misconduct, it concluded that some other approach had to be found. This is not
appropriate and the usual relevant revenue metric (that is the relevant revenue of
the London Branch) should be utilised. Enforcement’s approach is unfair to the Firm
and there is no good reason to justify removing the link with the Firm’s resources.
86. The Firm refers to the Credit Suisse Final Notice dated 19 October 20217 (“the
Credit Suisse Case”) which involved, inter alia, breaches of Principle 3
(management and control) in relation to financial crime and AML weaknesses,
which were exposed by three transactions related to two infrastructure projects in
the Republic of Mozambique. A financial penalty based on relevant revenue was
utilised in similar circumstances. This is as applicable to the Firm in this case as it
was in the Credit Suisse Case.
87. At its highest, the Presentation was no more than the thoughts of those persons
who were involved in its production committed to paper and sent to two persons,
David Rowland and Individual A, both of whom did not see the email and took no
action. The Firm considers that the alleged Principle 1 breach arises from a technical
legalistic attribution of the actions of certain individuals to the Firm, rather than
from a corporate systemic malaise. Accordingly, the seriousness of the misconduct,
notwithstanding a finding of a lack of integrity, should not be level 5.
88. The Firm considers that its case should be categorised instead as a level 4 case in
terms of seriousness, in light of the level 4 finding in the Credit Suisse Case which,
notwithstanding being a Principle 3 case, involved actual loss to the people of
Mozambique and the commission of a crime. The Firm is being treated in a
disproportionate and excessive way.
89. DEPP 6.5A.2G allows for the Authority to use an alternative metric where
revenue is not appropriate, and the Authority has done so in many
previous cases.
90. In the Credit Suisse Case there was a link between the amount of business
done through the Credit Suisse Emerging Markets Group (over which there
were poor controls) and the harm caused (namely the amount of money
available for bribery and corruption). Utilising a relevant revenue metric
was appropriate in the Credit Suisse Case.
91. In this case, the harm that might have been caused by the misconduct bore
no relation to the Firm’s activities and/or the revenue earned by the
London Branch of the Firm (or indeed the total revenue earned by the
Firm).
7 https://www.fca.org.uk/publication/final-notices/credit-suisse-2021.pdf
92. Accordingly, the Authority considers that it is more appropriate to use an
alternative metric rather than relevant revenue, when considering the
appropriateness of the Step 2 figure.
93. The Authority notes the comparator case of the Bank of Beirut, Final Notice
dated 4 March 20158 (“the Bank of Beirut Case”), where the underlying
concerns related to AML controls and the potential for the Bank of Beirut
to be exploited for financial crime. The Authority considers that the
financial penalty on the Firm should be substantially greater than the
financial penalty of £3 million imposed on the Bank of Beirut in 2015,
taking into account, inter alia, (i) that the Bank of Beirut was also subject
to the financial impact of a new customer restriction, (ii) the Firm’s
significantly more serious misconduct, and (iii) the Firm’s Principle 1
breach rather than the Bank of Beirut’s Principle 11 (Relations with
regulators) breach.
94. The Authority does not consider that in all the circumstances a level 5
finding of seriousness is disproportionate or unfair. It appropriately
reflects the very serious nature of the misconduct in this case.
95. Accordingly, the Authority considers that a £10,000,000 figure at Step 2 is
reasonable and proportionate to the misconduct.
Step 3: Aggravating and mitigating circumstances.
96. The Firm has shown co-operation which goes beyond what was required. This is
due to the early disclosure, and the quality, of the Project Gulf Report which the
Firm considered at the time to be (but which has subsequently been held not to
be) covered by legal professional privilege. The quality of the Project Gulf Report
was such that the Authority did not consider it necessary for it to conduct any
meaningful investigation beyond interviewing five persons, and this saved the
Authority time and resource. A reduction of 10% should be applied to reflect the
exceptional co-operation from the Firm.
97. Regulated firms are expected to co-operate fully with the Authority in its
investigation of suspected misconduct. The production by the Firm in this
case of an internal review report, which was not subject to legal
professional privilege, is not considered by the Authority to be exceptional
co-operation justifying a reduction at Step 3.
Breach of Principle 2 (rather than breach of Principle 1)
98. The Firm has accepted that it failed to conduct its business from the London Office
with due skill, care and diligence in breach of Principle 2.
99. In addition to the points made above, the Firm considers that the assessment of
seriousness should be reduced from that proposed for a breach of Principle 1, as
the misconduct would be one based on negligence rather than on a deliberate act.
Further, any penalty should be assessed on the allegations upon which the alleged
negligence is founded, rather than the consequences of the negligence. For these
reasons a level 3 finding is appropriate.
100. The Authority considers that the Firm’s failures are more appropriately
treated as a breach of Principle 1 rather than of Principle 2.
David Rowland’s Representations
101. The 30 August 2017 meeting was organised by Individual A, because the senior
representative of an Abu Dhabi sovereign wealth fund was due to be in London on
other business. It was an informal, unstructured meeting, with no agenda. David
Rowland attended the meeting to advance his interest in the Financial Institution,
which was a proposed partnership between the Abu Dhabi sovereign wealth fund
and David Rowland. This project was discussed in addition to personal greetings
and probably matters related to UK politics. The meeting lasted at most 20 minutes,
the Firm was not mentioned, and no mention was made of anything which could
have related to what became the contents of the Presentation. As the meeting
concluded, David Rowland went downstairs to use the cloakroom, leaving Mr
Rowland talking with the senior representative. Mr Rowland subsequently briefly
mentioned to David Rowland something about the Abu Dhabi sovereign wealth fund
“hedging their exposure”.
102. David Rowland’s attendance at the August Meeting had no significance and was not
relevant to the subsequent creation of the Presentation, nor did he have any
“behind the scenes” role in its creation. His involvement with the UAE is wholly
unrelated to the Firm. David Rowland does not think he has ever discussed the
Firm with the senior representative of the Abu Dhabi sovereign wealth fund or with
the Ruler of the UAE, whom David Rowland regards as a very close personal friend.
103. David Rowland has never attended any Board Meetings of the Firm or any
management meetings, nor has he been involved, or interfered, in any manner in
the management of the Firm. David Rowland’s attendance at the August Meeting
does not indicate that the Presentation was Bank Business, or that Bank Business
was discussed. David Rowland may have been Honorary President of the Firm, but
it meant nothing and gave him no authority in the Firm, it was a fiction. The title
was merely there to demonstrate his support for, and underwriting of, the Firm and
to give confidence to depositors.
104. David Rowland went to Abu Dhabi with Mr Rowland in late September 2017. He did
not discuss, read or look at the Presentation with Mr Rowland or anyone else during
this visit. It was inconceivable that Mr Rowland would have not mentioned the
Presentation to David Rowland, had he intended to hand over the Presentation to
promote the interests of the Rowland Family. Bank Business had no relevance to
the trip and the Firm has, and had, no relationship with the UAE.
105. The Presentation was not “disseminated”. The term dissemination is only used to
describe an act of distributing widely; this did not happen, as it was only sent to
David Rowland and Individual A, and there was no intention by either David
Rowland or Individual A to disseminate the Presentation. David Rowland was not
aware at the time he received the Presentation that he had received it by email
and did not open, read, print or forward it or give a copy to anyone else. The
Presentation was deleted from David Rowland’s computer by the automatic seven-
day deletion policy on his email system. The UAE Ambassador confirmed to David
Rowland, at the Abu Dhabi Grand Prix towards the end of November 2017, that he
had never received a copy. Accordingly, there was no meaningful “dissemination”,
and as this term is pejorative, it should not be used.
106. David Rowland was not aware of the Presentation, or its contents, until The
Intercept made contact. The telephone calls between David Rowland and Mr
Rowland on 12, 13 and 19 October 2017 do not indicate that David Rowland was
aware of the contents of the Presentation. Throughout these telephone calls David
Rowland and Mr Rowland were concerned about their communications being hacked
by agents of Qatar. The Presentation was not discussed; David Rowland’s concerns
related to a document regarding the Financial Institution and whether his phone
had been hacked. They therefore talk about what he and Mr Rowland should do
with their phones and their email addresses. The telephone calls were unguarded
conversations between father and son and do not show any attempt at a cover-up.
107. David Rowland has no idea what the references to “their office” refers to but
speculates that it could be Qatar or the office of Individual A who had also been
hacked by Qatar. The reference in the telephone calls to “badge of honour” is
nothing to do with the Presentation, nor to an economic warfare strategy. It
concerned the bad publicity resulting from being attacked by Qatar, due to David
Rowland’s friendship with and connection to the UAE. The Presentation could not
be used as a badge of honour; it was nonsense and a hugely embarrassing
document.
108. The Authority has not asserted that David Rowland was present during the
conversation between Mr Rowland and the senior representative of the
Abu Dhabi sovereign wealth fund, when the request for advice is said to
have occurred. Discussions at the August Meeting regarding the Financial
Institution did not preclude discussions on other matters which could be
taken forward as Bank Business. Such matters include the Presentation.
The Authority has not asserted that David Rowland had a “behind the
scenes” role in the creation of the Presentation.
109. Mr Rowland forwarded a copy of the Presentation to Individual A and David
Rowland using their email addresses outside the Firm. The Authority has
not asserted that David Rowland forwarded the Presentation. Having
taken into account all the relevant evidence, including that of Mr Bolelyy
and Mr Rowland, and the contents of the telephone calls on 12, 13 and 19
October 2017 between David Rowland and Mr Rowland, the Authority has
concluded that Mr Bolelyy did provide a copy of the Presentation to a
representative of the Abu Dhabi sovereign wealth fund during the trip to
Abu Dhabi. Accordingly, the Authority considers that it is appropriate to
state that the Presentation was “disseminated”.
110. The Authority refers to the fact that between April 2014 and June 2018
(which includes the Relevant Period) the Firm’s website referred to David
Rowland as its Honorary President and that, during the telephone call on
19 October 2017, David Rowland stated to Mr Rowland “don’t let’s put
anything on the Bank emails…and you can put that Vladimir [Bolelyy],
make him have one on, with Liwathon…and as soon as we can we take him
off the Bank’s payroll”. The Authority infers that, in practice, David
Rowland had a level of influence and management within the Firm.
111. In the telephone call between David Rowland and Mr Rowland on 12
October 2017, David Rowland asked Mr Rowland how he thought the
“thing in the Indian paper got there”. Mr Rowland replied “probably, I
assume – probably a leak from their office I would imagine”. Mr Rowland
then said he was aware that the content of the Presentation had been
discussed with “their” office. The Authority infers that “their office” refers
to the office of the Abu Dhabi sovereign wealth fund, which had been
provided with a copy of the Presentation during the visit. Mr Rowland also
stated to David Rowland “Never been talked to anyone else”. The
Authority infers that Mr Rowland was saying that the Presentation had not
been discussed with anyone other than the Abu Dhabi sovereign wealth
fund. Mr Rowland appeared to regard publication of the Firm’s involvement
as “a badge of honour when we go and see them next time”, and David
Rowland stated that “you can, we can capitalise on this” [with respect to
the Abu Dhabi sovereign wealth fund]. The Authority infers that at the time
of the telephone calls David Rowland is likely to have been aware that the
Presentation had been provided to the Abu Dhabi sovereign wealth fund.
Address:
5 Savile Row, London W1S
1.
ACTION
1.1.
For the reasons given in this Notice, the Authority has decided to impose on Banque
Havilland SA a financial penalty of £10,000,000 pursuant to section 206 of the Act.
2.
SUMMARY OF REASONS
2.1.
During the Relevant Period the Firm acted without integrity by creating and
disseminating a document, the Presentation, which contained obviously improper
advice for potential investors by recommending manipulative trading strategies,
including recommending conduct which could be a criminal offence, had it taken
place in the UK.
2.2.
The Presentation set out the Strategy. The Strategy comprised a multi-faceted
approach that included conduct aimed at creating a false or misleading impression
as to the market in, or the price of, Qatari bonds, with the objective of harming the
Banque Havilland SA has referred this Decision Notice to
the Upper Tribunal to determine what (if any) the
appropriate action is for the FCA to take, and remit the
matter to the FCA with such directions as the Upper
Tribunal considers appropriate.
David Rowland, exercising third party rights, has also
referred this Decision Notice to the Upper Tribunal which
will determine whether to dismiss that reference or remit
it to the FCA with a direction to reconsider and reach a
decision in accordance with the findings of the Upper
Tribunal.
Therefore, the findings outlined in this Decision Notice
are provisional in that they reflect the FCA’s belief as to
what occurred and how it considers the behaviour
described should be characterised. The Upper Tribunal’s
decision will be made public on its website.
economy of Qatar. Creating a false or misleading impression as to the market in,
or the price of, Qatari bonds would be an extremely serious matter and potentially
a criminal offence, if it were to take place in the UK (contrary to section 90 of the
Financial Services Act 2012). Section 1H of the Act provides that an offence
involving such misconduct amounts to “financial crime” for the purpose of the Act.
2.3.
The Strategy included regulated advice (pursuant to article 53 of the Regulated
Activities Order and section 22(1) of the Act) aimed at the UAE and/or other states
in the Middle East region because it advised those potential investors to transfer
their existing holdings of Qatari bonds into a “protected cell company” to “preserve
integrity” before manipulative trading intended to destabilise the Qatari economy
took place, which trading was to include the purchase of CDS and the sale and
purchase of Qatari bonds.
2.4.
The Firm intended to present the Strategy to representatives of the UAE and/or
other states in the Middle East region (whom the Firm considered might have
reasons to want to put economic pressure on Qatar) as a way of marketing its
services, and did provide a copy to an individual from an Abu Dhabi’s sovereign
wealth fund. Accordingly, the Firm breached Principle 1 (Integrity) of the
Authority’s Principles for Businesses.
2.5.
The Authority therefore has decided to impose on the Firm a financial penalty of
£10,000,000 pursuant to section 206 of the Act.
3.
DEFINITIONS
3.1.
The definitions below are used in this Notice:
“the Act” means the Financial Services and Markets Act 2000;
“the Authority” means the Financial Conduct Authority;
“CDS” means credit default swaps;
“COCON” means Code of Conduct in the Authority’s Handbook;
“Currency Peg” means a policy in which a national government sets a specific fixed
exchange rate for its currency with a foreign currency or a basket of currencies;
“DEPP” means the Decision Procedure and Penalties Manual, part of the Authority’s
Handbook of Rules and Guidance;
3
“EG” means the Authority’s Enforcement Guide set out in the Authority’s Handbook;
“the Financial Institution” means a financial institution being established through a
partnership of an Abu Dhabi sovereign wealth fund and the Rowland Family before,
and during, the Relevant Period. It was not a project of the Firm;
“the Firm” means Banque Havilland SA;
“Head Office” means the head office of the Firm in Luxembourg;
“Individual A” means the individual engaged by the Firm to market its services in
the UAE and the wider Middle East region;
“the Indian Article” means an article regarding the Presentation published by an
Indian media organisation called the Business Standard, entitled “Gulf Crisis may
affect Qatar’s security, India’s economic interests” on 12 October 2017;
“the Intercept” means a media organisation called The Intercept.com;
“the Intercept Article” means an article regarding the Presentation published by the
Intercept on 9 November 2017;
“London Branch” means the branch of the Firm based in London;
“MLRO” means Money Laundering Reporting Officer;
“PERG” means the Perimeter Guidance Manual in the Authority’s Handbook;
“the Presentation” means the document drafted by the Firm setting out a series of
steps which could be taken to harm the economy of Qatar, by using manipulative
trading practices aimed at creating a false or misleading impression as to the
market in or the price of Qatari bonds;
“PRIN” means the Principles for Businesses, part of the Authority’s Handbook of
Rules and Guidance;
“the Regulated Activities Order” or “the RAO” means the Financial Services and
Markets Act 2000 (Regulated Activities) Order 2001;
“the Relevant Period” means the period from 12 September 2017 to 13 November
2017;
“Mr Rowland” means Edmund Lloyd Rowland;
“the Rowland Family” means the family of David Rowland;
“the SFNH Document” means a document created by David Edward Weller on 14
September 2017 entitled “Setting Fire to the Neighbour’s House fund” setting out
details of a series of steps to devalue the Qatari Riyal by increasing and encouraging
selling pressure;
“the Strategy” means the series of steps as set out in the Presentation which could
be taken to harm the economy of Qatar by using manipulative trading practices
aimed at creating a false or misleading impression as to the market in or the price
of Qatari bonds;
“SYSC” means the Senior Management Arrangements, Systems and Controls
Sourcebook, part of the Authority’s Handbook of Rules and Guidance;
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber);
“UAE” means United Arab Emirates;
“Warning Notice” means the Warning Notice given to the Firm dated 14 October
2021; and
“Wash Trade” means a sale or purchase of an instrument where there is no change
in beneficial interest or market risk, or where the transfer of beneficial interest or
market risk is only between parties acting in concert or collusion, other than for
legitimate reasons.
4.
FACTS AND MATTERS
The Firm
4.1.
The Firm was established in 2009 by the Rowland Family and described itself,
during the Relevant Period, on its website “as being managed with the financial
conservatism which is the family’s hallmark”. The Firm’s head office is in
Luxembourg. It has various branch offices, including one in London. The Firm was
also described on its website as “an integral part of the [Rowland] Family’s interests
on both a professional and personal level”.
Key individuals
4.2.
The key individuals involved in this matter were all employed in the London Branch,
namely Edmund Lloyd Rowland, David Edward Weller and Vladimir Bolelyy. During
the Relevant Period:
4.2.1. Mr Rowland was approved by the Authority as Senior Manager Function 21
EEA Branch Senior Manager (“SMF21”) at the Firm. Those holding SMF21
are employees who have a significant responsibility for one or more
significant business units of a branch of an incoming EEA firm in the UK. Mr
Rowland was Chief Executive of the London Branch for almost three years
before stepping down in April 2017, after which he retained his SMF21
status. He was formally re-appointed as Chief Executive on 26 September
2017 (part way through the Relevant Period) and continued in this role until
his resignation on 13 December 2017.
4.2.2. Mr Weller was the Head of Asset Management at the London Branch and
was also approved by the Authority as an SMF21; he reported to Mr Rowland
and to the Firm’s Group Head of Asset Management.
4.2.3. Mr Bolelyy was employed by the Firm as a senior investment analyst and
was Mr Rowland’s assistant reporting directly to him.
4.3.
Throughout the Relevant Period, all three individuals were employed by and
received salary from the Firm only.
Marketing in the UAE
4.4.
On 18 April 2017, the Firm engaged the services of Individual A to provide
“consulting and professional assistance in developing Banque Havilland in the
United Arab Emirates”. This was defined as expanding “the undertaking of Banque
Havilland in the UAE and broader Middle East, with specific assistance in terms of
strategic marketing, local networking or anything else which will be agreed by the
Parties as useful to serve the present purpose”. Individual A was paid a monthly
fee of US $10,000 for these services. In addition to this consultancy role, Individual
A was also a special adviser to the Crown Prince of Abu Dhabi (the capital of the
The Qatar diplomatic crisis
4.5.
In June 2017, as was widely reported in the press, a Saudi-led coalition of Gulf
states (including the UAE) severed diplomatic relations with Qatar, citing Qatar’s
alleged support for terrorism as the main reason. The Qatari Riyal had a currency
peg with the US Dollar throughout the Relevant Period.
30 August 2017 meeting
4.6.
On 30 August 2017, at a meeting organised by Individual A, Mr Rowland and David
Rowland (Mr Rowland’s father and the ultimate controller of the Firm) met with a
senior representative of an Abu Dhabi sovereign wealth fund. Prior to that meeting,
on 27 August 2017, Mr Rowland had referred to the forthcoming meeting and stated
to a colleague: “they have another potential opportunity they want me to look at
also”. Mr Rowland told the Authority during an interview that at this meeting it was
made clear to him, in the absence of David Rowland, that the UAE sovereign wealth
fund’s representatives were concerned about the substantial exposure that Emirati
banks had in the interbank market to Qatar and particularly to the local banking
sector. This was due to the situation between Qatar and the UAE, and the
representatives’ fears that the stand-off would be significantly extended, as no
rapprochement seemed to be on the horizon. This was a reference to the political
tensions in that region, which had worsened since June 2017.
The Presentation
4.7.
At some point after the 30 August 2017 meeting and no later than 12 September
2017, Mr Rowland tasked Mr Bolelyy with preparing a written presentation as to
how economic pressure might be put on Qatar. Subsequently, on 12 September
2017 Mr Bolelyy sent himself an email recording the following matters in a number
of bullet points, all of which he then included in the first draft: “Bond exposure;
What natters [sic] is western view; Foreign reserves; Currency peg break; Cash to
pay for insurance; “Sanctions don’t work unless everyone is doing it”; Currency peg
pressure is effective when thought by everyone; Avoid jargon; Segregated vehicle”.
4.8.
The first draft of the document which became the Presentation, prepared by Mr
Bolelyy on 12 September 2017 in the form of slides, was named “Qatar
Opportunity” and proposed a series of steps with the purpose of devaluing the
Qatari Riyal and breaking its peg to the US Dollar.
13 September 2017 meeting
7
4.9.
On the following day, 13 September 2017, a meeting was convened at short notice
of various individuals in the London Branch; these individuals were Mr Rowland, Mr
Weller, Mr Bolelyy, another employee of the Firm and an individual not employed
by the Firm.
4.10. At the meeting, which appears to have lasted for about a quarter of an hour and
was subsequently described by Mr Weller subsequently as a brain-storming session,
Mr Rowland asked for ideas on how negatively to impact the Qatari economy by
undermining the value of the country’s currency. Mr Rowland explained that Saudi
Arabia, Abu Dhabi [sic] and Egypt were keen as nation states to persuade Qatar to
stop some of its funding activities. He further explained that the 3 countries had a
combined US $23 billion of Qatari assets that they were prepared to use to pressure
the Qatari Riyal. Mr Rowland went on to state that the potential economic interest
for the Rowland Family would come from being able to charge a small fee on the
assets which would be transferred to a vehicle arranged by the Rowland Family.
4.11. The Authority infers that the Firm intended that the Presentation would be
presented to representatives of the UAE and/or other states in the Middle East
region, which the Firm considered might have reasons to want to put economic
pressure on Qatar, in the hope it might lead to business for the Firm. Regardless
of whether the Strategy as set out in the Presentation was practicable or likely to
be accepted by such representatives, the Authority concludes that it was a way of
signalling to potential investors that the Firm was willing to countenance improper
market conduct, in order to advance its interests.
4.12. Following this meeting, none of the attendees raised any concerns with the Firm’s
MLRO or to any other senior manager. In addition, no concerns were raised to Head
Office or via the Firm’s whistle-blowing procedures.
Iterations of the Presentation
4.13. Later that day, 13 September 2017, Mr Bolelyy emailed the attendees of the earlier
meeting to request their “credible, high-level ideas re: a possible transaction
structure,” and asked that they “jot something coherent down” . He explained that
what he described as the “winning idea” would go into a presentation, the drafting
of which he would take care of, and that it would be shared and discussed at a
“high level”.
4.14. On 14 September 2017, Mr Bolelyy emailed a draft of the Presentation to Mr
Rowland and stated as follows: “Attached is a work in progress based on fragments
of information exchanged so far. As discussed yesterday, it will be useful for all of
us to sit down and nail down the basic skeleton. When can you do today?”.
4.15. This version of the Presentation included further details of the Strategy, specifically
regarding the stated aim of putting pressure on the Qatari Riyal to such an extent
that the Qatar National Bank would need to deploy significant portions of Qatar’s
foreign exchange reserves to maintain its value in relation to the US Dollar.
4.16. This version of the Presentation explicitly stated that “maintaining the [currency]
peg requires extensive use of central bank foreign exchange reserves. Existing
G$15bn [sic] of Qatari bonds represent close to 50% of all central bank reserves
available” and noted that “the selling pressure [generated by the Strategy] creates
upward pressure on the Qatari Riyal-US Dollar peg and forces Qatar National Bank
to defend it by decreasing available foreign exchange reserves”.
4.17. The Presentation envisaged the purchasing of Qatari bonds, deployment of long
CDS and long credit forwards with the express aim of negatively impacting the
value of the Qatari Riyal against the US Dollar.
4.18. Later on 14 September 2017, in response to Mr Bolelyy’s previous request for
contributions to what he described as ‘a possible transaction structure’, Mr Weller
emailed a document to Mr Bolelyy which contained his ideas. Mr Weller has
subsequently stated, that this document reflected what had been discussed
amongst the participants at the meeting on the previous day, together with some
research he had conducted through open sources on the internet. The document
was entitled “Setting Fire to the Neighbour’s House fund” (“the SFNH Document”)
and set out more details of the Strategy, namely, to devalue the Qatari Riyal by
increasing and encouraging selling pressure. The SFNH Document ended with a
cartoon depicting Qatar and the statement “Repeat as desired”. Mr Weller has
subsequently stated that at the time he did not regard the contents of the SFNH
Document as representing a serious proposal and that it was simply reflective of a
subject that Mr Rowland wished to explore.
4.19. The steps set out in the SFNH Document proposed to “[q]uietly pick up some Qatar
paper” or bonds “2026s and 2030s”, using “old school account painting” to “get
some ownership”, which would be used to “[c]ontrol the yield curve” by co-
operating parties “acting in concert”, trading back and forth at incrementally lower
prices. The final step in this stage would be to “dump” these holdings on the open
market, driving the bond “price further down and [to be then] picked back up [by]
the original seller”.
4.20. Following this, the plan was to “[e]stablish positions in Forwards on Riyal, options
where possible”, (…) “get long the CDS slowly with larger houses, just enough to
move the price to make it news worthy (sic)”.
4.21. Next, “[f]ire up the PR machine… to remind people there is [a] problem with
Qatar…”. A further increase of the CDS position was advised and then, “PR wave
two” stating that “despite the massive SWF [sovereign wealth fund] pressure is
building that could see Qatar having restricted access to Dollar… [and] credit rating
may be affected with the long-term future of the country now in doubt… Peg won’t
break, though credit markets will be looking shambolic…Once fire fully alight clear
out the [UAE Dirham] specs for a profit”.
4.22. Accordingly, the SFNH Document proposed a way in which the Qatari Riyal/ US
Dollar currency peg might be attacked. In summary, the SFNH Document
suggested a series of steps namely: (1) building up a portfolio of specific Qatari
debt without attracting attention by parties acting in concert in a series of Wash
Trades, (2) later dumping the position in order to create a false impression in the
market of a flight from Qatari debt, (3) opening a CDS position on the debt (bonds)
and then ‘dumping’ the said debt to drive the price down, (4) increasing and closing
the
CDS
position
in
order
to
add
negative
pressure
on
Qatari
assets/currency/economy, to profit from the manipulative bond trading, and
increasingly stressed markets, and (5) using a PR campaign deliberately magnifying
the false impression to increase selling of the Qatari Riyal or Qatari bond holdings
and encourage other market participants to do likewise.
4.23. In the evening of 14 September 2017, Mr Bolelyy took most of the content from
the SFNH Document and added it to the draft Presentation including the content
set out in the bullet points in the paragraph below.
4.24. Thereafter until 18 September 2017 Mr Bolelyy actively worked on the Presentation
which in its final form was entitled “Distressed Countries Fund” and set out in detail
the Strategy, which included the following:
•
“To preserve integrity of existing Qatari bond holdings, an in-situ transfer will
be arranged into a protected cell company”;
•
“Gear up to control the yield (and thus bond prices)” by purchasing “medium
and long-term Qatar paper”, as it “should favourably affect CDS pricing at later
stage”;
•
“Establish a crossing transaction arrangement whereby another affiliated party
sells the same bond holdings back to the original seller and thereby creates
additional downward pressure”;
•
“Purchase CDS on Qatar (…) to move the price sufficiently to make it
newsworthy”;
•
“Fire up the PR Machine to remind people there is a problem with Qatar”;
•
“Increase the positions”, by “buying additional CDS” to lead to “falling of bond
price, raising rates, and escalation in CDS premia”;
•
“Refresh the PR message to add more fuel to the fire”, as it will “focus on the
prospect of restricted access to US Dollar and now-doubtful stability of the
country”;
•
“FIFA Option…Qatar has committed to $200BN of spending for its hosting of
2022 World Cup…negative publicity can resurface around the original award of
the tournament…If Qatar now spends its reserves on protecting the currency
and domestic credit markets, there is less dry powder to fund the infrastructure
spending”.
4.25. The finalised Presentation therefore outlined how to impact the economy of Qatar
negatively through manipulative trading practices, including direct reference to
crossing transactions between two parties working in conjunction with the stated
aim of artificially driving down the price of Qatari government-backed bonds,
therefore weakening Qatar financially, in other words Wash Trades. The Strategy
included a coordinated PR strategy designed to increase the pressure placed upon
Qatar in addition to the existing sanctions and to force the Qatari government to
utilise its central bank foreign exchange reserves, to maintain the currency peg
between the Qatari Riyal and the US Dollar. As such, the Presentation clearly
contemplated manipulative trading which aimed to create a false or misleading
impression as to the market in or the price of Qatari bonds which, if conducted in
the UK, could amount to a criminal offence (contrary to section 90 of the Financial
Services Act 2012).
What then happened to the Presentation
4.26. On 18 September 2017, in preparation for a scheduled visit to Abu Dhabi by Mr
Rowland, David Rowland and Mr Bolelyy, Mr Bolelyy emailed a copy of the
Presentation to his personal email account and, at Mr Rowland’s request, printed
two copies for Mr Rowland to take with him to Abu Dhabi.
4.27. Following a request from Mr Rowland to send him a soft copy of “the Qatar
presentation in the morning”, Mr Bolelyy also emailed him the final version of the
Presentation at approximately 7pm on 18 September 2017. Mr Bolelyy informed Mr
Rowland that it was the latest version and the same as Mr Bolelyy had given him
that afternoon “for review”.
4.28. Mr Rowland immediately forwarded the Presentation to Individual A, with whom he
had had a meeting at the Firm’s London Branch five days’ earlier. He also forwarded
a copy of the Presentation to David Rowland.
4.29. Mr Rowland explained in interview with the Authority that he requested Mr Bolelyy
to print copies of the Presentation “because it was related to the UAE” and
confirmed that the Abu Dhabi trip was an opportunity potentially to discuss the
Presentation with senior individuals, including from an Abu Dhabi sovereign wealth
fund. During the trip, Mr Bolelyy provided a copy of the Presentation to an employee
of this Abu Dhabi’s sovereign wealth fund.
4.30. For an authorised firm to contemplate such a course of action (including
recommending conduct which could be a criminal offence if it took place in the UK),
intending it to be presented to potential investors, indicates a clear lack of integrity.
This is regardless of whether the Strategy set out in the Presentation was
achievable in reality (either by the Firm or by potential investors or recipients of
the Presentation).
Press reports and the Firm’s response
4.31. Mr Rowland, David Rowland and Mr Bolelyy visited Abu Dhabi from 21 to 25
September 2017. The Presentation was later reported in the media to have reached
the email inbox of the UAE Ambassador to the US between 18 September and 12
October 2017 and was said to have been stored under the heading “Rowland
Banque Havilland”. The UAE Ambassador to the US subsequently stated to the
Firm’s legal advisers in New York (through his own legal advisers) that he “did not
receive the Presentation”. The Presentation eventually became publicly available
on the internet (see below).
4.32. On 12 October 2017, as part of a pattern of sending press reports regarding Qatar
to the attendees of the 13 September 2017 meeting, Mr Weller discovered an article
by an Indian media organisation called the Business Standard, entitled “Gulf Crisis
may affect Qatar’s security, India’s economic interests” (“the Indian Article”).
4.33. The Indian Article referred to leaked or stolen emails from the Firm allegedly found
in the in-box of the UAE Ambassador to the US. The article claimed that these
emails revealed an “economic warfare strategy” which involved “setting up a
confidential commercial entity with sizeable size to buy certificate of deposits (CDs)
of Qatari banks, then selling the CDs back to original sellers at a lower price,
thereby reducing the market pricing. Negative global public relations campaign is
done, showing instability in Qatar as a key reason for this downward pressure on
CDs pricing. This will ultimately either force Qatar’s financial ministry to either
break the currency peg, or at least spend a lot of dollar reserves to maintain their
pricing when panic initiates global buyers to sell Qatari Riyal.” The article stated
that “David Rowland (…) could be serving UAE’s interests in the ongoing spat. He
is the man behind the meteoric rise of Banque Havilland…”.
4.34. At 12:35 on 12 October 2017, Mr Weller emailed a link to the Indian Article to Mr
Rowland, who had by then resumed his position as Chief Executive of the London
Branch. , Mr Rowland responded at 12.42pm with “made me laugh”.
4.35. At 3.02pm, Mr Weller sent a further email saying, “trending on Qatari Twitter as I
type” with an image from the social media site, Twitter, showing the following:
“#UAE targeted #Qatar’s Economy using…Rowland’s Banque Havilland amid
#GulfCrisis…”.
4.36. At 4.10pm David Rowland and Mr Rowland discussed the Indian Article on the
telephone. David Rowland asked Mr Rowland “What about that thing in the Indian
paper? How do you think that got there?” Mr Rowland responded “Probably, I
assume – probably a leak from their office I would imagine…. never been talked to
anyone else, so…don’t matter. Use it as a badge of honour when we go and see
them next time”. The Authority infers that “their office” refers to the office of the
Abu Dhabi’s Sovereign Wealth Fund, which had been provided with a copy of the
Presentation during the visit referred to at paragraph 4.31 above.
4.37. Neither Mr Weller nor Mr Rowland forwarded either of Mr Weller’s emails to the
Firm’s Compliance Officer, or to Head Office, or took any other steps to inform other
members of the Firm’s senior management, or the Authority, of the allegations on
that day. Head Office was in fact aware of the content of the Indian Article, yet no
steps were taken by it to check if there was any substance to the allegations.
Reliance by Head Office appears to have been placed at the time on the fact that
the Indian Article was published by a relatively unknown media source and that the
focus of the article was on David Rowland, who had been the subject of negative
press attention previously, and therefore the article was believed by the Firm’s
Head Office to lack credibility.
4.38. The next day, a journalist from a media organisation called The Intercept.com (“the
Intercept”) contacted the lawyer who represented the Firm in the US to obtain a
comment regarding the discovery of the Presentation in the mailbox of the UAE
Ambassador to the US. The journalist provided specific details of the Presentation
that would allow the Firm to discover it on their systems, stating that the Firm
should search for “‘Qatar Opportunity’ and ‘Distressed Countries Fund.’ The Mission
Statement includes: ‘Control the Yield curve, decide the future’”.
4.39. At 6.49pm David Rowland telephoned Mr Rowland. They discussed how their mobile
phones may have been hacked while they were in Abu Dhabi. Mr Rowland said “Yes,
if I was to guess. Nothing wrong, if you look at the two things they’ve got, there’s
nothing wrong with the two things, …There’s nothing in them”. The Authority
considers that this conversation indicates that Mr Rowland was aware of the
Presentation and its contents. David Rowland asked Mr Rowland what he was
intending to say to the Firm’s US lawyer. Mr Rowland said that his “plan” was to
say: "Banque Havilland S.A does not trade in bonds, securities, CDS or any
instruments of Qatar names and has no plans to. Banque Havilland is a prestigious
private banking group and will make no further comments on politically motivated
storylines”. David Rowland replied that he “like[d] that”. Mr Rowland later said to
his father that “our story just has to be its purely politically motivated because of
our, because of your friendship with the Crown Prince, leave it, that might bring us
a lot of points.”
4.40. The Firm’s response to the Intercept, as directed by Mr Rowland, to the Intercept
was as worded above.
4.41. However, the Firm took no steps to look for the Presentation on the Firm’s internal
systems or to investigate whether the allegations had any substance.
4.42. The journalist from the Intercept contacted the Firm’s US lawyer again on 18
October 2017 and informed him that he was aware that Mr Bolelyy was the author
of the document in the Intercept’s possession. The journalist also provided further
questions that he wanted the Firm to answer prior to moving forward with
publication of the story. These questions provided indications of the content of the
document, including: “Has the plan outlined in the “Distressed Countries Fund” [the
Presentation] document commenced? If so, when did it begin? If not, when is it
planned to begin, if at all? Is Banque-Havilland helping the UAE undermine the
economy of Qatar so that the UAE can gain diplomatic advantage?”
4.43. These further questions were shared with Mr Rowland by the Firm’s US lawyer, and
were forwarded to senior individuals at Head Office and also to David Rowland. The
Firm’s US lawyer suggested responding as follows: “Banque Havilland reaffirms that
it is not participating in and has never participated in any trading in the currency,
bonds or other derivatives of Qatar. The plans described in that document do not
include any participation by BH [Banque Havilland]”. As before, Mr Rowland took
no steps to identify the document on the Firm’s internal systems or to discuss the
document with the staff involved, despite the specific reference by the Intercept
journalist to Mr Bolelyy as the author of the document. In addition, the Firm failed
to notify the Authority that an article containing these allegations was going to be
published.
4.44. At 6.50pm, David Rowland and Mr Rowland further discussed the matter on the
telephone. Mr Rowland said that the Intercept had “obviously only got the
attachment”.
4.45. On 19 October 2017, David Rowland telephoned Mr Rowland at 1.30pm. They
discussed the [suspected] hacking of their mobile telephones. David Rowland said
“We can capitalise on this ….. and we don’t put any – don’t let’s put anything on
the Bank emails.” Mr Rowland agreed with David Rowland’s suggestion.
4.46. Mr Rowland and David Rowland then discussed taking Mr Bolelyy off the Firm’s
payroll as soon as they could and transferring him from the Firm to another
Rowland Family entity. David Rowland said “All we’ve got to do is play by the
fucking rules and we have, we’ve not broken any fucking laws”. Mr Rowland
responded by saying “No. The answer is if they ever write to you, you just say, all
you’ve got to say to them, is that the Bank was not involved in anything. But the
principal is asked of hedging strategies to protect their 15 billion dollar investment.
That’s all you’ve got to say”. David Rowland responded by saying that he liked that.
Mr Rowland further said that “We know that’s what you’re allowed to - and if you
look at the Presentation that’s all it says. This is how you protect the value of your
15 billion dollar investment. And then everyone will understand, even the jokers
down there”. David Rowland stated that “You can capitalise on all this shit”.
4.47. On 9 November 2017, the Intercept published the Intercept Article, stating that the
Presentation had been found in the inbox of the UAE Ambassador to the US and
providing copies of some of the Presentation slides. The article was titled “Leaked
Documents Expose Stunning Plan To Wage Financial War On Qatar (…)” and
explained that “economic warfare involved an attack on Qatar’s currency using
bond and derivatives manipulation….The outline, prepared by Banque Havilland,
(…) laid out a scheme to drive down the value of Qatar’s bond and increase the
cost of insuring them, with the ultimate goal of creating a currency crisis that would
drain the country’s cash reserves”.
4.48. The content of the pages featured in the Intercept Article were identical to the
Presentation as sent by Mr Rowland to Individual A and David Rowland on 18
September 2017. The Intercept Article identified Mr Bolelyy as the creator of the
Presentation, according to the metadata of the document obtained by the Intercept.
4.49. The publication of the Intercept Article led to the immediate resignation of Mr
Bolelyy on 9 November 2017, and an internal investigation was initiated by Head
Office on 13 November 2017.
4.50. The Firm, via Mr Rowland, in his capacity as Chief Executive of the London Branch,
contacted the Authority on 14 November 2017 by telephone, providing limited
information regarding the events referred to above and the involvement of the
Firm. This was followed up by an email from Mr Rowland to the Authority on 15
November 2017 noting what was said in the call, as follows: “1. An article
mentioning a junior analyst name [sic] for the creation of a non bank presentation.
2. A forensic investigation being held. 3. The groups [sic] regulator CSSF was
informed. 4. The PR firm the group uses has clarified the facts. 5. We will share the
findings of the investigation once complete subject to CSSF approval”.
4.51. On 13 December 2017 Mr Rowland resigned as an employee, Chief Executive of the
London Branch and member of the executive management of the Firm with
immediate effect, and Mr Weller left the Firm on 10 April 2018.
5.
FAILINGS
5.1.
The statutory and regulatory provisions relevant to this Notice are referred to in
5.2.
Principle 1 requires a firm to conduct its business with integrity. During the
Relevant Period, the Firm breached Principle 1 by creating and disseminating the
Presentation (for purposes that included marketing the Firm) which recommended
the Strategy that included engaging in obviously improper conduct.
5.3.
The Strategy set out a multi-faceted approach that included conduct aimed at
creating a false or misleading impression as to the market in, or the price of, Qatari
bonds, with the objective of harming the economy of Qatar. Creating a false or
misleading impression as to the market in, or the price of, Qatari bonds would be
an extremely serious matter and a criminal offence, if it were to take place in the
UK (contrary to section 90 of the Financial Services Act 2012). Section 1H of the
Act provides that an offence involving such misconduct amounts to “financial crime”
for the purpose of the Act.
5.4.
The Strategy included regulated advice (pursuant to article 53 of the Regulated
Activities Order and section 22(1) of the Act) aimed at the UAE and/or other states
in the Middle East region because it advised those potential investors to transfer
their existing holdings of Qatari bonds into a “protected cell company” to “preserve
integrity” before manipulative trading intended to destabilise the Qatari economy
took place, which trading was to include the purchase of CDSs and the sale and
purchase of Qatari bonds.
6.
SANCTION
Financial penalty
6.1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of
DEPP. DEPP 6.5A sets out the details of the five-step framework that applies in
respect of financial penalties imposed on firms.
Step 1: disgorgement
6.2.
Pursuant to DEPP 6.5A.1G, at Step 1 the Authority seeks to deprive a firm of the
financial benefit derived directly from the breach where it is practicable to quantify
this.
6.3.
The Authority has not identified any financial benefit that the Firm derived directly
from its breach.
6.4.
Step 1 is therefore £0.
Step 2: the seriousness of the breach
6.5.
Pursuant to DEPP 6.5A.2G, at Step 2 the Authority determines a figure that reflects
the seriousness of the breach. Where the amount of revenue generated by a firm
from a particular product line or business area is indicative of the harm or potential
harm that its breach may cause, that figure will be based on a percentage of the
firm’s revenue from the relevant products or business area.
6.6.
The Authority considers that the revenue generated by the Firm’s London Branch
is not an appropriate indicator of the harm or potential harm caused by its breach.
The Authority has not identified an alternative indicator of harm or potential harm
and so, pursuant to DEPP 6.5A.2G(13), has determined the appropriate Step 2
amount by taking into account those factors which are relevant to an assessment
of the level of seriousness of the breach.
6.7.
In assessing the seriousness level, the Authority has taken into account various
factors which reflect the impact and nature of the breach, and whether it was
committed deliberately or recklessly. DEPP 6.5A.2G(11) lists factors which are
likely to be considered ‘level 4 or 5 factors’. Of these, the Authority considers the
following factors to be relevant:
6.7.1.
the Firm failed to conduct its business with integrity by creating and
disseminating the Presentation to parties that might have an interest in
actioning it, with the expectation of profit;
6.7.2.
the breach actively encouraged the commission of financial crime
pursuant to section 1H of the Act; and
6.7.3.
the breach was committed by the Firm deliberately.
6.8.
DEPP 6.5A.2G(12) lists factors which are likely to be considered ‘level 1, 2 or 3
factors’. Of these, the Authority considers the following factor to be relevant:
6.8.1.
the Firm made no profit as a result of the breach.
6.9.
Taking all of these factors into account, the Authority considers the seriousness of
the breach to be level 5 and has determined that the appropriate Step 2 figure is
£10,000,000.
Step 3: mitigating and aggravating factors
6.10. Pursuant to DEPP 6.5A.3G, at Step 3 the Authority may increase or decrease the
amount of the financial penalty arrived at after Step 2, but not including any
amount to be disgorged as set out in Step 1, to take into account factors which
aggravate or mitigate the breach.
6.11. The Authority considers that there are no factors which aggravate or mitigate the
breach.
6.12. Step 3 is therefore £10,000,000.
Step 4: adjustment for deterrence
6.13. Pursuant to DEPP 6.5A.4G, if the Authority considers the figure arrived at after Step
3 is insufficient to deter the firm who committed the breach, or others, from
committing further or similar breaches, then the Authority may increase the
penalty.
6.14. The Authority considers that the Step 3 figure of £10,000,000 is sufficient in relation
to the breach to meet its objective of credible deterrence. The Authority has
therefore not increased the penalty at Step 4.
6.15. Step 4 is therefore £10,000,000.
Step 5: settlement discount
6.16. Pursuant to DEPP 6.5A.5G, if the Authority and the firm on whom a penalty is to be
imposed agree the amount of the financial penalty and other terms, DEPP 6.7
provides that the amount of the financial penalty which might otherwise have been
payable will be reduced to reflect the stage at which the Authority and the firm
reached agreement.
6.17. The Firm and the Authority did not reach an agreement so no discount applies to
the Step 4 figure. The Step 5 figure is therefore £10,000,000.
6.18. The Authority has therefore decided to impose a total financial penalty of
£10,000,000 on the Firm for breaching Principle 1.
7.
REPRESENTATIONS
7.1.
Annex B contains a brief summary of the key representations made by the Firm,
and by David Rowland as a third party, in response to the Warning Notice and how
they have been dealt with. In making the decision which gave rise to the obligation
to give this Notice, the Authority has taken account of all of the representations
made by the Firm and by David Rowland as a third party, whether or not set out in
Annex B.
8.
PROCEDURAL MATTERS
8.1.
This Notice is given to the Firm under section 208 and in accordance with section
388 of the Act.
Decision maker
8.2.
The decision which gave rise to the obligation to give this Notice was made by the
RDC. The RDC is a committee of the Authority which takes certain decisions on
behalf of the Authority. The members of the RDC are separate to the Authority staff
involved in conducting investigations and recommending action against firms and
individuals. Further information about the RDC can be found on the Authority’s
https://www.fca.org.uk/about/committees/regulatory-decisions-committee-rdc.
The Tribunal
8.3.
The Firm has the right to refer the matter to which this Notice relates to the
Tribunal. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, the Firm has 28 days from the date on which this Notice is
given to it to refer the matter to the Tribunal. A reference to the Tribunal is made
by way of a signed reference notice (Form FTC3) filed with a copy of this Notice.
The Tribunal’s contact details are: Upper Tribunal, Tax and Chancery Chamber,
Fifth Floor, Rolls Building, Fetter Lane, London EC4A 1NL (tel: 020 7612 9730;
email: fs@hmcts.gsi.gov.uk).
8.4.
Further information on the Tribunal, including guidance and the relevant forms to
complete, can be found on the HM Courts and Tribunal Service website:
8.5.
A copy of Form FTC3 must also be sent to the Authority at the same time as filing
a reference with the Tribunal. A copy should be sent to Victoria Chaloyard at the
Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.
8.6.
Once any such referral is determined by the Tribunal and subject to that
determination, or if the matter has not been referred to the Tribunal, the Authority
will issue a final notice about the implementation of that decision.
Access to evidence
8.7.
Section 394 of the Act applies to this Notice.
8.8.
The person to whom this Notice is given has the right to access:
(1)
the material upon which the Authority has relied in deciding to give this Notice; and
(2)
the secondary material which, in the opinion of the Authority, might undermine that
decision.
8.9.
A copy of this Notice is being given to David Rowland as a third party identified in
the reasons above and to whom in the opinion of the Authority the matter to which
those reasons relate is prejudicial. As a third party, David Rowland has similar rights
to those mentioned in paragraphs 8.3 and 8.8 above in relation to the matters
which identify him.
Confidentiality and publicity
8.10. This Notice may contain confidential information and should not be disclosed to a
third party (except for the purpose of obtaining advice on its contents). In
accordance with section 391 of the Act, a person to whom this Notice is given or
copied may not publish the Notice or any details concerning it unless the Authority
has published the Notice or those details.
8.11. However, the Authority must publish such information about the matter to which a
Decision Notice or Final Notice relates as it considers appropriate. The persons to
whom this Notice is given or copied should therefore be aware that the facts and
matters contained in this Notice may be made public.
Authority contacts
8.12. For more information concerning this matter generally, contact Victoria Chaloyard
at the Authority: direct line: 020 7066 3108/email: victoria.chaloyard@fca.org.uk.
Chair, Regulatory Decisions Committee
ANNEX A
1.
RELEVANT STATUTORY PROVISIONS
1.1.
The Authority’s operational objectives, set out in section 1B(3) of the Act, include
the integrity objective of protecting and enhancing the integrity of the UK financial
system, which includes it not being used for a purpose connected with financial
crime.
1.2.
Section 206(1) of the Act provides:
“If the appropriate regulator considers that an authorised person has contravened
a relevant requirement imposed on the person it may impose on him a penalty, in
respect of the contravention, of such amount as it considers appropriate.”
1.3.
Section 1H of the Act provides:
“(3) “Financial crime” includes any offence involving
(a)
fraud or dishonesty,
(b)
misconduct in, or misuse of information relating to, a financial
market.
(4)
“Offence” includes an act or omission which would be an offence if it had
taken place in the United Kingdom.”
1.4.
Section 90 of the Financial Services Act 2012 provides that:
“(1) a person (“P”) who does any act or engages in any course of conduct which
creates a false or misleading impression as to the market in or the price or value
of any relevant investments commits an offence if—
(a)
P intends to create the impression, and
(b)
the case falls within subsection (2) or (3) (or both).
(2)
The case falls within this subsection if P intends, by creating the impression,
to induce another person to acquire, dispose of, subscribe for or underwrite the
investments or to refrain from doing so or to exercise or refrain from exercising
any rights conferred by the investments.
(3)
The case falls within this subsection if—
(a)
P knows that the impression is false or misleading or is reckless as to
whether it is, and
(b)
P intends by creating the impression to produce any of the results in
subsection (4) or is aware that creating the impression is likely to produce
any of the results in that subsection.
(4)
Those results are—
(a)
the making of a gain for P or another, or
(b)
the causing of loss to another person or the exposing of another person
to the risk of loss.”
1.5
Article 53(1) of the Regulated Activities Order provided that advising a person is a
specified kind of activity if the advice is-
(a)
given to the person in his capacity as an investor or potential
investor, or in his capacity as agent for an investor or a potential investor;
and
(b)
advice on the merits of his doing any of the following (whether as
principal or agent)-
(i).
buying, selling, subscribing for or underwriting a particular
investment which is a security, structured deposit or a relevant
investment, or
(ii).
exercising any right conferred by such an investment to buy,
sell, subscribe for or underwrite such an investment.
1.6
Section 22(1) of the Act provides that an activity is a regulated activity for the
purpose of the Act if it is an activity of a specified kind which is carried on by way
of business and (a) relates to an investment of a specified kind.
2.
RELEVANT REGULATORY PROVISIONS
2.1.
In exercising its powers to impose a financial penalty, the Authority has had regard
to the relevant regulatory provisions published in the Authority’s Handbook. The
main provisions that the Authority considers relevant are set out below.
Principles for Businesses (PRIN)
2.2.
The Principles are a general statement of the fundamental obligations of firms
under the regulatory system and are set out in the Authority’s Handbook. They
derive their authority from the Authority’s rule-making powers set out in the Act.
2.3.
Principle 1 provides:
“A firm must conduct its business with integrity.”
Decision Procedure and Penalties Manual (“DEPP”)
2.4.
Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the
Authority’s statement of policy to the imposition and amount of financial penalties
under the Act. In particular, DEPP 6.5A sets out the five steps for penalties imposed
on firms in respect of conduct taking place on or after 6 March 2010.
The Enforcement Guide
2.5.
The Enforcement Guide sets out the Authority’s approach to exercising its main
enforcement powers under the Act.
2.6.
Chapter 7 of the Enforcement Guide sets out the Authority’s approach to exercising
its power to impose a financial a penalty.
ANNEX B: REPRESENTATIONS
1. A summary of the key representations made by the Firm and by the third party,
David Rowland, and the Authority’s conclusions in respect of them (in bold type),
is set out below.
The Firm’s Representations
The Regulated Advice issue
2. The Presentation was not regulated advice, pursuant to section 22 of the Act. By
section 22 of the Act, a “regulated activity” is, in summary: (1) a specified activity,
(2) relating to an investment of a specified kind, and which is (3) carried on by way
of business. Activities and investments are specified in the RAO. As the Presentation
was not a regulated activity, or an ancillary activity to a regulated activity, as a
matter of law, the Firm cannot be held liable for a breach of Principle 1 or, indeed,
any of the Principles for Businesses.
3. During the Relevant Period, under Article 53 (Advising on investments) of the RAO,
advising a person was a specified activity if the advice was (a) given to a person in
his capacity as an investor or potential investor, or in his capacity as agent for an
investor or potential investor; and (b) advice on the merits of the investor or
potential investor buying, selling, subscribing for or underwriting a particular
investment which is a security or a contractually based investment.
4. The requirements of Article 53 are therefore that: i. advice must be given; ii. the
advice must go to a person in their capacity as an investor or potential investor (or
an agent of the same); iii. the advice must be on the merits; and iv. the advice
must relate to a particular investment.
5. The Presentation was not given to anyone; and it was not intended to be given to
an investor or potential investor (or agent thereof).
6. Neither the Abu Dhabi sovereign wealth fund nor its senior representative were
investors, or potential investors, for these purposes and there was nothing to
suggest that the senior representative was acting as an agent for an investor or
potential investor. Mr Rowland stated that the UAE banking sector had exposure to
Qatari bonds, not the Abu Dhabi sovereign wealth fund or its senior representative.
The banks that the senior representative had in mind which might be interested in
receiving the Presentation were unnamed and unknown to Mr Rowland.
7. The Perimeter Guidance Manual (“PERG”) 8.29 provided guidance as to what
constituted investment advice. PERG 8.29.1 provided that advice “must relate to
the buying or selling of an investment – in other words, the pros or cons of doing
so”. The distinction between giving information and advising is between providing
“information for the purpose of enabling someone else to decide upon a course of
action and [advising] someone as to what course of action he should take”1. Advice
“requires an element of opinion on the part of the adviser. In effect, it is a
recommendation as to a course of action”2. Conveying mere information is not
regulated advice. The Presentation did not contain any recommendations or
encouragement to buy or sell investments, was not presented as being suitable for
any particular person and was not based on a consideration of the circumstances
of anyone in particular. Accordingly, it cannot be regulated advice within the
specific meaning of Article 53 of the RAO and PERG.
8. Regulated advice must relate to a “particular”, or a specific, investment. The
Authority’s guidance at PERG 2.7.15G provides that: “Giving a person generic
advice about specified investments (for example, invest in Japan rather than
Europe) is not a regulated activity….”. The Presentation did not contain advice in
relation to a “particular investment”.
9. As to the application of the Principles for Businesses, in the event that the
Presentation is not considered to be regulated advice, the preparation of the
Presentation, or the formulation of the Strategy contained therein, cannot have
been carried on “in connection with a regulated activity” [PRIN 3.2.1AR(3)3] (e.g.
arranging deals in investments or advising on investments). There was no
arranging. The Presentation contained a vague and general commercial proposition
that was never executed. Accordingly, the Firm’s activities could not be said to be
ancillary activities in relation to designated investment business.
Was the Presentation given?
1 Lord Hoffman in South Australia Asset Corp v York Montague [1996] 3 All E.R. 365 at 372j
2 PERG 5.8.8 G
3 PRIN 3.2.1AR: PRIN applies with respect to the carrying on of:
(1) regulated activities; (2) activities that constitute dealing in investments as principal, disregarding the
exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc); and (3) ancillary activities
in relation to designated investment business, home finance activity, credit-related regulated activity,
insurance mediation activity and accepting deposits.
10. As requested by Mr Rowland, Mr Bolelyy printed off two copies of the
Presentation to take on the trip to Abu Dhabi, so that it could be discussed
with a representative of an Abu Dhabi sovereign wealth fund. Mr Bolelyy
signed a statement, dated 15 November 2017, saying that during the visit
he had handed one single copy of the Presentation to a (named) senior
employee of an Abu Dhabi sovereign wealth fund. On 13 November 2017
Mr Rowland confirmed that Mr Bolelyy had said to him on 21 September
2017, that he had provided the Presentation to the senior employee. On
25 November 2017, Mr Rowland signed a statement saying that he was
made aware that Mr Bolelyy may have given the Presentation to a junior
employee at the same Abu Dhabi sovereign wealth fund.
11. Mr Bolelyy subsequently withdrew his statement that he had passed the
copy of the Presentation to the (named) senior employee. He then added
he may have given the Presentation to a junior employee. Mr Rowland
subsequently withdrew his statement.
12. Mr Rowland purported to explain why he did so. He said that he had had
no knowledge of Mr Bolelyy sharing the Presentation and he had assumed
that the investigation had already determined that he had. However, when
he later learnt that the senior employee of the Abu Dhabi sovereign wealth
fund had been in Brazil at the time of the trip to Abu Dhabi, he considered
he had been mistaken.
13. The Authority refers to the telephone call between Mr Rowland and David
Rowland on 12 October 2017. In this call, David Rowland asked Mr
Rowland how he thought the “thing in the Indian paper got there”. Mr
Rowland replied “probably, I assume – probably a leak from their office I
would imagine”. Mr Rowland then says he is aware that the content of the
Presentation had been discussed with “their” office. The Authority infers
that “their office” refers to the office of the Abu Dhabi sovereign wealth
fund, which had been provided with a copy of the Presentation during the
visit. Mr Rowland appeared to see publication of the Firm’s involvement as
“a badge of honour” with respect to the Abu Dhabi sovereign wealth fund.
14. Mr Rowland has stated that the Presentation (albeit in a different form)
was requested by the senior representative of the Abu Dhabi sovereign
wealth fund. Two copies of the Presentation were taken on the visit to Abu
Dhabi, so that it could be discussed with them. The Authority considers
that it is likely that Mr Bolelyy did in fact provide a copy of the Presentation
to a representative of the Abu Dhabi sovereign wealth fund (albeit not the
senior representative who was in Brazil at the time) and that Mr Rowland
knew that he had done so.
Was the Presentation given to the person in his capacity as an investor or
potential investor?
15. PERG 8.27.1G provides that advice must be given to or directed at
someone who either holds investments or is a prospective investor (or
their agent). PERG 8.27.5G provides that advice will still be covered by
Article 53(1) even though it may not be given to or directed at a particular
investor (for example, advice given in a periodical publication or on a
website). The expression ‘investor’ has a broad meaning and will include
institutional
or
professional
investors.
There
was,
therefore,
no
requirement that the person to whom the advice was given be an existing
client, or investor, or that there be an intention that the relationship would
continue after the advice was given. In addition, advice can still be
regulated if it was not specifically tailored for the person to whom it was
given.
16. The Authority considers the Presentation was given to an Abu Dhabi
sovereign wealth fund. The sovereign wealth fund is owned by the
government of Abu Dhabi (one of the seven Emirates of the UAE). The UAE
held Qatari bonds. The Strategy was aimed at the UAE, amongst others,
and it advised those investors to transfer their existing holdings of Qatari
bonds into a “protected cell company” to “preserve integrity”, before
manipulative trading intended to destabilise the Qatari economy took
place, which trading was to include the purchase of CDS and the sale and
purchase of Qatari bonds. The Abu Dhabi sovereign wealth fund was
therefore an investor, a potential investor and/or an agent of the UAE,
which was itself an investor or potential investor for the purpose of Article
53 of the RAO.
Did the Presentation include advice on the merits?
17. Article 53(b) requires the advice to be “on the merits” rather than mere
information. There are various elements to the difference between advice
and information. Advice must relate to the buying, holding or selling of an
investment, in other words, the pros or cons of doing so (PERG 8.29).
PERG 8.28 sets out what advice means, namely, requiring an element of
opinion on the part of the adviser, in effect, being a recommendation as to
a course of action. Regulated advice includes any communication with the
customer which, in the particular context in which it is given, goes beyond
the mere provision of information and is objectively likely to influence the
customer’s decision whether or not to buy or sell. Any significant element
of evaluation, value judgment or persuasion is likely to mean that advice
is being given.
18. The fact that advice was not implemented (or even could not be
implemented) should not stop it from being advice. Incompetence does
not turn advice into mere information.
19. The Authority has considered the contents of the Presentation, namely,
Establish the Execution Strategy (Stage 1); Gear Up to Control the Yield
Curve (Stage 2); and Public Relations Machine and Position Increase
(Stage 3).
20. Stage 1 advised the recipient of the Presentation on the steps needed to
preserve the integrity of their existing Qatari bond holdings and arranging
an in-situ transfer into a protected cell company. This involved, inter alia,
the creation of a sizeable, strong and standalone entity which could be
viewed as a smaller counterpart to central bank reserve holdings, with the
Qatari bond holdings serving as collateral. Stage 1 also advised the
recipient of the Presentation to assess global market conditions for the
Qatari Riyal and CDS to establish the execution strategy. This involved,
inter alia, determining available liquidity, supply and pricing. It also
involved identifying appropriate instruments such as currency forwards,
currency options and bond CDS.
21. Stage 2 advised the recipient of the Presentation as to the reasons behind
the recommendation to purchase medium and long-term Qatari paper and
CDS. It was indicated in the Presentation that this would, inter alia, allow
the participant to control the yield curve (and thus bond prices) and should
favourably affect CDS pricing at a later stage.
22. Stage 3 advised the recipient of the Presentation to utilise a public
relations message and to increase positions, by simultaneously hitting all
second-tier bank CDS lines and by increasing existing positions with larger
banks and buying additional CDS, leading to falling bond prices, rising
rates and the escalation of CDS premia.
23. In light of the above, the Authority considers that the Presentation
contains a significant element of evaluation, value judgement and
persuasion.
It
goes
beyond
the
mere
provision
of
information.
Accordingly, it should be considered to be “advice on the merits”.
Did the advice relate to a “particular”, or a specific, investment?
24. PERG
8.26
provides
examples
of
generic
advice
and
particular
investments. The current PERG 8.28.5G states that “A key question is
whether an impartial observer, having due regard to the regulatory regime
and guidance, context, timing and what passed between the parties, would
conclude that what the adviser says could reasonably have been
understood by the customer as being advice”4.
25. The advice in the Presentation relates to: (i) transferring the UAE’s holding
of Qatari bonds into a protected cell company and using the bonds as
collateral (“the Protected Cell Company”); (ii) buying medium and long-
term Qatari paper (i.e. bonds); wash-trading with an affiliated party;
buying CDS on Qatar “to move the price” of the bonds; and buying
additional CDS to drive down bond prices/increase CDS premia, all with
the ultimate aim of causing Qatar to deploy substantial resources to
support the value of its currency (“the Underlying Investment”).
26. The Protected Cell Company was clearly intended to be a preliminary
arrangement intended to support the Strategy, which involved the transfer
of existing bond holdings. Accordingly, it identifies the securities to be
transferred (i.e. all the investor’s existing holdings of Qatari paper). As
such, the Authority considers it to have been advice in relation to a specific
investment.
4 PERG 8.28.5G came into force on 23.02.2018 after the end of the Relevant Period, but notwithstanding this,
context must still have been relevant.
27. The advice regarding the Underlying Investment should be seen in context
and in light of what passed between/was known by the parties, namely
that: (i) the Firm and the recipient of the advice were aware that the UAE
was holding significant amounts of Qatari paper (i.e. bonds); (ii) the
purpose of the Strategy was to manipulate the market price of the Qatari
Riyal for the benefit of the UAE and the detriment of Qatar; and (iii) the
recipient of the advice was aware of the quantity of the Qatari paper held.
28. The proposal to enter into CDS was to be underpinned by the Qatari paper
and the context makes it clear that the transactions were to be based on
the bond holdings. Accordingly, the investment referred to in the
Presentation would have been clear to both parties, and the advice about
the Underlying Investment should therefore be considered to be advice in
relation to a specific investment.
29. The Authority considers that both parts of the advice as set out in the
Presentation, namely the advice regarding the Protected Cell Company and
the Underlying Investment, are sufficiently specific or “particular” for the
purpose of Article 53(b)(i) of the RAO.
Application of the Principles for Businesses to ancillary activities
30. The Firm has raised the issue as to whether, if the Authority concluded
that all or significant parts of the Presentation were unregulated, the
Principles for Businesses would nonetheless apply to the unregulated
part(s).
31. Since the Authority has found that the entirety of the Presentation was
regulated advice, it is not necessary for it to determine this issue.
However, in light of the Firm’s submissions the Authority makes the
following observations.
32. If unregulated activities are “ancillary activities in relation to designated
investment business”, this would constitute an alternative basis upon
which the Principles for Businesses could apply to a Firm (PRIN
3.2.1AR(3)). “Ancillary activity” is defined in the Handbook Glossary as:
“an activity which is not a regulated activity but which is: (a) carried on in
connection with a regulated activity; or (b) held out as being for the
purposes of a regulated activity”. This scenario may have occurred if, for
example, the Authority had found that the advice regarding the Protected
Cell Company was regulated advice and the advice regarding the
Underlying Investment was not (or vice-versa).
33. Had this been the case, the Authority considers that there would have been
a sufficient connection between the regulated business and the assumed
ancillary (unregulated) activity, and that the “ancillary” activity had a
subsidiary, supporting function in relation to the regulated activity. The
Authority notes that it would be difficult, if not impossible, to untangle the
two connected parts of the overall Strategy and the regulated activity
cannot, on the facts, be said to have been insignificant. Accordingly, the
Authority considers that the unregulated activity would have met the
criteria set out in PRIN 3.2.1AR(3), as it was carried on in connection with
a regulated activity.
The Presentation as “Bank Business”
34. The Presentation was not created or sent by any person doing an act for and on
behalf of the Firm. It was not created or shared by way of “Bank Business”. Unless
the Presentation was demonstrated to be, on the facts, Bank Business the Firm
cannot commit a breach of Principle 1 and incur a financial penalty. The Firm
provided a number of reasons, to be considered in the round, as to why the
Presentation should not be considered to be Bank Business (or facts which
undermined the Authority’s case that it was Bank Business). These are as follows.
The reasons for the creation of the Presentation
35. The Presentation arose out of a request from Mr Rowland to Mr Bolelyy. Mr
Rowland, whilst still a member of the Board in Luxembourg and drawing a modest
salary, was not working for the Firm at the time he tasked Mr Bolelyy to produce
this document and had stood down as Chief Executive of the London Branch on 24
May 2017. Drawing a modest salary from the Firm throughout the Relevant Period
is not a reliable indicator as to whether his work was restricted to Bank Business
at the time.
36. Mr Rowland was heavily engaged in another project with an Abu Dhabi sovereign
wealth fund at the time, seeking to establish the Financial Institution with it which
was not a project of the Firm. The Abu Dhabi sovereign wealth fund was not a
client, or prospective client, of the Firm but a business partner of Mr Rowland in his
separate business project to establish the Financial Institution.
37. The genesis of the document was a meeting on 30 August 2017 (referred to at
paragraph 4.6) (“the August Meeting”) and the purpose of that meeting was to
discuss the Financial Institution. The meeting was not attended by anyone who was
actively working for the Firm at the time. It was attended by Mr Rowland and David
Rowland and potential business partners of the Financial Institution. David Rowland
had not been involved in the management of the Firm, nor had he attended
meetings of the Board. David Rowland confirmed this in his representations as a
third party. Mr Rowland, meanwhile, had been spending his time on the project to
set up the Financial Institution.
38. David Rowland and Individual A were sent the Presentation, not because of their
connections to the Firm but because of their connections to the Rowland Family’s
other business interests, namely the setting up of the Financial Institution in which
they were both involved. Individual A helped to facilitate other business projects
outside of the Firm. When Individual A received the Presentation from Mr Rowland
it cannot be assumed that he received it in his capacity of a consultant to the Firm;
there is no direct evidence of the capacity in which he was acting when he received
the document. The Presentation was sent to Individual A’s personal email address,
rather than his dedicated Firm email address.
39. Neither the Abu Dhabi sovereign wealth fund nor its senior representative were
clients or prospective clients of the Firm. They were prospective business partners
of Mr Rowland with respect to the Financial Institution. There is no evidence that
the Firm was involved in marketing in the Middle East, or to Middle Eastern clients,
at the time. There was a representative office in the UAE for expatriates. The Firm
had no Emirati clients but it did have a small number of Middle Eastern clients.
Further, the idea that there was a collateral benefit to the Firm and that made the
Presentation a Firm project is simply not credible.
40. Mr Rowland was an SMF 21 (EEA Branch Manager) of the Firm during the
Relevant Period and thereafter, up to 15 December 2017. Mr Rowland
remained a Board Member of the Firm and continued to be influential in
the London Branch. Mr Rowland was described, by another senior member
of staff as still being the “Boss” even after he formally stood down as the
Chief Executive. Although he may not have been spending all his time
working on the Firm’s matters during the Relevant Period (for example
when he was working on the Financial Institution project), this did not
preclude him from spending some of his time working on matters relating
to the Firm.
41. In the same way, meetings with representatives of an Abu Dhabi sovereign
wealth fund, to discuss, inter alia, the Financial Institution project, do not
preclude discussions occurring on other matters, including matters which
were Bank Business. The Financial Institution was not yet set up and
operating during the Relevant Period: at that point it was still just a
project, rather than being an existing entity capable of providing the
regulated services which the Firm was in the business of providing.
42. Prior to the August Meeting Mr Rowland had mentioned the meeting to a
colleague and stated: “I am now seeing [the senior representative] in
London on Wednesday so will finalise all [the Financial Institution] issues
with him then, they have another potential opportunity they want me to
look at also”. The Authority notes that the Presentation was entitled “the
Qatar Opportunity” and infers that the other “potential opportunity”
referred to by the senior representative concerned Qatar. Discussions at
the August Meeting regarding the Financial Institution did not preclude
discussions on other matters which could be taken forward as Bank
Business. Such matters include the Presentation.
43. Working on the proposed establishment of the Financial Institution did not
preclude Mr Rowland, or indeed anyone else, from separately working on
Bank Business.
44. David Rowland was the Honorary President of the Firm; Individual A was
paid $10,000 per month by the Firm to “develop [the Firm] in the UAE”
and would have had an interest in any marketing by the Firm in the region.
Mr Rowland was aware of Individual A’s role within the Firm and had been
asked by Individual A for a copy of the Presentation, before it was sent to
him on 18 September 2017. The Authority considers that Individual A
must have been aware that it was being prepared, in advance of the
Presentation being sent to him. The Authority notes that Individual A had
met Mr Rowland in the London Office on 13 September 2017 and close to
the time of Mr Rowland’s meeting with Mr Weller, Mr Bolelyy, another
employee of the Firm and an individual not employed by the Firm, referred
to at paragraphs 4.9 and 4.10. The Authority infers the Presentation was
sent to Individual A in his capacity as a consultant to the Firm.
The implausibility of the Strategy
45. The content of the Presentation suggests it was not a document prepared for and
on behalf of the Firm. The Firm provides private banking and services to
institutional clients; it was/is unable to trade the products described in the
Presentation and it did not have the means to trade in the volumes that could have
moved the markets or interest curve in relation to the Qatari Riyal. The Firm did
not trade, and has never traded, the Qatari Riyal and the currency had never been
opened on the Firm’s trading system. For the Qatari Riyal to be traded, new
corresponding banking relationships would have had to have been established or
new Qatari accounts would have had to have been opened with the Firm’s existing
cash correspondent banks. No such steps were ever taken. The size and scale of
the operation made the conduct outlined in the Presentation way beyond the
resources of the Firm.
46. The Presentation was not reviewed by the Firm’s centralised risk and compliance
systems and was never subject to the Firm’s product approval process. If the
Presentation had been a project of the Firm it would have been analysed by the
Firm’s centralised risk and compliance functions in Luxembourg and it would have
been subject to new product approval by the management committees (risk
committee and authorised management committee) before being submitted to the
Board of Directors for final approval. This did not happen.
47. The notion that the Presentation was a marketing document is undermined by the
contents of the Presentation itself, which is wholly unrealistic and amateur. It is the
antithesis of marketing to demonstrate “amateur incompetence” and it is further
the antithesis of good marketing for the Firm to advance an illegal trading strategy.
There was no branding of Banque Havilland anywhere within the Presentation. The
Presentation was simply sent as a draft to two people, David Rowland and
Individual A. It was not disseminated. The fact that it was a draft document in itself
undermines any suggestion that it was intended as a marketing document or for
wider distribution.
48. The Presentation refers to an execution strategy and implies that further
advice would be required. Even if the execution of the entire Strategy was
beyond the resources and competence of the Firm, it could still have been
involved, for example in sourcing the further advice required. The
Authority also notes that Mr Rowland had indicated, in the meeting on 13
September 2017, referred to at paragraphs 4.9 and 4.10, that the
economic interest for the Rowland Family would come from potentially
being able to charge a small fee on the assets put into the holding vehicle
which appears to be the Protected Cell Company referred to in the
Presentation.
49. The Presentation was so obviously improper that it would have made no
sense for Mr Rowland to have sent it to the Firm’s compliance function or
to the Board of Directors for approval.
50. Furthermore, it is not surprising in the circumstances that there was no
explicit Firm branding on the Presentation; it was not a conventional
marketing document but one which was designed to be a clear indicator
that the Firm (and therefore the Rowland Family) were supportive of the
UAE in its economic conflict with Qatar. During telephone calls between Mr
Rowland and David Rowland, Mr Rowland referred to the Presentation as
a “badge of honour when we go and see them” [i.e. the Abu Dhabi
sovereign wealth fund] (paragraph 4.36); and David Rowland said that
“we can capitalise on this” (paragraph 4.45).
Resources involved (human and non-human)
51. Mr Bolelyy was tasked by Mr Rowland with producing a presentation. Although
exclusively on the Firm’s payroll, Mr Bolelyy was in essence Mr Rowland’s personal
assistant rather than the “analyst” which his official job title at the Firm suggested.
Mr Rowland would use him as such, not differentiating between tasks which were
Bank Business and those which were not. Mr Bolelyy was not certified by the Firm
for the purpose of the Authority’s Senior Managers and Certification Regime
(SMCR).
52. Non-Bank Business and other business of the Rowland Family was conducted from
the Firm’s premises. The set-up in the London Branch was sufficiently fluid to
enable Mr Rowland to conduct non-Bank Business from the Firm’s London premises.
Mr Rowland’s resignation from the Chief Executive role simply meant that his use
of the Firm’s resources for personal projects became even more transparent. The
London office was used by Mr Rowland as a private office and the Firm’s physical
and human assets could be, and were, used by him to further and advance his
wider business interests outside of those of the Firm.
53. The use of the Firm’s email systems and the use of the Firm’s systems for
preparation of the Presentation does not support the Authority’s view that it was
indicative of the document being prepared on behalf of the Firm. People working
on the Financial Institution project used their Firm email addresses; the
Presentation was created by Mr Bolelyy using a template from the documents used
with respect to the Financial Institution project; and the Presentation was not
stored on the Firm’s main IT system but in a personal folder to which only Mr
Bolelyy had access, contrary to the policy of the Firm. A Firm document should not
be stored in a personal folder. It should be stored in a part of the Firm’s server that
was accessible to others.
54. The trip that Mr Rowland and Mr Bolelyy embarked upon to Abu Dhabi had nothing
to do with the Firm. The trip was organised and arranged through the Personal
Assistant to the family office, and not through the Firm. The itinerary for the trip
shows that there was no Bank Business involved in the trip at all. No-one who went
on the trip to Abu Dhabi went in their capacity as representatives of the Firm. The
Firm was not aware of, nor did it authorise, the trip for the purposes of the Firm’s
business. The expenses associated with the trip were not claimed from the Firm
nor paid by the Firm. None of the persons Mr Rowland intended to meet on the trip
were clients, or prospective clients, of the Firm.
55. Mr Bolelyy was not a “personal assistant” for the purpose of COCON
1.1.2R(6)(r)5. Working for Mr Rowland on personal, or non-Firm matters,
did not preclude him from working for the Firm on Bank Business. Mr
Bolelyy’s salary was exclusively paid by the Firm; he did not receive an
income from Mr Rowland, or the Rowland Family, directly.
56. There was no clear separation between Rowland Family interests and the
Firm's interests so far as work carried out at the London Branch was
concerned. The Authority does not consider it appropriate for the Firm to
rely on this failure, to argue now that the assistance and expertise which
Mr Rowland needed from the Firm’s employees for the creation of the
Presentation meant that the Presentation was not Bank Business. The
5 COCON 1.1 Application: COCON 1.1.2R(6): Persons to whom COCON applies
Authority notes that this assistance and expertise were not available to Mr
Rowland outside the Firm.
57. The Presentation was created in the Firm’s London Office premises, using
the Firm’s IT systems, and was disseminated from Mr Rowland’s Firm
email account. Mr Bolelyy’s email to self, dated 12 September 2017
(referred to in paragraph 4.7), was sent by him to and from his email
address at the Firm. In the Authority’s view, the clearly inappropriate
nature of the Presentation makes it likely that Mr Bolelyy would not have
filed it in the usual place within the Firm’s IT systems, where it would have
been accessible to other employees of the Firm not involved in assisting
with the preparation of the Presentation.
58. The administrative arrangements for the trip to Abu Dhabi in September
2017 do not indicate as to whether the purpose of the trip was solely for
Mr Rowland (and others) to discuss the setting up of the Financial
Institution. The Rowland Family had multiple and parallel business
operations, including the Firm. Discussions on setting up the Financial
Institution did not preclude discussions on other matters which were Bank
Business.
Dissemination of the Presentation
59. The Presentation was not received by the UAE Ambassador. The Ambassador’s
lawyers stated in written legal correspondence (produced around 16 June 2021)
that the Ambassador did not receive the Presentation, nor did he communicate with
any representative of the Firm concerning the Presentation or its underlying subject
matter. David Rowland also confirmed this in his representations on the Warning
Notice as a third party.
60. The Presentation was simply sent in draft to two people, David Rowland and
Individual A. There is no credible evidence that it was given to anyone else, only
David Rowland and Individual A. The Presentation was not disseminated within the
ordinary dictionary meaning of the word. The fact that it was a draft document,
and marked “draft”, in itself undermines any suggestion that it was intended as a
marketing document. Documents marked "draft" are not for wider distribution.
61. The Authority notes that the Presentation was reported to have been found
in the UAE Ambassador’s Outlook Tasks under the name of “Rowland
Banque Havilland”, appearing to indicate the origin of, or at least the
Firm’s connection with, the Presentation. The Authority makes no findings
as to why it was reported that the Presentation was found in the UAE
Ambassador’s Outlook Tasks.
62. In the circumstances set out above, the Authority considers that it is
appropriate to state that the Presentation was “disseminated” (within the
ordinary dictionary meaning of the word). In addition to Mr Rowland
sending the Presentation externally by email (i.e. outside the Firm’s email
systems), it was given by Mr Bolelyy to a representative of an Abu Dhabi
sovereign wealth fund (and was subsequently reported to have been found
on the UAE Ambassador’s computer system).
Views of relevant persons
63. Other employees, including those on whom the Authority relies with respect to
other aspects of their evidence and are treated as reliable witnesses, considered
that the Presentation was not a project of the Firm.
64. An individual not employed by the Firm was at the meeting on 13 September 2017
and subsequently involved in the Presentation’s production (referred to in
paragraph 4.9). The Authority has asserted that the presence of Firm staff
suggested it was a Firm project but does not engage in the issue as to whether the
involvement of non-Firm staff suggests it was not.
65. Events after the UAE trip confirm that the Presentation was not Bank Business.
When the articles and rumours started to appear online, the evidence is clear that
Mr Rowland, David Rowland and other Rowland Family members all viewed it as a
Rowland Family issue rather than a Firm one, albeit one which had reputational
consequences for the Firm due to the family association. It was not escalated by
Mr Rowland to the Firm until the publication of the Intercept Article.
66. The Firm’s actions following publication of the Intercept Article support its position
that the Presentation was not Bank Business in that they demonstrate that such a
document would never have been produced on behalf of the Firm: the Luxembourg
Regulator, CSSF, was notified the day after the article was published and the
Authority was notified on 14 November 2017. The Firm engaged lawyers in the UK
and Luxembourg, and disciplinary action was taken against Mr Rowland, Mr Weller
and Mr Bolelyy. The report was subsequently volunteered by the Firm to the CSSF
and to the Authority (through the CSSF).
67. Employees’ views (particularly those with very limited involvement in the
matter) as to whether the Presentation was Bank Business or Rowland
Family business, are of limited relevance. The assessment as to whether
the Presentation was Bank Business or not is an objective one, taking into
account all the circumstances and evidence. One person who was not
employed by the Firm was involved in the Presentation’s production;
however, his input appears to have been limited to advising on football
matters (i.e. not on financial services) and the preparation of the slide
regarding the “FIFA Option” referenced at paragraph 4.24. All other
personnel involved in the Presentation’s production, and in relation to the
financial services content (as opposed to the football content) were
employed by, and received a salary exclusively from, the Firm during the
Relevant Period. Receiving assistance from a person not employed by the
Firm, for a limited part of the Presentation, does not in the Authority’s view
change the nature of the document as a whole.
68. The Authority has taken into account actions by the Firm subsequent to
the publication of the Intercept Article, including that the Firm’s senior
management in Luxembourg acted promptly by making regulatory
notifications and instructing lawyers to prepare an internal report, which
was provided to the Authority via the CSSF; however, it does not consider
that these actions support the Firm’s contention that the Presentation was
not Bank Business.
Attribution as a matter of law
69. It is only Mr Rowland’s actions which could, as a matter of law, be attributed to the
Firm, Mr Weller and Mr Bolelyy not being sufficiently senior.
70. The Authority considers that Mr Rowland was directly responsible, and
personally culpable, for the misconduct referred to in this Notice. As such,
his misconduct can properly be attributed to the Firm as a matter of law,
and is not an issue in dispute. It is therefore not necessary for the
Authority to consider whether the actions of Mr Weller and/or Mr Bolelyy
are, in themselves, attributable to the Firm.
71. Even if the Authority concluded, as a matter of evidence, that Mr Rowland had
lacked integrity it is not obliged to attribute that lack of integrity onto the Firm if it
considers that such a finding would be disproportionate and inconsistent with the
regulatory objectives of the Authority.
72. There has not been an allegation that the Firm has lacked integrity at an
organisational level. A lack of integrity is the most serious allegation which may be
made against a financial institution. It is unprecedented. The Firm has tried to do
the right thing following discovery of the issues, including making prompt
notifications to the regulators, ordering a detailed forensic investigation and
removing the individuals involved from the Firm. The Firm has admitted that its
corporate governance within the London Branch failed, and its systems and controls
have been significantly improved. The actions of the Firm are not the actions of an
organisation that lacks integrity. It is not necessary to taint the Firm with a finding
based on the actions of a single individual.
73. It is likely that a Principle 1 (integrity) finding would cause disproportionate harm
to the Firm. Banking is a business based largely on trust; an integrity finding poses
a real threat to the continued viability of the Firm.
74. The Authority has not asserted that the Firm has lacked integrity at an
organisational level nor that it currently lacks integrity.
75. The misconduct committed by Mr Rowland, Mr Weller and Mr Bolelyy, in
respect of which the Authority concludes all three to have lacked integrity,
was particularly serious. Mr Rowland’s misconduct is attributable to the
Firm. The Authority has noted, inter alia, the governance changes and the
Firm’s actions on discovery of the breach and has taken these into account
when assessing the proportionality of a conclusion of lack of integrity. The
Authority has noted its criminal prosecution of National Westminster Bank
plc6
and taken into account the Firm’s view that this matter is
unprecedented. Notwithstanding these matters, the Authority considers
that it is reasonable and proportionate to conclude that the Firm lacked
6 National Westminster Bank plc was fined £264,772,619.95 on 13 December 2021
integrity with respect to one aspect of its business during the Relevant
Period.
Enforcement’s unfair approach to the case
76. The Firm has a number of concerns with the conduct and the approach to the
investigation of the Authority’s Enforcement case team (”Enforcement”).
Accordingly, this has been unfair to the Firm.
77. Enforcement has not conducted its own thorough investigation of the underlying
facts and matters. It has simply relied on the report commissioned by the Firm
(“the Project Gulf Report”), carried out a limited number of interviews, and reached
a different conclusion as to whether the Presentation was created for and on behalf
of the Firm. Enforcement decided not to interview obviously relevant witnesses who
should have been interviewed (for example, the individual not employed by the
Firm referred to in paragraphs 4.9 and 4.10). Reasonable lines of enquiry were not
followed. Rather than obtaining all relevant evidence, seeing where the evidence
leads and reaching an appropriate conclusion, Enforcement has chosen not to do
this, and continued with their initial false case theory and factual narrative.
78. The decision to give the Firm this Notice was made on behalf of the
Authority by the RDC. As is explained in paragraph 8.2 of the Decision
Notice, the RDC is a committee of the Authority which takes certain
decisions on behalf of the Authority, and its members are separate to the
Authority staff involved in conducting investigations and recommending
action against firms and individuals. The RDC has decided to give this
Notice on the basis of the evidence before it regarding the conduct of the
Firm.
79. The RDC noted the reasons provided by Enforcement for not interviewing
other individuals and considers that this was reasonable in all the
circumstances. Accordingly, it does not consider that Enforcement’s
approach to the case has resulted in the Firm being treated unfairly.
80. The submissions made by the Firm, as to the nature and conduct of the
investigation, have been duly considered by the RDC but it considers that
they do not undermine the evidence on which the decision is based.
Systems and Controls in the London Office
81. The Firm accepts that weaknesses in the Firm’s systems and controls within the
London office enabled non-Bank Business to be undertaken from its London
premises and enabled Mr Rowland, utilising the Firm’s human and physical
resources, to pursue his own business interests separate to those of the Firm from
those premises. In failing to prevent non-Bank Business being conducted from the
London Office, the Firm accepts that it failed to conduct its business from the
London Office with due skill, care and diligence in breach of Principle 2 (a firm must
conduct its business with due skill, care and diligence).
82. The Authority has noted that the Firm has accepted it has breached
Principle 2. The Authority considers that the Firm’s failures go further than
a breach of Principle 2 and are more appropriately classified as a breach
of Principle 1 (integrity).
Step 2: seriousness and relevant revenue
83. The relevant revenue in this case is the revenue of the London Branch (which the
Firm asserts is consistent with DEPP 6.5A.2) and not the revenue of the Firm
outside of the operation of the London Branch. The relevant revenue of the London
Branch from 1 April 2017 to 31 March 2018 was £4,374,473. This should be the
figure utilised at Step 2.
84. Relevant revenue has not been utilised, as it was considered by Enforcement that
relevant revenue is not an appropriate indicator of the harm, or the potential harm,
caused by the breach. This approach wrongly separates the need for the penalty to
be commensurate with the Firm’s resources.
85. Because the relevant revenue figure calculated in the usual way produces a Step 2
figure which Enforcement considers does not appropriately reflect the Firm’s
misconduct, it concluded that some other approach had to be found. This is not
appropriate and the usual relevant revenue metric (that is the relevant revenue of
the London Branch) should be utilised. Enforcement’s approach is unfair to the Firm
and there is no good reason to justify removing the link with the Firm’s resources.
86. The Firm refers to the Credit Suisse Final Notice dated 19 October 20217 (“the
Credit Suisse Case”) which involved, inter alia, breaches of Principle 3
(management and control) in relation to financial crime and AML weaknesses,
which were exposed by three transactions related to two infrastructure projects in
the Republic of Mozambique. A financial penalty based on relevant revenue was
utilised in similar circumstances. This is as applicable to the Firm in this case as it
was in the Credit Suisse Case.
87. At its highest, the Presentation was no more than the thoughts of those persons
who were involved in its production committed to paper and sent to two persons,
David Rowland and Individual A, both of whom did not see the email and took no
action. The Firm considers that the alleged Principle 1 breach arises from a technical
legalistic attribution of the actions of certain individuals to the Firm, rather than
from a corporate systemic malaise. Accordingly, the seriousness of the misconduct,
notwithstanding a finding of a lack of integrity, should not be level 5.
88. The Firm considers that its case should be categorised instead as a level 4 case in
terms of seriousness, in light of the level 4 finding in the Credit Suisse Case which,
notwithstanding being a Principle 3 case, involved actual loss to the people of
Mozambique and the commission of a crime. The Firm is being treated in a
disproportionate and excessive way.
89. DEPP 6.5A.2G allows for the Authority to use an alternative metric where
revenue is not appropriate, and the Authority has done so in many
previous cases.
90. In the Credit Suisse Case there was a link between the amount of business
done through the Credit Suisse Emerging Markets Group (over which there
were poor controls) and the harm caused (namely the amount of money
available for bribery and corruption). Utilising a relevant revenue metric
was appropriate in the Credit Suisse Case.
91. In this case, the harm that might have been caused by the misconduct bore
no relation to the Firm’s activities and/or the revenue earned by the
London Branch of the Firm (or indeed the total revenue earned by the
Firm).
7 https://www.fca.org.uk/publication/final-notices/credit-suisse-2021.pdf
92. Accordingly, the Authority considers that it is more appropriate to use an
alternative metric rather than relevant revenue, when considering the
appropriateness of the Step 2 figure.
93. The Authority notes the comparator case of the Bank of Beirut, Final Notice
dated 4 March 20158 (“the Bank of Beirut Case”), where the underlying
concerns related to AML controls and the potential for the Bank of Beirut
to be exploited for financial crime. The Authority considers that the
financial penalty on the Firm should be substantially greater than the
financial penalty of £3 million imposed on the Bank of Beirut in 2015,
taking into account, inter alia, (i) that the Bank of Beirut was also subject
to the financial impact of a new customer restriction, (ii) the Firm’s
significantly more serious misconduct, and (iii) the Firm’s Principle 1
breach rather than the Bank of Beirut’s Principle 11 (Relations with
regulators) breach.
94. The Authority does not consider that in all the circumstances a level 5
finding of seriousness is disproportionate or unfair. It appropriately
reflects the very serious nature of the misconduct in this case.
95. Accordingly, the Authority considers that a £10,000,000 figure at Step 2 is
reasonable and proportionate to the misconduct.
Step 3: Aggravating and mitigating circumstances.
96. The Firm has shown co-operation which goes beyond what was required. This is
due to the early disclosure, and the quality, of the Project Gulf Report which the
Firm considered at the time to be (but which has subsequently been held not to
be) covered by legal professional privilege. The quality of the Project Gulf Report
was such that the Authority did not consider it necessary for it to conduct any
meaningful investigation beyond interviewing five persons, and this saved the
Authority time and resource. A reduction of 10% should be applied to reflect the
exceptional co-operation from the Firm.
97. Regulated firms are expected to co-operate fully with the Authority in its
investigation of suspected misconduct. The production by the Firm in this
case of an internal review report, which was not subject to legal
professional privilege, is not considered by the Authority to be exceptional
co-operation justifying a reduction at Step 3.
Breach of Principle 2 (rather than breach of Principle 1)
98. The Firm has accepted that it failed to conduct its business from the London Office
with due skill, care and diligence in breach of Principle 2.
99. In addition to the points made above, the Firm considers that the assessment of
seriousness should be reduced from that proposed for a breach of Principle 1, as
the misconduct would be one based on negligence rather than on a deliberate act.
Further, any penalty should be assessed on the allegations upon which the alleged
negligence is founded, rather than the consequences of the negligence. For these
reasons a level 3 finding is appropriate.
100. The Authority considers that the Firm’s failures are more appropriately
treated as a breach of Principle 1 rather than of Principle 2.
David Rowland’s Representations
101. The 30 August 2017 meeting was organised by Individual A, because the senior
representative of an Abu Dhabi sovereign wealth fund was due to be in London on
other business. It was an informal, unstructured meeting, with no agenda. David
Rowland attended the meeting to advance his interest in the Financial Institution,
which was a proposed partnership between the Abu Dhabi sovereign wealth fund
and David Rowland. This project was discussed in addition to personal greetings
and probably matters related to UK politics. The meeting lasted at most 20 minutes,
the Firm was not mentioned, and no mention was made of anything which could
have related to what became the contents of the Presentation. As the meeting
concluded, David Rowland went downstairs to use the cloakroom, leaving Mr
Rowland talking with the senior representative. Mr Rowland subsequently briefly
mentioned to David Rowland something about the Abu Dhabi sovereign wealth fund
“hedging their exposure”.
102. David Rowland’s attendance at the August Meeting had no significance and was not
relevant to the subsequent creation of the Presentation, nor did he have any
“behind the scenes” role in its creation. His involvement with the UAE is wholly
unrelated to the Firm. David Rowland does not think he has ever discussed the
Firm with the senior representative of the Abu Dhabi sovereign wealth fund or with
the Ruler of the UAE, whom David Rowland regards as a very close personal friend.
103. David Rowland has never attended any Board Meetings of the Firm or any
management meetings, nor has he been involved, or interfered, in any manner in
the management of the Firm. David Rowland’s attendance at the August Meeting
does not indicate that the Presentation was Bank Business, or that Bank Business
was discussed. David Rowland may have been Honorary President of the Firm, but
it meant nothing and gave him no authority in the Firm, it was a fiction. The title
was merely there to demonstrate his support for, and underwriting of, the Firm and
to give confidence to depositors.
104. David Rowland went to Abu Dhabi with Mr Rowland in late September 2017. He did
not discuss, read or look at the Presentation with Mr Rowland or anyone else during
this visit. It was inconceivable that Mr Rowland would have not mentioned the
Presentation to David Rowland, had he intended to hand over the Presentation to
promote the interests of the Rowland Family. Bank Business had no relevance to
the trip and the Firm has, and had, no relationship with the UAE.
105. The Presentation was not “disseminated”. The term dissemination is only used to
describe an act of distributing widely; this did not happen, as it was only sent to
David Rowland and Individual A, and there was no intention by either David
Rowland or Individual A to disseminate the Presentation. David Rowland was not
aware at the time he received the Presentation that he had received it by email
and did not open, read, print or forward it or give a copy to anyone else. The
Presentation was deleted from David Rowland’s computer by the automatic seven-
day deletion policy on his email system. The UAE Ambassador confirmed to David
Rowland, at the Abu Dhabi Grand Prix towards the end of November 2017, that he
had never received a copy. Accordingly, there was no meaningful “dissemination”,
and as this term is pejorative, it should not be used.
106. David Rowland was not aware of the Presentation, or its contents, until The
Intercept made contact. The telephone calls between David Rowland and Mr
Rowland on 12, 13 and 19 October 2017 do not indicate that David Rowland was
aware of the contents of the Presentation. Throughout these telephone calls David
Rowland and Mr Rowland were concerned about their communications being hacked
by agents of Qatar. The Presentation was not discussed; David Rowland’s concerns
related to a document regarding the Financial Institution and whether his phone
had been hacked. They therefore talk about what he and Mr Rowland should do
with their phones and their email addresses. The telephone calls were unguarded
conversations between father and son and do not show any attempt at a cover-up.
107. David Rowland has no idea what the references to “their office” refers to but
speculates that it could be Qatar or the office of Individual A who had also been
hacked by Qatar. The reference in the telephone calls to “badge of honour” is
nothing to do with the Presentation, nor to an economic warfare strategy. It
concerned the bad publicity resulting from being attacked by Qatar, due to David
Rowland’s friendship with and connection to the UAE. The Presentation could not
be used as a badge of honour; it was nonsense and a hugely embarrassing
document.
108. The Authority has not asserted that David Rowland was present during the
conversation between Mr Rowland and the senior representative of the
Abu Dhabi sovereign wealth fund, when the request for advice is said to
have occurred. Discussions at the August Meeting regarding the Financial
Institution did not preclude discussions on other matters which could be
taken forward as Bank Business. Such matters include the Presentation.
The Authority has not asserted that David Rowland had a “behind the
scenes” role in the creation of the Presentation.
109. Mr Rowland forwarded a copy of the Presentation to Individual A and David
Rowland using their email addresses outside the Firm. The Authority has
not asserted that David Rowland forwarded the Presentation. Having
taken into account all the relevant evidence, including that of Mr Bolelyy
and Mr Rowland, and the contents of the telephone calls on 12, 13 and 19
October 2017 between David Rowland and Mr Rowland, the Authority has
concluded that Mr Bolelyy did provide a copy of the Presentation to a
representative of the Abu Dhabi sovereign wealth fund during the trip to
Abu Dhabi. Accordingly, the Authority considers that it is appropriate to
state that the Presentation was “disseminated”.
110. The Authority refers to the fact that between April 2014 and June 2018
(which includes the Relevant Period) the Firm’s website referred to David
Rowland as its Honorary President and that, during the telephone call on
19 October 2017, David Rowland stated to Mr Rowland “don’t let’s put
anything on the Bank emails…and you can put that Vladimir [Bolelyy],
make him have one on, with Liwathon…and as soon as we can we take him
off the Bank’s payroll”. The Authority infers that, in practice, David
Rowland had a level of influence and management within the Firm.
111. In the telephone call between David Rowland and Mr Rowland on 12
October 2017, David Rowland asked Mr Rowland how he thought the
“thing in the Indian paper got there”. Mr Rowland replied “probably, I
assume – probably a leak from their office I would imagine”. Mr Rowland
then said he was aware that the content of the Presentation had been
discussed with “their” office. The Authority infers that “their office” refers
to the office of the Abu Dhabi sovereign wealth fund, which had been
provided with a copy of the Presentation during the visit. Mr Rowland also
stated to David Rowland “Never been talked to anyone else”. The
Authority infers that Mr Rowland was saying that the Presentation had not
been discussed with anyone other than the Abu Dhabi sovereign wealth
fund. Mr Rowland appeared to regard publication of the Firm’s involvement
as “a badge of honour when we go and see them next time”, and David
Rowland stated that “you can, we can capitalise on this” [with respect to
the Abu Dhabi sovereign wealth fund]. The Authority infers that at the time
of the telephone calls David Rowland is likely to have been aware that the
Presentation had been provided to the Abu Dhabi sovereign wealth fund.