According to EY, UK stock market listings in the first three quarters are the highest they’ve been in 20 years, with 14 IPOs raising £2.9bn on the main market and 19 IPOs raising £1.1bn on Alternative Investment Market (AIM). While an IPO is a notable objective for businesses, with a lot of potential benefits, some risks and considerations come with going public.
Not articulating your Equity Story Properly
An equity story is the cornerstone of a successful IPO, so it’s crucial that it’s articulated well. Equity stories help share a business’ vision while offering compelling reasons why investors should buy stocks. Companies only get one chance to tell their story, and if they get this wrong, they risk being incorrectly valued and investors not understanding the business.
So what elements must be included to construct a powerful equity story? While there is no one-size-fits-all approach, and every business has its own authentic message, a number of components make up a compelling equity story. Firstly, investors should be able to see profit, growth and return clearly. It’s crucial that they understand the business, its purpose, its key drivers, and its plans to capitalise on future opportunities. When drafting an equity story, consider the three Cs. Is it Clear? Is it Concise?, and is it Compelling? Finally, it’s important not to overpromise. Post-IPO, investors will hold businesses accountable for delivering against those future opportunities in full, and even beyond in some cases.
Costs
Companies must have good visibility of costs before going public. An IPO process isn’t cheap. While the cost of going public varies depending on company size, offering proceeds and company readiness, businesses will likely still have to fork out millions across underwriting fees, legal fees, auditor fees and other transaction costs.
As well as the costs of going public, Board members must consider the additional costs usually incurred once they are a public company. A survey of CFOs, carried out by PWC found that the incremental costs of being public are broadly split across five areas: incremental audit, public/investor relations, financial reporting, legal and regulatory compliance.
Timing & Resources
CFOs cannot manage an IPO by themselves, so it’s important that organisations have a well-staffed finance department supporting them. An IPO puts an immense strain on finance teams, with high workloads and strict deadlines accompanying it. If they’re not prepared for this, they run the risk of juggling too many tasks and making mistakes. These errors could seriously impact the company’s valuation or disrupt the ‘business as usual’ activity.
As explained in Protiviti’s Guide to Public Company Transformation, “The failure to fully develop sound business processes, controls and infrastructure, particularly those that support financial reporting processes, is one of the most common mistakes companies make in their public company readiness effort.”
Access to Capital
One of the most appealing reasons for going public is the substantial amounts of capital that can be raised. Many businesses find it expensive and dilutive to raise equity from venture capitalists and other big investors. However, equity investments from the public can help businesses to gain the capital it needs to deliver their vision. This capital can then be invested back into the company, allowing it to grow and innovate. IPOs have helped corporations fund research, develop new products, increase marketing efforts and reduce debt.
Publicity
Going public also gives businesses great exposure. As soon as a company announces its IPO, it receives a lot of publicity and media coverage. This public awareness could not only result in more investors, but it could also bring in more suppliers, customers and even future leadership candidates. As Investopedia shares, “A publicly-traded company conveys a positive image (if the business goes well) and attracts high-quality personnel at all levels, including senior management.”
Validation
A listed business has effectively been sold to the general public. People are putting money behind it and believe in its potential. This validation can have a substantial effect on businesses earlier in their journey or companies going through a transformation or releasing new products.
The decision to go public should not be rushed. While there are some exciting benefits for a growing company, the challenges and risks associated with going public could be too demanding if the timing is not considered. It is the responsibility of Board members to evaluate the company’s readiness for an effective transition. This decision should not be taken lightly.
About the author: Imran Anwar, Chief Financial Officer at Epos Now has 15+ years of cross-industry experience in maximising sustainable company growth, raising capital, initial public offerings (IPO) and strategic business transformation.
Prior to joining Epos Now, Imran served as Deputy Group CFO at The Hut Group (THG PLC). During this time, he built out the finance, governance and risk infrastructure to drive the company through a successful IPO on the London Stock Market, the largest UK initial public offering for 3 years.
The idea of retirement is changing quickly. People are no longer content with working for the same company for decades and then living on a modest pension. Many invest their money, so they can retire early and ensure their retirement funds are much more substantial. If you are up for this, you need to have a good understanding of how to get good returns, and why cryptocurrency as a type of investment is becoming popular.
Bank savings accounts don't work anymore. Interest rates around the world are approaching 0% as banks try to stimulate the economy. That means you earn almost nothing for placing money on deposit. It gets much worse than that. The financial crisis in 2008 and the coronavirus pandemic are only some of the events that make governments print more money than ever. 40% of US dollars in existence were printed in just 18 months in 2020/2021, which inevitably leads to inflation. Prices of goods and services will increase over time, effectively making your money decrease in value.
The combination of 0% interest rates and huge money printing means that the old retirement playbook no longer works. If you want to grow your wealth with compound interest over time, you need to invest in other assets. One asset that is immune to inflation is cryptocurrency.
Cryptocurrency has caught the attention of retirees because of its immense returns over the last few years. Investing $1,000 in Bitcoin in October 2016 would have got you a 1.57 BTC, which now amounts to almost $79,000. If you invested the same amount in Ethereum in 2016, it would now be worth about $300,000. These returns on investment are ridiculous. It's why there are so many Bitcoin millionaires in the world. So, what is driving such insane growth in the value of cryptocurrencies? The first reason is the growth of the crypto market. It is expanding quickly, and those that invest early reap the rewards. Crypto still likely has a long way to go in this regard, as the technology has not made it to the mass adoption point yet.
However, there's something else going on. Bitcoin and many other cryptocurrencies have a tightly controlled supply. There are only 21 million BTC that can ever exist. This is written into the Bitcoin protocol and will never be changed. Because of this limited supply, the coin is immune to inflation from money printing as we discussed earlier. In fact, Bitcoin is deflationary in nature, meaning when you hold it, prices will seem to deflate relatively to your currency. This is a great thing for you as an investor.
Another benefit of investing in cryptocurrency is that crypto assets are weakly correlated with other traditional assets. Price changes in the stock market or currency markets don’t automatically bring cryptocurrency prices with them. This means cryptocurrency is a great way to diversify your investment portfolio. It works as a defensive asset to hedge against crashes in other areas of the economy.
If you want to add digital assets to your retirement investment portfolio, you’ll need a plan to do it successfully. The first step is to get started. Cryptocurrency is still growing in value quickly, and the earlier you can get in, the better. The market may go up and down after you buy, but remember: this is a long-term investment. Try not to get too caught up in the ups and downs of the market.
If you're new to cryptocurrency, you'll also need to educate yourself. Investing in crypto is a little different from other assets. There are some technological and legal hurdles to overcome. These may be very easy or difficult, depending on where you live. You can follow many crypto influencers to learn more about cryptocurrency. Or, you can also take some of the many online courses to get familiar with specific cryptocurrencies.
The most important thing when investing for retirement is to diversify. When you're going for the long term, anything can happen in the markets. Having all your eggs in one basket is a terrible idea when looking for good returns over decades. So, don't put all of your pension in Bitcoin. This means diversifying beyond crypto (have traditional assets like stocks, gold, etc. in your portfolio) and also diversifying within crypto (having multiple cryptocurrencies in your crypto portfolio).
Keep in mind that cryptocurrency is a risky asset. Many people have made a ton of money in cryptocurrency, but just as many have lost considerable sums of crypto, too. Cryptocurrency is volatile and can suddenly crash in value. This happened many times in the past. Cryptocurrency is also vulnerable to hacks and theft if you don't look after it properly. Then, there's a simple risk you might 'lose' your cryptocurrency by losing your “keys” (like your crypto password). If this happens, it's gone forever. Many governments haven't yet officially decided on the legal status of cryptocurrency, so the legal risk also exists. If you want to invest in crypto for retirement, you're going to be a pioneer. No generation has done this before. The risks are real, but the rewards can be very large.
In some countries like the USA, you can already save cryptocurrency on your self-directed Individual Retirement Account (IRA). They work just like regular IRAs, except a self-directed IRA allows you to hold alternative asset classes like cryptocurrency and real estate.
One of the biggest advantages of having crypto as a retirement investment is the diversification of your portfolio. The more diverse it is, the more protected your account will be in case of any market downturns. With the crypto market growing in popularity each year, there is also a high chance that it will bring you large financial benefits if you invest in it now. Amongst the main disadvantage of having cryptocurrency as your retirement investment is its high price volatility. Take Bitcoin as an example: in December 2017, its price dropped to $14,000. Although the price increased and reached new heights in 2021, many might pick a more stable alternative to crypto.
Investing for retirement is getting trickier with time. Gone are the days when you can just leave your savings in a bank account and earn high interest from the bank. Now, inflation is silently eating away at the savings of those that aren't aware of it. Cryptocurrencies are a new inflation-proof asset class that provides extremely high returns for long-term investors. Just be prepared for a wilder investment ride than other long-term assets.
In recent years, several countries and states have legalised the use of cannabis for medical and recreational purposes. In 2013, Uruguay became the first country in the world to legalise cannabis for recreational use, with Canada following suit in 2018. In the US, Marijuana remains illegal as a recreational drug at federal level, but numerous states, including Washington, California, Colorado, and Nevada, have now moved to legalise it within their borders. In the UK, the medical use of cannabis was legalised in November 2018, after the cases of two epileptic children, who benefited substantially from using cannabis, drew increased public attention to the matter.
By 2030, the cannabis industry is set to be worth $100 billion in the United States alone, a forecast that certainly makes cannabis an investment worth considering. In the most recent quarter, Jushi Holdings Inc (JUSH.CX) — which is a multi-state company focused on building a portfolio of branded cannabis and hemp-based assets — was the marijuana stock with the highest year-over-year (YOY) sales growth, with revenue growth of 355.4%.
There are three key ways in which cannabis investment can be done: through directly investing in marijuana shares, spread betting, or CFD trading. However, it is important to note that both spread betting and CFD trading carry much higher risks. For those who are new to trading, it is wise to stick to investing in cannabis shares directly.
Cannabis stocks (or marijuana stocks) are the shares of companies that are either involved in the growing of cannabis, involved in the pharmaceutical or biotech developments of medical cannabis, or are suppliers of cannabis products and services.
There are two main types of cannabis products: recreational or medical, with the vast majority of companies being involved in the latter. In recent years, there has been a lot of evidence to suggest that cannabis products have positive effects on people suffering from a wide variety of medical conditions. Preliminary research suggests that cannabis can help to reduce chronic pain and muscle spasms, can alleviate nausea during chemotherapy, can improve appetite in people suffering from HIV/AIDS, and can even treat severe forms of epilepsy, as seen in the UK.
As with investing in any type of asset, it’s important to understand that there is always some degree of risk involved. Before investing in cannabis stocks, there are some specific risks you should weigh up:
There are numerous companies providing services to the cannabis industry, meaning investors have a wide choice of stocks or ETFs.
Research is an essential part of making any investment. You should check out the latest news surrounding a given company, gain a feel for the market sentiment on platforms such as Stocktwits, and check SEC filings and other documents required by diverse regulatory agencies.
Stocks are volatile and the future is unpredictable. As a rule of thumb, you should never invest more than what you can afford to lose. Although thorough research often leads to strong returns, there’s no guarantee that this will always be the case.
When you buy and sell can make a big difference, so it’s important to consider your timing carefully. However, you should note that it can be very difficult to time the market correctly. An investment strategy that may be worth considering is dollar-cost averaging (DCA). This is a strategy in which an investor divides the total amount that they wish to invest across periodic purchases of a target asset. DCA can help to limit the impact of volatility on the overall purchase.
A broker serves as an intermediary between an investor and a securities exchange. Choosing your broker isn’t dissimilar to picking a stock, it starts with understanding your investing style and determining your investment goals for the short and long term. Apps like Freetrade and IG are great places to start.
For beginners especially, the process of actually buying stock can be trickier than it initially sounds. “There are generally 2 types of ‘buy’ orders: market order and a limit order. A market order will execute the purchase at the present market price, while a limit order will only execute if the price falls at or below the limit price,” Benzinga’s Thomas Rudy explains. “Although a limit price might give an investor a lower price of entry, there is no guarantee that the limit order will execute.”
Another way to invest in cannabis stocks is through cannabis ETFs (Exchange Traded Funds). ETFs are similar to mutual funds but there are a few key differences. As with mutual funds, ETFs invest in a diverse range of securities and offer automatic diversification to shareholders. Instead of buying shares of an individual stock, investors buy shares in the ETF. They are entitled to a corresponding portion of its overall value. One key difference between ETFs and mutual bonds, however, is that ETFs are traded on the open market, meaning ETF shareholders can buy and sell shares of an ETF whenever they choose.
ETFs are popular investments because they can be bought and sold easily and because they are generally inexpensive. ETFs also involve fewer fees than other types of investments and are more tax-efficient than mutual funds. Although there is some degree of risk with any investment, ETFs can be very safe investments provided you do sufficient research first.
As cultural tolerance of cannabis increases across the globe, a plethora of opportunities open for companies and investors alike. However, as with any investment, it is important to do your research carefully and weigh up whether or not it's a sensible addition, or start, to your portfolio.
This article does not constitute financial advice. The author and Universal Media Ltd. are not qualified financial advisers. All investments are made at the reader’s own risk.
Given the mass amounts of information available and the complex nature of Bitcoin investment, it’s completely understandable that you’d be a little confused. However, now is the time to say goodbye to disorientation and hello to a diversified investment portfolio. Read on to discover your perfect introduction to investing in Bitcoin.
Bitcoin is a type of cryptocurrency that was created in January 2009. It promises investors and traders lower transaction fees than traditional online payment platforms. Additionally, it is operated by a decentralised authority, making it starkly different from government-issued currencies. Like all forms of cryptocurrency, Bitcoin is intangible, meaning there is no physical coin you can use; instead all of your Bitcoin funds are held in a digital wallet.
Despite the fact that it’s an intangible and largely unofficial form of currency, you can use Bitcoin to purchase goods and services from several companies. Some of them include:
Once you grow into a more confident investor and trader, you can also use Bitcoin in your Forex trading activities.
Like any form of investment, Bitcoin investment carries its fair share of risks, of which you need to be aware before spending your hard-earned cash. Some of the most prominent risks include:
You feel ready to invest in Bitcoin, and now all that’s left to do is figure out how to buy some. First, you’ll need to choose an exchange, such as Gemini, Coinbase, or Kraken. There are several exchange platforms on the market, so be sure to do your research and compare your options to find the best one for you.
Next, you’ll need to link a payment method to your exchange account. This payment method is what you’ll use to purchase your Bitcoin. From there, you can place your order for as much Bitcoin as you’d like. Once you have it, make sure to store it in a safe place, such as your digital wallet.
As a beginner, investing in Bitcoin can seem daunting, but it doesn’t have to be. By reading this guide, you’ve taken the first step in overcoming your investing fears and mastering Bitcoin. With this knowledge, you’ll be poised to reach new investing heights.
A good credit score provides you with so many benefits, such as reasonable interest rates, faster loan approvals, and suitable insurance policies. Nearly 70 million Americans are suffering from bad credit because repairing your credit requires a lot of time and self-control. So, what is the best way to improve your credit score in no time? The answer is simple – buy a tradeline.
But, in order to understand how to improve your credit score by using a tradeline, you need to understand the term “tradeline” first.
A tradeline is basically any account appearing on your credit report. A tradeline keeps a record of creditor’s information to calculate his credit report. You can mutually benefit from someone with positive credit history and improve your credit score if he adds you as an authorized user (AU).
Most people ask their family and friends to add them as their AU, but if you want a quick improvement to your credit score, you can add users with exceptional credit history as an authorized user. These AU provide positive data regarding:
Fair Isaac Corporation (FICO) places a credit score in 5 different grades.
Buying 2-3 seasoned tradeline can help you jump to a 720-850 credit score in a month.
A tradeline helps you improve your credit score so it will reap all the benefits a good credit score enables you to achieve. Without a good credit score, you will have limited access and services of your credit card, loan plan, and a higher rate of mortgages. In short, you will have to end up paying more money than usual.
But good tradelines on your account will help you achieve a credit score of 750 or higher in no time. When you buy an authorized tradeline from someone like Personal Tradelines, you are added as an AU to one of their credit card accounts, and it takes only 25-30 days to get your credit up to a good score.
The most common mistake people do is buy a tradeline without having the slightest idea of how it works. I recommend that you read all about tradelines and their types before actually committing to buying one. You can also get help and information from tradelines vendors.
Tradelines work by adding positive information to your account. If you have fraud alerts or credit freezes on your account, buying a tradeline will not work as new information can’t be posted on your credit report.
The effectiveness of a tradeline is always going to be relative to how old your own account is and what is in your credit file. For example, if you have a 10-year-old account, an 8-year-old tradeline would not have much impact on it. However, if the account is only 1-2 years old, an 8-year-old tradeline would do wonders in increasing your credit score.
Before buying tradelines, it is vital to know how a credit score impacts your general lifestyle. Because even if you are successful at getting a good credit score after buying tradelines; you will have to follow a particular set of rules to maintain it.
Some people go for 4-5 cheap tradelines instead of buying 2-3 seasoned tradelines. It ends up costing you more money, and you are better off buying seasoned or authorized tradelines rather than a lot of cheap tradelines.
Also, a cheap tradeline will not have that much positive effect on your credit report as they don’t have good age. This works against the goal of improving your credit score exponentially.
Unfortunately, there are a lot of companies that are selling tradelines, and it is tough to trust someone random. It is essential to do a background check on a company which includes customer reviews, their ratings, and some money-back guarantee to make that you are getting the best service possible.
The company, which advises organisations of all sizes on their insurance requirements, and which has worked with a quarter companies in the FTSE 100, has recently launched a new Cyber Risk Consulting Practice. This helps clients to understand their exposure to cyber risks, and to source appropriate insurance cover for these. In a report, it has recently reviewed dozens of ‘off-the-shelf’ cyber insurance policies and identified seven significant common flaws:
1. Cover can be limited to events triggered by attacks or unauthorised activity – excluding cover for issues caused by accidental errors or omissions
2. Data breach costs can be limited – e.g. covering only costs that the business is strictly legally required to incur (as opposed to much greater costs which would be incurred in practice)
3. Systems interruption cover can be limited to only the brief period of actual network interruption, providing no cover for the more significant knock-on revenue impact in the period after IT systems are restored but the business is still disrupted
4. Cover for systems delivered by outsourced service providers (many businesses’ most significant exposure) varies significantly and is often limited or excluded
5. Exclusions for software in development or systems being rolled out are common and can be unclear or in the worst cases exclude events relating to any recently updated systems
6. Where contractors cause issues (e.g. a data breach) but the business is legally responsible, policies will sometimes not respond
7. Notification requirements are often complex and onerous
Bruce Hepburn, CEO of Mactavish said: “There are a number of new cyber insurance policies being launched, but despite a sharp increase in cyber incidents this market is very immature and in many respects untested. Perhaps some of these policies have been rushed to market by insurers eager to capitalise on the growing cyber risks facing organisations, and their desire to spend significant amounts of money to protect themselves against this.
“Very few claims have been made on these new cyber insurance policies, but my bet is that many will be disputed, or settlements will be much lower than clients expected. However, this can be avoided if organisations first understand the cyber risks they face, and then secure a bespoke policy to meet their needs.”
(Source: Mactavish)
Zac Cohen, General Manager at Trulioo, discusses the key considerations for businesses before engaging in commerce in high-risk countries.
Doing business internationally is a complicated undertaking. Aside from the standard logistical challenges associated with doing business globally, organisations have to factor in considerations specific to different regions and countries. These considerations may include factors such as legislative, political, currency and transparency challenges.
Nevertheless, globalisation is storming ahead and businesses must be prepared to look beyond their domestic surroundings if they are to remain competitive in our global marketplace. International trade secretary Liam Fox has endorsed a move for UK-based businesses to adopt a more international focus, highlighting the importance of global competitiveness. Consequently, UK businesses are feeling the pressure to ramp up their efforts to target a more international consumer base. As if this wasn’t enough for international businesses and investors to grapple with, further complications and difficulties are liable to arise when doing business with “high risk” countries.
A recent study by the World Bank estimated that an extra 10 per cent is added to the cost of doing business internationally as a direct result of bribery and corruption.1 Considering the immense amount of international trade, this figure is significant. The danger of doing business with countries considered to be “high risk” – defined by the Financial Action Task Force (FATF) as any country with weak measures to combat money laundering and terrorist financing – is the heightened potential of inviting transactions that are either fraudulent or otherwise corrupt.1 The following considerations should be carefully observed before entering into any commercial dealings with a country considered to be high-risk.
As a result of the 4th Anti Money Laundering (AMLD4) directive, developed by the European Union, businesses have to adopt a risk-based outlook. The AMLD4 specifies that EU-based businesses must collect relevant official documents directly from official sources like government registers and public documents, rather than from the organisation in question. If a potential trading partner is located in a high-risk country, or serves an industry that has a higher than normal risk of money laundering, then that partner must conduct Enhanced Due Diligence (EDD) on the business entity. This Enhanced Due Diligence process involves additional searches that must be carried out by any firm seeking to do business with this kind of organisation. These searches may include parameters such as the location of the organisation, the purpose of the transaction, the payment method and the expected origin of the payment.
AMLD4 also outlines the need to discover the ultimate beneficial owner of a business, whether they are customers, partners, suppliers or connected to you in another business relationship.
According to the Financial Action Task Force (FATF),
Beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.
This is important as businesses need to understand who they are dealing with when physical verification is not a practical option. Difficulties could arise when verifying UBOs in high-risk countries as some national jurisdictions impose secrecy policies which block access to verification documentation. This problem is compounded when checking UBOs against international sanction and watch lists as there are more than 200 lists, which vary in scale and uniformity.
However, verification can still be successful. Many are now turning to software that helps businesses to perform the necessary diligence checks. We gave a lot of consideration to the specific complexities of working with high-risk countries when developing our Global Gateway platform. Programmes such as these are designed to allow companies to perform the Enhanced Due Diligence, Know Your Business and Know your Customer checks that are required when doing business internationally, particularly with high-risk countries. Compliance with the various pieces of legislation on this topic should be at the forefront when implementing the necessary verification checks.
Across the world, markets are becoming increasingly more open, paving the way to a truly global economy. If companies can get to grips with the key due diligence requirements, this is a move that will ultimately benefit the global consumer and customers alike.
Technology advances have changed every aspect of financial markets. For consumers, this transformation has made financial services more affordable, accessible and tailored to our individual needs. For financial institutions, digital tools, including emerging technologies such as artificial intelligence (AI), robotics and analytics, have delivered huge opportunities to radically improve the efficiency and effectiveness of risk management, while reducing costs and better meeting the needs of customers.
However, these advances have also raised fundamental questions around how regulation should adapt. For an industry still finalizing reforms introduced after the global financial crisis, financial technology and innovation present a new round of challenges. That’s why it’s time for financial institutions and regulators to ask: How can we build a regulatory environment fit for a digital future? Below Kara Cauter, Partner, Financial Services, Advisory Ernst & Young LLP UK, answers the hard question.
Technology’s potential to make financial markets safer
It’s inevitable that new technologies introduce new risks, and new twists on old risks, as well as different ways of working. Systems can fail and undermine market stability; machines can make decisions with unintended consequences that harm customers and markets; and the almost limitless data that is the lifeblood of the digital world can be manipulated, misused, stolen or inadvertently disguise criminal behavior. But new technologies also offer significant opportunities to improve risk management and enhance the efficiency, safety and soundness of markets and convenience to consumers.
As a result, financial services firms are constantly tapping into new tools to improve the customer experience and strengthen risk management and compliance:
Regulators are also exploring how to use technology in their role:
Time to ask new questions about old risk principles
But despite positive moves to deploy technology to improve the security and efficiency of global financial markets, it’s still early days. Both industry and regulators are struggling with fundamental questions around how to identify and describe the risks posed by new technologies and new ways of doing business.
Delivering regulatory answers fit for a digital future will call on all market participants to revisit old principles, ask new questions and work together. Building a transparent, balanced, and connected risk management ecosystem will require:
Ultimately, as regulators and market participants navigate the FinTech landscape, they’ll need to consider how to best use and regulate the use of digital tools to deliver effective risk management and compliance – without stifling the innovation that can help deliver better and secure financial services.
In force since January, the Second Payment Services Directive (PSD2), aka Open banking, is a regulation that forces the largest of our banks to open up access to their data; a necessity that could change the way many people and businesses bank. Below Jerry Matthews, Commercial Manager & Head of Bridging at KIS Finance, explains everything you need to know, touching on the risks and opportunities therein, and answering the big question: is it safe?
The Competition and Markets Authority (CMA) has started a revolution which encourages consumers to share their financial data to third-party companies, after years of being told to do the exact opposite.
The Open Banking Implementation Entity (OBIE) was created in response to the UK Government’s request for a fairer, more transparent banking and financial services. Transparent is definitely what they got.
What is Open Banking?
Open Banking is a new system which means customers can allow third party providers, other than their bank, to access their financial information.
These providers can be anything from insurance and mortgage companies to shopping sites, mobile phones and broadband providers.
The main idea is to give consumers more control of their financial information and have access to a wider range of products and services. Customers can allow the company to analyse their spending habits and offer them better deals, tailored to them.
There has been a new change in UK law which means that banks must allow FCA regulated businesses to access a customer’s personal and financial information, but the customer must give their permission first. Customers can give and withdraw permission at any time they choose.
The bank can only prevent the business access, on the customer’s behalf, if they suspect that the company is fraudulent, or not regulated by the FCA.
When will Open Banking Start?
Four of the nine largest UK account providers, Lloyds Banking Group, Nationwide, Allied Irish Bank and Danske are ready to start Opening Banking now.
Six weeks maximum has been given to RBS, HSBC, Barclays and Bank of Ireland by the Competition and Markets Authority (CMA). Santander’s Cater Allen has been given another year to prepare.
In order to integrate the new system smoothly, for the first 6 weeks the banks and companies offering Opening Banking services have been asked to only make it available to a small group of selected customers and to limit the amount of instructions processed.
How Will These Third-Party Providers Gain Access to our Information?
There appears to be two methods as to how your information can be accessed;
API’s: New communication technologies have been developed, Application Programming Interfaces, which are designed with customer security at the forefront. API’s are regularly used by various online tools and mobile apps to provide joined facilities, allowing software from numerous companies to, essentially, ‘talk’ to each other. This way, your information will be securely passed between companies with this technology in place.
Log-In Details: Another method may be that third-party providers will request that you share your online bank log-in details directly with the company. Yes, you read that right. A separate piece of legislation, the Payment Services Directive, will allow some companies to do this.
The company can then log in to your online banking account, like they were you, to access your financial data, such as; transaction history, direct debits and standing orders. This means that the company is likely to be able to access a much larger range of information, so really, the one way to withdraw your permission to this company, for certain, is to change your account password and other security details.
Do you Actually Have to Share your Information?
I am glad to say no, this isn’t mandatory.
The new rules state that banks must allow third-parties access to your information, but you have to explicitly give that company your permission – they can’t just look at your account willy-nilly. There will be an option to either switch on or switch off Open Banking on your account.
Once you have given that company permission, it’s not set in stone either. You can withdraw your permission at any time.
So, there is some security in knowing that this isn’t some sort of new binding contract.
So, what are the Potential Risks with Open Banking?
Current surveys suggest that a majority of consumers are reluctant to hand out personal and financial data. But, with the new system, this behaviour is expected to steadily change over time.
However, this does open up massive risks surrounding data privacy and security.
There are worries concerning the fact that by creating more chains of data access, it will be much harder to prove who was at fault if the customer’s information is stolen, making it harder than it already is to be compensated in these situations.
Not to mention how people handing out personal and financial data is like a gold mine to fraudsters.
To name just one potential scam, fraudsters could easily mimic third-party providers, by copying their choice of contact, to trick people into handing over their data which leaves consumers at risk of losing their money, and potentially, their identity being stolen.
Also, giving a company your bank log-in details with the only secure way of knowing that you have cancelled your permission is by changing your password? This is the main thing that consumers are told to never do, to never hand out your bank log-in details. This leaves your details at huge risk, and something just doesn’t make sense to me.
It is absolutely vital that the industry regulators ensure that consumers are wholly protected from any data breaches if they are to use these services with confidence and trust.
The Positives…
Although I think there is a lot at stake for people who decide to go forwards with Open Banking, I do think, for some people, this could be a way to gain much better control over their finances.
With Open Banking, it could be made easier to assess what type of bank account is best for you by analysing how you actually use it. For example, a lot of people can be unsure of how much their overdraft is costing them, but if a company can see your account, they may be able to provide you with a much clearer perspective and give you cheaper alternatives.
Or, for people who want to save money but are struggling to do so, sharing their data with budgeting companies/apps could help them see where and how they can save money.
When an investment goes against expectation, what do you do? Hedging in IGOFX can help protect you against these unexpected risks. It is vital to ensure you do not miss out on any opportunities.
This week Tesco finally agreed to a £129 million fine for overstating its profits in 2014, thus avoiding prosecution. This agreement, made by Tesco Stores Ltd. Follows a two-year probe from the SFO. Not only did Tesco suffer majorly from share price hits, but is now also facing a huge fine for its errors. Alex Ktorides, Head of Ethics and Risk Management at Gordon Dadds LLP, here provides Finance Monthly with a specialist overview of the matter, and hints at potential implications for any business missing the mark when it comes to such critical internal vulnerabilities.
Tesco appears this week to have reached a key stage in the financial misstatement scandal that so badly hit its share price and reputation in 2014.
A brief recap. The retailer, in or about September 2014, shocked the financial world when it admitted that it had identified an apparent £250 million overstatement of its profits. The central problem was that it was alleged that Tesco had significantly overstated its profits by supposedly booking rebates (receipts) from suppliers that it had not yet received. A range of regulators became involved as the Tesco share price took a serious hit in the wake of the revelations.
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Misstating profits, as in the Tesco case, can give rise to a number of concurrent investigations in the UK, all involving different investigating and prosecuting authorities with differently sized sticks with which to beat the offending corporate entity and singled out individuals.
First in the firing line (though there is no magical order in reality) are the internal financial directors and external auditors who will likely face serious scrutiny from the Financial Reporting Council (FRC), which has in the past brought investigations in relation to past scandals such as Torex, Cattles and car manufacturer, Rover.
The FRC has a range of powers including fines and sanctions against individuals and the auditing firms. This will not be a cheap case to defend (FRC investigators invariably outsource forensic accounting investigatory aspects, the costs of which it will seek to recoup) and which may or may not be covered by the terms of professional indemnity insurance depending on the programme carried by the auditor in question.
Secondly will be the SFO investigation. The SFO will not be shy in seeking information and this will include amongst other things extensive disclosure of documents, countless recorded meetings and a range of witness statements and experts’ reports. Not a short process, nor one which is stress free.
The FCA will also be interested in protecting the public. In the instance of alleged misstatement of profits, as in the Tesco case, the ‘public’ are the investors and shareholders buying shares in a listed entity in a major regulated market such as the FTSE 100.
Similar to the ‘soft dollar’ settlements propounded by the SEC in the US, the FCA will look to quickly assess the period during which the share price may have been artificially inflated (or indeed in some cases, deflated) and look to impose or agree a settlement scheme as swiftly as possible. There is precedent to this, as well as the Tesco scheme announced very recently. In the mid-2000’s the FSA (now FCA) put huge pressure on the IFA sector to agree with Aberdeen Asset Management and others a financial compensation scheme for individual investors miss-sold so-called ‘split-cap’ investment trusts. This was no easy feat for the then Chief of the FSA John Tiner who was (anecdotally) personally calling up the professional indemnity insurers of those advisors involved in a bid to speed up the implementation of the compensation scheme. One imagines that Tesco and its management/insurers will be receiving similar pressure to agree the £85m scheme it has just announced.
Tesco’s Deferred Prosecution Agreement (DPA) – if it is sanctioned in the Southwark Crown Court next week – will be the fourth reached by the SFO. All of the DPAs reached so far have involved very different allegations and conduct (see Rolls Royce for example). The allegations involving Tesco relate to relatively short periods of time and very specific behaviour of alleged accounting errors involving the early booking of receipts from suppliers.
There is one common feature to the DPAs reached so far, and that is that each of the corporates under investigation that have successfully reached DPAs with the SFO have been seen to be cooperating with the investigation. That does appear to be a crucial aspect of the potential for reaching a DPA with the SFO.
So, what to do if an investigation occurs? The first thing is to obtain advice speedily. It may be necessary for legal advice to be obtained by different advisors and professional firms, with individuals quite often having to be separately advised to the corporate entities. A DPA may be the obvious and best solution and these are always predicated on cooperation. Very often in the case of enforcement proceedings or criminal investigations, cooperation is a vital component of reaching agreement and this is only increased significantly with the advent of DPAs. Indeed, in a recent speech, the director of the SFO stated that DPAs are not the ‘new normal’ but rather will only be available where there has been significant cooperation which is meaningful evidence by the corporation in question.
Cooperation can take many forms including but not limited to, the provision of documents (this sounds simple but often in reality these are frequently requested in huge volumes and under tight timescales and in a format that the SFO’s computing experts can easily handle). In the Polly Peck case, revisited on the return of Asil Nadir after some 19 years in the sun of Northern Cyprus, the SFO had recourse to review thousands of documents which were in some cases 20 years old and it was fortunate indeed that they had been retained at all.
DPAs can lead to a swifter conclusion of investigations (which are of course very damaging) and discounts on any penalties. Also, receiving reduced sentencing for those cooperating with the prosecutors may be on the table.
In summary, financial accounting methods and over or understating profit is a business critical issue. The implications – financial penalty, share price collapse, civil compensation schemes, expensive regulatory and criminal investigations, loss of income and in some cases, prison – are as serious as it gets in the corporate world. As Tesco has shown us (and a glance at current cases with both the SFO and FCA shows us that there are many more to come, not least of all such big brands as Barclays, Airbus Group and GlaxoSmithKline) misstating profits is a short term boost towards long term pain. The settlements with the FCA and SFO as a special offer that Tesco will not be looking to repeat.
With Americans losing tens of billions of dollars annually to investment fraud schemes, what mindsets and behaviors are common among those who fall victim? A new survey by the AARP Fraud Watch Network finds that the most susceptible typically exhibit an unusually high degree of confidence in unregulated investments and tend to trade more actively than the general investor population. More of the investment scam victims also reported that they value wealth accumulation as a significant measure of success in life and acknowledged being open to unsolicited telephone and email sales pitches.
Based on these findings, the AARP Fraud Watch Network has launched a campaign to warn consumers about the inclinations and activities common to investment fraud victims. The campaign includes an online quiz designed to prompt investors to consider adjusting their investment approach if results show they fit the profile of those most at risk of becoming a victim.
AARP's survey report notes that economic forces have converged to make the current environment ideal for investment swindlers to practice their craft. "The decline in traditional pensions has prompted millions of relatively inexperienced Americans to take on the job of investing their own money in a fast-moving and complex market," said Doug Shadel, Ph.D., lead researcher for the AARP Fraud Watch Network. "Meanwhile, today's sophisticated technology makes it significantly easier for scammers to reach large numbers of investors."
The Fraud Watch Network survey, conducted in August and September 2016, included interviews with more than 200 known victims of investment fraud and 800 interviews with members of the general investing public.
"While previous surveys in this area have developed a demographic picture of investment fraud victims – usually older, financially literate males who are more educated and have higher incomes – our goal with this survey was to learn about why people fall prey and how it can be avoided," said Shadel.
The AARP survey found stark differences between the past investment fraud victims and regular investors in three areas:
Psychological Mindset – More victims reported preferring unregulated investments, valuing wealth accumulation as a measure of success in life, being open to sales pitches, being willing to take risks, and describing themselves as ideologically conservative.
Behavioral Characteristics – Victims reported that they more frequently receive targeted phone calls and emails from brokers, they make five or more investment decisions each year, and more of them respond to remote sales pitches – those delivered via telephone, email or television commercials.
Demographics – Somewhat replicating the previous industry studies, higher percentages of victims were found to be of older age, male, married and military veterans.
By taking the AARP Fraud Watch Network's online quiz, investors can learn whether they possess the characteristics that may predict likely fraud victimization. Investors who score high on the quiz are urged to apply a new level of caution when they receive unsolicited investment overtures, and adhere to the following investor protection tips:
The AARP Fraud Watch Network was launched in 2013 as a free resource for people of all ages. The website provides information about fraud and scams, prevention tips from experts, an interactive scam-tracking map, fun educational quizzes, and video presentations featuring Fraud Watch Network Ambassador Frank Abagnale. Users may sign up for "Watchdog Alert" emails that deliver breaking scam information, or call a free helpline at 877-908-3360 to speak with volunteers trained in fraud counseling.
(Source: AARP)
