Decision Notice
On , the Financial Conduct Authority issued a Decision Notice to Mr Edmund Lloyd Rowland
DECISION NOTICE
Individual
Reference
Number:
ELR01010
1.
ACTION
1.1.
For the reasons given in this Notice, the Authority has decided to:
1.1.1.
impose on Mr Edmund Lloyd Rowland a financial penalty of £352,000
pursuant to section 66 of the Act; and
1.1.2.
make an order, pursuant to section 56 of the Act, prohibiting Mr Rowland
from performing any function in relation to any regulated activity carried
on by any authorised or exempt person, or exempt professional firm.
2.
SUMMARY OF REASONS
2.1.
During the Relevant Period, Mr Rowland played a key role in the creation and
dissemination of a document, namely the Presentation, which contained obviously
improper advice for potential investors by recommending manipulative trading
Edmund Rowland has referred this Decision Notice to the Upper
Tribunal to determine: (a) in relation to the FCA’s decision to
impose a financial penalty, what (if any) is the appropriate action
for the FCA to take, and remit the matter to the FCA with such
directions as the Upper Tribunal considers appropriate and (b) in
relation to the prohibition order, whether to dismiss the 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.
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.
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strategies, including recommending conduct which could be a criminal offence, had
it taken place in the UK. At the time, Mr Rowland was a senior manager in the Firm.
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
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.
Mr Rowland tasked employees of the Firm to draft the Presentation. He then
emailed it to David Rowland and Individual A, with the intention that it be presented
subsequently to representatives of the UAE and/or other states in the Middle East
region (who he considered might have reasons to want to put economic pressure
on Qatar) as a way of marketing the Firm’s services. Mr Rowland also instructed a
more junior staff member, Vladimir Bolelyy, to provide a copy of the Presentation
to an employee at an Abu Dhabi sovereign wealth fund.
2.5.
The Presentation signalled to potential clients that Mr Rowland was willing to be
involved in manipulative trading, and allow the Firm to be used to facilitate such
potentially unlawful activities. The Authority considers it particularly serious that
Mr Rowland, as a person who held a position of significant influence within an
authorised firm, was not only involved himself but also engaged a more junior staff
member at the Firm to work on the Presentation.
2.6.
By virtue of the misconduct described in this Notice Mr Rowland failed to act with
integrity in breach of Individual Conduct Rule 1 (COCON 2.1.1R) and demonstrated
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that he is not a fit and proper person to perform any function in relation to any
regulated activities.
2.7.
The Authority has decided to (i) impose on Mr Rowland a financial penalty of
£352,000 pursuant to section 66 of the Act, and (ii) make an order prohibiting Mr
Rowland from performing any function in relation to any regulated activities carried
on by any authorised or exempt person, or exempt professional firm pursuant to
section 56 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 swap;
“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;
“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;
“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;
“Individual A” means the individual engaged by the Firm to market its services in
the UAE and the wider Middle East region;
“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;
“Mr Rowland” means Edmund Lloyd Rowland;
“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;
“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;
“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;
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber);
“UAE” means United Arab Emirates;
“Warning Notice” means the Warning Notice given to Mr Rowland 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
Mr Rowland and 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”.
4.2.
During the Relevant Period, Mr Rowland was approved by the Authority to carry out
the EEA branch senior manager function (“SMF21”) at the Firm. Those holding
SMF21 are employees who have 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. Mr Rowland
had considerable managerial influence within the Firm, both in terms of his
retention of the SMF21 role and his day-to-day involvement with the London
Branch, throughout the Relevant Period. Mr Rowland’s responsibilities were,
amongst other things, to generate new business and give approval of new projects,
manage senior managers in the differing departments, and responsibility for day-
to-day decisions.
4.3.
The key individuals involved in this matter were all employed in the London Branch,
namely, Mr Rowland, David Edward Weller and Vladimir Bolelyy. During the
4.3.1. Mr Weller was the Head of Asset Management at the London Branch and
was also approved by the Authority as a SMF21; he reported to Mr Rowland
and to the Firm’s Group Head of Asset Management.
4.3.2. Mr Bolelyy was employed by the Firm as a senior investment analyst and
was Mr Rowland’s assistant reporting directly to him.
4.4.
Throughout the Relevant Period, Mr Rowland, Mr Weller and Mr Bolelyy were
employed by and received salary from the Firm only.
Marketing in the UAE
4.5.
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”. His professional assistance was defined as to expand “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 USD 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 (Abu Dhabi is the capital of the UAE).
The Qatar diplomatic crisis
4.6.
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
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4.7.
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 a UAE 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
4.8.
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”.
4.9.
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
4.10. 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.
4.11. At the meeting, which appears to have lasted for about a quarter of an hour and
was subsequently described by Mr Weller 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
$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.
4.12. The Authority infers that Mr Rowland intended for the Presentation to be presented
to representatives of the UAE and/or other states in the Middle East region who he
considered might have reasons to want to put economic pressure on Qatar, and
that Mr Rowland was motivated by the potential to earn fees for Rowland Family
interests which included 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 clients that Mr
Rowland and the Firm were willing to countenance improper market conduct in
order to advance their interests.
4.13. 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
4.14. 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”, which the Authority infers meant at least Mr Rowland, who was copied
into this request.
4.15. 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?”.
4.16. 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.
4.17. This version of the Presentation also 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”.
4.18. 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.
4.19. 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 he did not regard the contents of the SFNH Document as
representing a serious proposal and that it was simply reflective of a subject Mr
Rowland wished to explore.
4.20. 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”.
4.21. 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”.
4.22. 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”.
4.23. 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.
4.24. 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.
4.25. 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”.
4.26. 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 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
4.27. 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.
4.28. 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”.
4.29. 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.
4.30. 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 sovereign wealth fund.
4.31. 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). Mr Rowland directed the creation of the Presentation and also
directed the dissemination of the Presentation externally.
Press reports and the Firm’s response
4.32. 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).
4.33. 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”).
4.34. The Indian Article referred to leaked or stolen emails from the Firm allegedly found
in the inbox 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…”.
4.35. At 12.35pm 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”.
4.36. At 3.02pm, Mr Weller sent a further email to Mr Rowland 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…”
4.37. 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 Sovereign Wealth Fund which had been provided with a copy of the
Presentation during the visit referred to at paragraph 4.32 above.
4.38. Neither Mr Weller nor Mr Rowland forwarded either email to the Firm’s Compliance
officer, or to the Head Office, or took any other steps to inform other senior
management of the allegations. In addition, neither individual, nor anyone else at
the Firm, informed the Authority of these concerns.
4.39. 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 have allowed Mr Rowland to discover it on the Firm’s systems, stating
that he should search for “‘Qatar Opportunity’ and ‘Distressed Countries Fund.’ The
Mission Statement includes: ‘Control the Yield curve, decide the future”.
4.40. 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
David Rowland that “our story just has to be it’s purely politically motivated because
of our, because of your friendship with the Crown Prince, leave it, that might bring
us a lot of points.”
4.41. The Firm’s response to the Intercept, as directed by Mr Rowland, was as worded
above.
4.42. However, Mr Rowland took no steps to look for the Presentation on the Firm’s
internal systems or to investigate whether the allegations had any substance.
4.43. 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?”.
4.44. These further questions were shared with Mr Rowland by the Firm’s US lawyer, and
were forwarded on 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, Mr Rowland
failed to notify the Authority that an article containing these allegations was going
to be published.
4.45. 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”.
4.46. 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.
4.47. 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”.
4.48. 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”.
4.49. 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.
4.50. 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.
4.51. On 14 November 2017 Mr Rowland telephoned the Authority on behalf of the Firm,
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”.
4.52. On 13 December 2017 Mr Rowland resigned as an employee, Chief Executive of the
London Branch and member of 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
Individual Conduct Rule 1: You must act with integrity
5.2.
Individual Conduct Rule 1 required Mr Rowland to act with integrity in relation to
the performance by him of functions relating to the carrying on of activities
(whether or not regulated activities) by the Firm. During the Relevant Period, Mr
Rowland breached this requirement, whilst acting as an approved senior manager
of the Firm’s London Branch (SMF21), by creating and disseminating the
Presentation.
5.3. Mr Rowland failed to act with integrity because 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 could be a criminal offence if it took 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. Through the Presentation, Mr Rowland deliberately designed
a manipulative trading strategy intended to serve what he believed to be the political
interests of certain nation states and, in doing so, he put an authorised firm at risk
of facilitating financial crime. He did this in an attempt to produce economic benefits
for the Rowland Family interests (including the Firm) and himself by creating and
enhancing what he believed to be important relationships with influential people in
the UAE and elsewhere in the Middle East.
Not Fit and Proper
5.4. The Authority considers that Mr Rowland’s actions as described in this Notice
demonstrate that he lacks fitness and propriety because he lacks integrity.
6.
SANCTION
Financial penalty
6.1. The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of DEPP.
DEPP 6.5B sets out the details of the five-step framework that applies in respect of
financial penalties imposed on individuals in non-market abuse cases.
Step 1: disgorgement
6.2. Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual 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 Mr Rowland derived directly
from his breach.
6.4.
Step 1 is therefore £0.
Step 2: the seriousness of the breach
6.5.
Pursuant to DEPP 6.5B.2G, at Step 2 the Authority determines a figure that reflects
the seriousness of the breach. That figure is based on a percentage of the
individual’s relevant income. The individual’s relevant income is the gross amount
of all benefits received by the individual from the employment in connection with
which the breach occurred, and for the period of the breach.
6.6.
As Mr Rowland’s breach lasted less than 12 months, the relevant income will be
that earned by him in the 12 months preceding the last day of his breach, being 13
November 2017. The Authority considers Mr Rowland’s relevant income for this
period to be £44,000.
6.7.
In deciding on the percentage of the relevant revenue that forms the basis of the
Step 2 figure, the Authority considers the seriousness of the breach and chooses a
percentage between 0% and 40%. This range is divided into five fixed levels which
represent, on a sliding scale, the seriousness of the breach; the more serious the
breach, the higher the level. For penalties imposed on individuals in non-market
abuse cases there are the following five levels:
Level 1 – 0%
Level 2 – 10%
Level 3 – 20%
Level 4 – 30%
Level 5 – 40%
6.8.
In assessing the seriousness level, the Authority has taken into account various
factors which reflect the impact and nature of the breach, including that he held a
senior position in the Firm and caused more junior employees at the Firm to commit
breaches; and whether it was committed deliberately or recklessly. DEPP
6.5B.2G(12) lists factors which are likely to be considered ‘level 4 or 5 factors’. Of
these, the Authority considers the following factors to be most relevant:
6.8.1.
Mr Rowland actively encouraged conduct which potentially could be a
criminal offence, and financial crime, were it to take place in the UK in
the hope that the Firm and/or the Rowland Family would profit;
6.8.2.
Mr Rowland failed to act with integrity; and
6.8.3.
his breach was committed deliberately.
6.9.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. Of
these, the Authority considers the following factors to be relevant:
6.9.1.
Mr Rowland made no profit as a result of the breach.
6.10. 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
40% of £44,000.
6.11. Step 2 is therefore £17,600.
Step 3: mitigating and aggravating factors
6.12. Pursuant to DEPP 6.5B.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.
6.13. The Authority considers that there were no factors which aggravate or mitigate the
breach.
6.14. Step 3 is therefore £17,600.
Step 4: adjustment for deterrence
6.15. Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after Step
3 is insufficient to deter the individual who committed the breach, or others, from
committing further or similar breaches, then the Authority may increase the
penalty.
6.16. In light of the seriousness of the breach and the position held by Mr Rowland during
the Relevant Period, the Authority considers that the Step 3 figure of £17,600 is
insufficient to deter Mr Rowland, or others, from committing further or similar
breaches. The Authority has increased the penalty at Step 4 by a multiple of 20.
6.17. Step 4 is therefore £352,000.
Step 5: settlement discount
6.18. Pursuant to DEPP 6.5B.5G, if the Authority and the individual 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 individual
reached agreement.
6.19. Mr Rowland and the Authority did not reach an agreement so no discount applies
to the Step 4 figure. The Step 5 figure is therefore £352,000.
6.20. The Authority has therefore decided to impose a total financial penalty of £352,000
on Mr Rowland for breaching Individual Conduct Rule 1 (COCON 2.1.1R).
6.21. As stated above, the Authority considers that Mr Rowland actions as described in
this Notice demonstrate that he lacks fitness and propriety because he lacks
integrity. As such, the Authority believes that it is appropriate to prohibit Mr
Rowland from performing any function in relation to any regulated activity carried
on by any authorised person, exempt person or exempt professional firm.
7.
REPRESENTATIONS
7.1.
Annex B contains a brief summary of the key representations made by Mr Rowland,
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 Mr Rowland 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 under sections 57 and 67 of the Act 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
The Tribunal
8.3.
Mr Rowland 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, Mr Rowland has 28 days from the date on which this Notice
is given to him 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
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 matter which
identifies 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/
e-mail:
victoria.chaloyard@fca.org.uk.
Chair, Regulatory Decisions Committee
ANNEX A
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 56 of the Act provides that the Authority may make a prohibition order if it
appears to the Authority that an individual is not a fit and proper person to perform
functions in relation to a regulated activity carried on by an authorised person,
exempt person, or a person to whom, as a result of Part 20, the general prohibition
does not apply in relation to that activity. Such an order may relate to a specified
regulated activity, any regulated activity falling within a specified description, or all
regulated activities.
1.3.
Section 66 of the Act provides that the Authority may take action against a person
if it appears to the Authority that he is guilty of misconduct and the Authority is
satisfied that it is appropriate in all the circumstances to take action against him.
1.4.
Section 66A of the Act provides that for the purposes of action by the Authority
under section 66, a person is guilty of misconduct if any of conditions A to C is met
in relation to the person. Section 66A(2) sets out Condition A, which during the
Relevant Period stated that:
“(a) the person has at any time failed to comply with rules made by the FCA under
section 64A, and
(b) at that time the person was –
(i) an approved person,
(ii) an employee of a relevant authorised person, or
(iii) a director of an authorised person.”
1.5.
Section 66(3)(a) and (b) of the Act provides that if the Authority is entitled to take
action against a person under section 66, it may impose a penalty on him of such
amount as it considers appropriate, or publish a statement of his misconduct.
1.6.
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.”
1.7.
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.”
1.8.
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.
1.9.
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.
The Code of Conduct Sourcebook (COCON) was issued under section 64A of the
Act. COCON sets out the rules of conduct which apply to individuals within the
scope of COCON, which during the Relevant Period included SMF managers
according to COCON 1.1.2R(1).
2.2.
COCON 1.1.6R provides that in relation to ’a person (P) who is an approved person,
COCON applies to the conduct of P in relation to the performance by P of functions
relating to the carrying on of activities (whether or not regulated activities) by the
firm on whose application approval was given to P’.
Individual conduct rules
2.3.
Chapter 2 of COCON sets out the Individual Conduct Rules. COCON 2.1.1R
(Individual Conduct Rule 1) provides that a person must act with integrity.
The Fit and Proper Test for Employees and Senior Personnel (“FIT”)
2.4.
The part of the Authority’s Handbook entitled “The Fit and Proper Test for Approved
Persons” sets out the criteria that the Authority will consider when assessing the
fitness and propriety of a candidate whom the firm is proposing to put forward for
approval as an FCA-approved SMF manager. FIT is also relevant in assessing the
continuing fitness and propriety of a person approved to perform the function of an
FCA-approved SMF manager.
2.5.
FIT 1.3.1G states that the Authority will have regard to a number of factors when
assessing the fitness and propriety of a person. In the Authority’s view, the most
important considerations will be the person’s honesty, integrity and reputation;
competence and capability; and financial soundness.
Enforcement Guide (“EG”)
2.6.
The Authority’s policy for exercising its power to make a prohibition order is set out
in Chapter 9 of EG.
EG 9.1 states that the Authority may exercise this power where it considers that,
to achieve any of its regulatory objectives, it is appropriate either to prevent an
individual from performing any functions in relation to regulated activities or to
restrict the functions which he may perform.
Decision Procedure and Penalties Manual (“DEPP”)
2.7.
Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the
Authority’s statement of policy on the imposition of a financial penalty or public
censure. In particular, DEPP 6.5B sets out the five steps for penalties imposed on
individuals in a non-market abuse case in respect of conduct taking place on or
after 6 March 2010.
ANNEX B: REPRESENTATIONS
1. A summary of the key representations made by Mr Rowland, and by the third party,
David Rowland, and the Authority’s conclusions in respect of them (in bold type),
is set out below.
Mr Rowland’s Representations
The Background
2. It is necessary to consider the wider context within which the matters in this case
occurred.
3. Mr Rowland, and David Rowland, often find themselves subject to (unwanted) press
interest and press intrusion. Mr Rowland’s experiences with the press over the
years has left him very cynical of journalists, including when they engage on
matters relating to the Rowland Family’s business interests.
4. Mr Rowland’s priority during the Relevant Period was working on the Financial
Institution, and he stood down as the Chief Executive of the London Branch of the
Firm in April 2017, so he could focus on the Financial Institution, including obtaining
regulatory approval for it from the relevant financial services regulator. This meant
that Mr Rowland had to make himself subject to intense regulatory scrutiny in the
UAE, including by attending numerous long interviews with the relevant regulator.
In circumstances where Mr Rowland was subjecting himself to such intense
regulatory scrutiny, Mr Rowland was particularly alive to the risk of any missteps
that might impact the prospects of the Financial Institution securing the necessary
regulatory approval. The Financial Institution was not a Firm venture (it was non-
Bank Business).
5. Following his resignation in April 2017, Mr Rowland’s executive responsibilities
within the London Branch came to an end, although he continued to work from the
London Branch’s office irregularly and he was therefore available to provide ad-hoc
assistance to anyone in the office who asked for it. On about 26 September 2017,
Mr Rowland accepted a request from the departing Chief Executive to act as
caretaker Chief Executive.
6. Individual A has been based in the UAE for over 20 years; he has been a friend and
close confidant of Mr Rowland and David Rowland for many years. Individual A has
considerable expertise in doing business in the Middle East and is very well
connected. He has been a trusted advisor to Mr Rowland and David Rowland,
particularly in relation to any issues connected with the Middle East. For this reason,
whenever Mr Rowland shared information with David Rowland about wider business
interests in the Middle East, Mr Rowland would generally share the same
information with Individual A.
The Presentation
7. On 30 August 2017, Mr Rowland and David Rowland met by appointment a senior
representative of a UAE sovereign wealth fund in the bar and coffee areas of a
London hotel. The meeting was fairly informal and was intended to cover “Hellos,
Football, the Financial Institution, RDIF, Request”. Towards the end of the meeting,
while David Rowland was in the cloakroom, the senior representative mentioned to
Mr Rowland that UAE banks had holdings in Qatari bonds and that consideration
was being given to ways in which the risks associated with those holdings could be
ring-fenced; the UAE needed to hedge its Qatari assets, because the value of those
assets was being adversely affected by the UAE’s diplomatic actions against Qatar.
He asked Mr Rowland to put together a few pages of ideas on how this might be
achieved. Mr Rowland understood that the senior representative was referring to
Qatari bonds held by UAE banks. The request to Mr Rowland was very general,
vague and high-level and there was no deadline. Mr Rowland therefore considered
the request as an unimportant and low priority matter that would most likely never
be mentioned again.
8. Mr Rowland’s instructions to Mr Bolelyy, on around 11 September 2017, were brief:
he said that UAE banks had holdings in Qatari bonds and were looking at ways of
hedging those investments. Mr Rowland asked Mr Bolelyy to do some research and
put together a note. Mr Rowland emphasised that the project was a ‘non-Bank’
project and that he should not invest too much time or energy in it.
9. On 12 September 2017, Mr Bolelyy sent an email to himself with a number of bullet
points under the heading “Qatar”. Mr Rowland had nothing to do with that email or
the notes contained within it. Mr Bolelyy has stated that this email contained notes
of a conversation he had with Mr Weller. Mr Weller has simply stated that he had
“no recollection” of providing the information but that it was “very unlikely” that he
did. The documentary evidence that does exist supports Mr Bolelyy’s account.
10. Mr Rowland thinks it likely that he met Individual A on 13 September 2017 at the
London Branch office. Mr Rowland does not recall attending this” meeting arranged
by Mr Bolelyy which was occurring at the same time as his meeting with Individual
A. The documentary evidence suggests that Mr Rowland was not one of the
individuals invited to the meeting on 13 September 2017 and that he did not attend
it. As he was not at this meeting Mr Rowland cannot comment on what was
discussed. The recollection of another employee of the Firm that Mr Rowland was
present at this meeting on 13 September 2017 should not be relied on and may
not be impartial; the employee concerned had difficulty in recalling the role played
by Mr Rowland at the meeting, and Mr Rowland’s own account (and Mr Bolelyy’s
account) is consistent with the documentary evidence.
11. Mr Rowland does recall that, later that day, there was another gathering of
employees after a senior individual announced his departure from the Firm.
Towards the end of this gathering, Mr Weller mentioned something about assisting
Mr Bolelyy with the document he had been working on for Mr Rowland, and Mr
Weller was animated in this discussion.
12. Mr Rowland played no role in the drafting of the Presentation after this meeting nor
in the creation of Mr Weller’s SFNH Document. Mr Rowland did not have an
opportunity to review the Presentation at the material time. Had he read it, he
would not have permitted it to go any further. There is nothing which links the
contents of Mr Weller’s SFNH Document with anything that was requested by Mr
Rowland.
13. Mr Rowland asked for a copy of Mr Bolelyy’s draft “Qatar presentation” on 18
September 2017 because he thought that he might be meeting the senior
representative of the Abu Dhabi sovereign wealth fund during his forthcoming trip
to Abu Dhabi; there was therefore a chance, albeit remote, that the senior
representative might mention his earlier request for some thoughts on how UAE
banks might hedge their exposure to Qatar. Mr Rowland had not reviewed the draft
document but would have done so before permitting it to be disseminated. He may
also have wished to discuss it with Individual A and David Rowland, hence his
reason for forwarding the document to them. He forwarded the document to them
immediately because he knew it was a draft that needed to be reviewed and he
was sending it to the people who might wish to review it. The facts that Mr
Rowland’s emails had no covering explanation reflected the fact that he did not
consider the Presentation to be particularly important.
14. Neither the Presentation nor its contents were remotely close to an acceptable
standard for dissemination. It was not intended that it should be disseminated to
representatives of the UAE and/or other states in the Middle East. Had Mr Rowland
intended to disseminate the Presentation as a marketing tool, he would have asked
for more than two copies. The Presentation was not handed to anyone at the Abu
Dhabi sovereign wealth fund. It is outlandish to suggest that Mr Bolelyy, a junior
employee, would deliver an unreviewed, highly sensitive document to an important
business contact without any clearance whatsoever from his supervisor.
15. There is no evidence of any reaction to the Presentation from the Abu Dhabi
sovereign wealth fund. Nor is there any evidence, or investigation into, how the
Presentation was subsequently put into the public domain by journalists. The UAE
Ambassador has stated that he did not receive the Presentation and it was never
sent to him.
16. Individual A and David Rowland were not aware of the contents of the Presentation
before it was sent to them on 18 September 2017. There is no evidence to support
the allegation that they were. In addition, Mr Rowland was unaware of the contents
of the Presentation at this time.
17. On 27 August 2017, Mr Rowland referred to the forthcoming meeting on
30 August 2017 in an email to a colleague, stating : “they have another
potential opportunity they want me to look at also” (see paragraph 4.7 of
the Decision Notice). This email appears to relate to the request made at
the meeting for advice with respect to the UAE’s holdings of Qatari bonds.
It is notable that Mr Rowland’s use of the phrase “another potential
opportunity” is consistent with Mr Bolelyy’s subsequent choice of file name
for the Presentation (namely Qatar Opportunity.ppt).
18. On Mr Rowland’s own account, which the Authority does not accept as
accurate, following his discussions with the senior representative of the
Abu Dhabi sovereign wealth fund on 30 August 2017, he asked Mr Bolelyy
to do some research and put together a note on hedging strategies for
Qatari bonds, i.e. he asked him to undertake investment analysis. This
would have involved a regulated activity and within Mr Bolelyy’s job
description as a “Senior Investment Analyst”. Whether or not Mr Rowland
told Mr Bolelyy at the time that it was not a Bank-related matter is not
determinative. 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.
19. On 12 September 2017 Mr Bolelyy sent himself an email with the “Qatar
Opportunity file”, notes and bullet points. The Authority considers that this
first version of the Presentation reflects the intention behind its creation,
namely, to outline potential strategies and actions that would negatively
impact Qatar. In the Authority’s view Mr Rowland must have been the
source of the instructions in light of which Mr Bolelyy drafted the first
version of the Presentation on 12 September 2017. The Authority
considers it highly unlikely, and unrealistic, in the circumstances that Mr
Weller would have taken it upon himself to persuade Mr Bolelyy to go far
beyond what their boss (i.e. the former Chief Executive and son of the
ultimate controller of the Firm) now says that he wanted, namely a
“vanilla” hedging note, and instead produce a highly improper plan about
an “opportunity” aimed at breaking the Qatari currency peg. The Authority
has concluded that only Mr Rowland would have had the confidence (due
to his position in the Rowland Family and seniority within the Firm) and
the motivation (a desire to curry favour in particular in the UAE) to suggest
such obvious impropriety.
20. The meeting on 13 September 2017 was convened by Mr Bolelyy on the
direct instructions from Mr Rowland. The Authority has considered the
evidence from the other employee of the Firm and Mr Weller, together with
the evidence from Mr Bolelyy and Mr Rowland, as to what took place at
this meeting. The other employee stated that Mr Rowland began the
meeting asking how one might, hypothetically, devalue Qatar’s currency.
In the notes of his interview conducted on behalf of the Firm the other
employee is recorded as stating, “the meeting was clear about the plan
‘how can we undermine the Qatar economy’”. Mr Weller’s account was
similar “the question asked by Edmund was how could a George
Soros/GBP type situation from the 1990s be applied to Qatar today”. The
other employee did not get involved with the Presentation and the
accounts of him and Mr Weller align reasonably closely with the two emails
sent by Mr Bolelyy that day. The other employee admitted that he could
not remember every specific detail. Admitting this does not, in itself, make
his recollection unreliable. The Authority considers that he appears to be
a credible and reasonably objective witness. Having considered all the
relevant evidence, the Authority has concluded that Mr Rowland was
present at the meeting on 13 September 2017.
21. Mr Weller has stated that he only discussed ideas (which led to the
preparation of the SFNH Document on 14 September 2017) as to how
undermine the Qatari currency peg with Mr Bolelyy after the meeting on
13 September 2017. The Authority considers that Mr Weller’s account of
the reason for preparation of the SFNH Document is a credible explanation.
The SFNH Document was not the sole source of the Presentation. Following
receipt of the SFNH Document, on 14 September 2017, Mr Bolelyy created
drafts of the Presentation which contained additional material that was
not included in the SFNH Document. For example, the SFNH Document
makes no mention of the use of a “protected cell company”, yet that
concept appears in the Presentation.
22. The contemporaneous documentary evidence shows that Mr Rowland
continued to play a role in the creation of the Presentation after the
meeting on 13 September 2017. This is demonstrated by two emails sent
by Mr Bolelyy to Mr Rowland soon after the meeting on 13 September 2017
and on the following day, the latter stating: “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?” This indicates that Mr Bolelyy was
requesting further input from Mr Rowland. Mr Bolelyy followed this with
an email to Mr Rowland on 18 September 2017 attaching a copy of the
Presentation and stating: “Sure. Attached is the latest and same version I
gave you this afternoon for review”. These emails contradict Mr Rowland’s
assertion that he did not show and real interest in the Presentation or its
contents, and instead show his continuing oversight of the work he had
tasked Mr Bolelyy with.
23. Mr Rowland asked Mr Bolelyy to print out the latest version of the
Presentation on 18 September 2017 before his upcoming trip to Abu Dhabi
and shortly afterwards, on the same day, Mr Rowland requested it to be
emailed to him. He then forwarded the Presentation, without a covering
message, to Individual A and David Rowland. The Authority considers that,
given the absence of any covering message, it is likely that Individual A
and David Rowland already had some awareness of what the Presentation
was about.
24. The Authority considers that Mr Rowland did authorise Mr Bolelyy to give
the Presentation to the Abu Dhabi sovereign wealth fund for the reasons
set out in the section below: Was the Presentation given?
Press reports and the Firm’s response
25. On 12 October 2017, the Indian Article was published. Mr Rowland did not read the
article at the time of its publication. His reaction to the publication (responding to
Mr Weller’s email by saying “made me laugh”) is consistent with him (i) not drawing
a connection between the Indian Article and the hedging document that he had
asked Mr Bolelyy to produce and (ii) not knowing about the content of the
Presentation. If Mr Rowland had known of the content, he would not have found
the article humorous but instead considered it to be very serious.
26. On 13 October 2017, Mr Rowland received a telephone call from a journalist from
an online media outlet called ‘The Intercept’. Mr Rowland recalled that at the time
he instinctively connected the request to discuss Qatar with the work he was doing
in the Middle East, in particular with respect to the Financial Institution rather than
the Presentation. After the journalist contacted the Firm’s US lawyers, Mr Rowland
considered it to be appropriate for there to be a formal response and a form of
words was agreed, reflecting the fact that Mr Rowland now thought that the
journalist might be referring to the hedging document that he had asked Mr Bolelyy
to produce. The proposed press statement1 made it clear that the Firm did not deal
in the type of instruments that would commonly be used for hedging purposes.
27. Mr Rowland had a telephone call with David Rowland on 13 October 2017. During
the call, neither Mr Rowland nor David Rowland said anything about the actual
content of the Presentation. This is consistent with neither of them knowing about
it. David Rowland’s primary concern was that his mobile phone might have been
hacked whilst he was in Abu Dhabi. When Mr Rowland’s father referred to a
presentation that he thought the journalists might have had, he was not referring
to the Presentation but to a different presentation he had been sent regarding the
Financial Institution.
28. Mr Rowland had a further telephone call with David Rowland on 19 October 2017.
At this time, Mr Rowland had still not read the Presentation. This is clear, as Mr
Rowland tells David Rowland that, if he were to look at the Presentation, he would
see that all it contains is information about hedging strategies to protect an
investment. Mr Rowland would not, and did not, lie to his father about the content
of the Presentation.
29. Mr Rowland was shocked when he finally read the Presentation on 9 November
2017 (after the Intercept published its article). It was not what Mr Rowland had
asked Mr Bolelyy to produce.
30. The Authority considers that Mr Rowland was aware of the contents of the
Presentation at the time of the publication of the Indian Article for, inter
alia, the reasons set out in the above section: The Presentation and in the
below section: Was the Presentation given? This second section details the
Authority’s conclusions arising from the telephone calls between Mr
Rowland and David Rowland.
31. The Authority also refers to the contact which Mr Rowland, and the Firm,
had with the Firm’s US lawyers following the contact from the Intercept
journalist. Mr Rowland’s assertion that he assumed the telephone call with
1 See paragraph 4.40 of the Decision Notice
the Intercept journalist related to the work he was doing in relation to the
Financial Institution is not reflected in the subsequent press statement2,
which makes no reference to the Financial Institution or the sort of work
it would have done.
32. The Authority also notes the list of questions that the Intercept journalist
had prepared, which had been forwarded to Mr Rowland on 18 October
2017, and considers it highly unlikely that Mr Rowland could have believed
that the Presentation was simply a “vanilla” hedging document.
33. In addition, during a telephone call Mr Rowland subsequently had with
another senior employee of the Firm, shortly after the publication of the
Intercept Article on 9 November, the senior employee said: “I was [good]
before I read that thing on the Intercept… So I think we can agree that
there is nothing good in this article”. Mr Rowland replied “No, nothing
good, nothing bad. I would just say that it’s not”. The senior employee
then stated: “No, it’s very bad, Edmund, it is very bad. It’s – it’s very bad”.
The Authority infers from this exchange that Mr Rowland was trying, even
at this late stage, to persuade the senior employee that there was nothing
wrong about the contents of the Presentation.
34. The Authority also considers as relevant the following undated notes
(which had been deleted but were subsequently recovered) made on Mr
Rowland’s telephone:
“Reframe the agenda Q attacks pattern over last 6-9 months Macro note
hedging No named security No reply back Hubris, embellished Work was
not reviewed Took responsibility resigned with immediate effect No trades
have ever been done, attempted to be done, have accounts that can even
trade them or have attempted to open accounts that can trade
Instruments we do not know what they our, in an entity that does not
exist, with asserts we Do not they have, by entities we do not know.
Regulated banks No meetings, discussion, face to face or electronic has
ever occurred on the matter, and it was never mentioned again We where
2 ibid
38
never to be involved as bank, company or individuals in any way [the Abu
Dhabi sovereign wealth fund] is a large swf had just committed 75 million
to new bank short macro hedging note”. [sic]
These notes demonstrate Mr Rowland’s thinking (and how he sought to
“reframe the agenda”) over the Relevant Period.
Regulated activity
35. 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 (Integrity)
or, indeed, any of the Principles for Businesses part of the Authority’s Handbook of
Rules and Guidance.
36. 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.
37. 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.
38. The Presentation was not given to anyone; and it was not intended to be given to
an investor or potential investor (or agent thereof).
39. 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.
40. 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”3. Advice
“requires an element of opinion on the part of the adviser. In effect, it is a
recommendation as to a course of action”4. 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.
41. 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”.
42. 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)5] (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.
3 Lord Hoffman in South Australia Asset Corp v York Montague [1996] 3 All E.R. 365 at 372j,
4 PERG 5.8.8 G
5 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.
The Application of COCON
43. COCON 1.1.6R provides that for a person who is an approved person, as
Mr Rowland was during the Relevant Period, COCON applies to his conduct
in relation to his performance of functions relating to the carrying on of
activities (whether or not regulated activities) by the Firm. The Authority
considers that the creation of the Presentation was an activity carried out
by the Firm (see the section Bank Business below).
44. COCON applies to the conduct of Mr Rowland, whether or not the
Presentation was regulated (as the Authority has concluded it was), or
unregulated, activity. Accordingly, Mr Rowland’s arguments with respect
to whether the Presentation was regulated advice do not affect the
application of COCON to the performance of his functions relating to the
carrying on of activities in question by the Firm, since this would be the
case, even if the activities were not regulated. Notwithstanding this, since
Mr Rowland has argued at length that the Presentation was not regulated
advice, the Authority sets out below the reasons why it does not agree
with that argument.
Was the Presentation given?
45. As requested by Mr Rowland, Mr Bolelyy printed off two copies of the
Presentation to take on their forthcoming 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.
46. 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.
47. 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 Firm’s internal 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.
48. 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 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 appeared to see publication of the Firm’s
involvement as “a badge of honour” with respect to the Abu Dhabi
sovereign wealth fund.
49. 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?
50. 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.
51. The Authority considers that the Presentation was given to an Abu Dhabi
sovereign wealth fund 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 assisting 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?
52. 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.
53. The fact that advice was not implemented (or even could not be
implemented) does not stop it from being advice. So, for example, an
incompetent failure to implement advice does not turn that advice into
mere information.
54. 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).
55. 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.
56. 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.
57. 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.
58. 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 was “advice on the merits”.
Did the advice relate to a “particular” or a specific investment?
59. 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”6.
60. 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); (iii) wash-trading with an affiliated party;
(iv) buying CDS on Qatar “to move the price” of the bonds; and (v) 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”).
61. 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.
62. 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
6 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.
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.
63. 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 Authority
considers that the advice about the Underlying Investment was advice in
relation to a specific investment.
64. The Authority further 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
65. Mr Rowland 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).
66. 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 Mr Rowland’s submissions the Authority makes the
following observations.
67. 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).
68. 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.
69. Mr Bolelyy’s Presentation was a non-Bank project and therefore Mr Rowland’s
actions in relation to it were not connected with the activities of the Firm. As a
result, there can be no regulatory breach and the Authority does not have
jurisdiction to impose a penalty on Mr Rowland. COCON 2.1.1R applies to a person’s
conduct only “in relation to the performance [by the person] of functions relating
to the carrying on of activities … by the firm on whose application approval was
given to [the person]”.
70. The non-Bank nature of the Presentation is clear from, inter alia, the following:
•
The Presentation was not produced on the Firm’s materials; in fact, an early
draft of the document appears to have been produced on the Financial
Institution’s materials.
•
Mr Bolelyy was assisting Mr Rowland in relation to matters outside of the
Firm, including in relation to the Financial Institution. It was in that capacity
that Mr Bolelyy came to produce the Presentation.
•
Mr Rowland was not the Chief Executive of the London Branch when he
tasked Mr Bolelyy with preparing the document.
•
The Presentation was produced following a request from the senior
representative of the Abu Dhabi sovereign wealth fund with whom the
Rowland Family were doing business through the Financial Institution joint
venture.
•
There is no evidence that Mr Rowland, or anyone else, attempted to use the
Presentation to market the Firm.
•
The Presentation was so absurd that it would have been a useless marketing
tool and the Firm could never have been a vehicle for carrying out the plan
in the Presentation.
71. 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, 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.
72. Mr Bolelyy was not a “personal assistant” for the purpose of COCON
1.1.2R(6)(r)7. 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.
73. 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 spent 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.
74. In the same way, meetings with representatives of an Abu Dhabi sovereign
wealth fund, to discuss, inter alia, the Financial Institution project, did not
preclude discussions occurring on other matters, including matters which
7 COCON 1.1 Application: COCON 1.1.2R(6): Persons to whom COCON applies
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.
75. Prior to the meeting on 30 August 2017 Mr Rowland had mentioned it 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 request for advice which led to the
creation of the Presentation.
76. Working on the proposed establishment of the Financial Institution did not
preclude Mr Rowland, or indeed anyone else, from separately working on
Bank Business.
77. 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, 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.
78. The Presentation 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];
and David Rowland said that “we can capitalise on this”.
Integrity and Financial Penalty
79. Mr Rowland did not act with a lack of integrity. The Presentation was very different
to the document Mr Bolelyy had been asked to produce by Mr Rowland. Mr Bolelyy,
a junior individual, was instructed to produce a document about how UAE banks
could hedge their exposure to Qatar but he ended up producing a very different
document, in part assisted (or encouraged) by others, including Mr Weller, who
were seeking to impress Mr Rowland and who may have sought to ‘read between
the lines’ as to the true nature of the request (or who may simply have found the
whole thing humorous). Mr Rowland was not responsible.
80. As a matter of jurisdiction, the FCA cannot impose a financial penalty on Mr Rowland
in relation to his conduct as regards the Presentation because it was a non-Bank
project. Mr Rowland did not act with a lack of integrity and therefore he did not
breach COCON 2.1.1R. It is therefore inappropriate to impose any financial penalty.
81. The proposed penalty is grossly disproportionate. This is particularly so given the
penalty proposed in relation to Mr Bolelyy, who was the creator of the Presentation,
and the penalty proposed in relation to Mr Weller, who created the SFNH Document
and therefore was key to a large part of the contents of the Presentation. Mr
Weller’s culpability is, at a minimum, on a par with Mr Rowland’s culpability, if not
greater. The Warning Notice purports to apply the five-step penalty process, but at
Step 4 of that process a very substantial uplift is applied. There is no basis for
requiring such a disproportionate uplift at Step 4 in relation to Mr Rowland,
particularly given the limited role he played at the London Branch (his work at the
time being focused on the Financial Institution) and his low salary. In addition, the
seriousness of Mr Rowland’s alleged misconduct is not ‘Level 5’, particularly with
Mr Weller’s misconduct being proposed at Level 4. The justification for a very
substantial Step 4 increase to reflect Mr Rowland’s misconduct in “creating and
disseminating” the Presentation is baseless as Mr Rowland did not “disseminate”
the document nor did he “create” it (as this was drafted by Mr Bolelyy with
significant assistance from Mr Weller and the non-Firm employee).
82. The Authority considers that the Presentation was Bank Business and
contained regulated advice and that Mr Rowland acted without integrity
and breached COCON 2.1.1R. Accordingly, it is permitted to impose a
financial penalty on Mr Rowland.
83. The Authority considers that Mr Rowland was the instigator and the driver
behind the creation and the dissemination of the Presentation. He took
steps to cover up his conduct throughout the Relevant Period. His level of
personal culpability was more serious than the culpability of Mr Weller and
Mr Bolelyy and justifies the most serious Level 5 finding.
84. The Authority considers a significant deterrence uplift is justified at Step
4. Mr Rowland’s relevant income in the 12 months preceding the last day
of his breach (i.e. 13 November 2017) was £44,000. This relatively modest
figure covered Mr Rowland’s time being the Chief Executive of the London
Branch for much of this 12 month period. The Step 2 figure, with a finding
of the most serious Level 5 misconduct, becomes £17,600. The Authority
considers that this would be insufficient to deter Mr Rowland, or others,
from committing further or similar breaches.
85. The Authority considers that the financial penalty at Step 4 should be
increased by a multiple of 20. The financial penalty is therefore £352,000.
David Rowland’s Representations
86. 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”.
87. 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.
88. 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.
89. 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.
90. 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.
91. 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.
92. 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.
93. 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.
94. 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”.
95. 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.
96. 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.
Individual
Reference
Number:
ELR01010
1.
ACTION
1.1.
For the reasons given in this Notice, the Authority has decided to:
1.1.1.
impose on Mr Edmund Lloyd Rowland a financial penalty of £352,000
pursuant to section 66 of the Act; and
1.1.2.
make an order, pursuant to section 56 of the Act, prohibiting Mr Rowland
from performing any function in relation to any regulated activity carried
on by any authorised or exempt person, or exempt professional firm.
2.
SUMMARY OF REASONS
2.1.
During the Relevant Period, Mr Rowland played a key role in the creation and
dissemination of a document, namely the Presentation, which contained obviously
improper advice for potential investors by recommending manipulative trading
Edmund Rowland has referred this Decision Notice to the Upper
Tribunal to determine: (a) in relation to the FCA’s decision to
impose a financial penalty, what (if any) is the appropriate action
for the FCA to take, and remit the matter to the FCA with such
directions as the Upper Tribunal considers appropriate and (b) in
relation to the prohibition order, whether to dismiss the 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.
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.
2
strategies, including recommending conduct which could be a criminal offence, had
it taken place in the UK. At the time, Mr Rowland was a senior manager in the Firm.
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
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.
Mr Rowland tasked employees of the Firm to draft the Presentation. He then
emailed it to David Rowland and Individual A, with the intention that it be presented
subsequently to representatives of the UAE and/or other states in the Middle East
region (who he considered might have reasons to want to put economic pressure
on Qatar) as a way of marketing the Firm’s services. Mr Rowland also instructed a
more junior staff member, Vladimir Bolelyy, to provide a copy of the Presentation
to an employee at an Abu Dhabi sovereign wealth fund.
2.5.
The Presentation signalled to potential clients that Mr Rowland was willing to be
involved in manipulative trading, and allow the Firm to be used to facilitate such
potentially unlawful activities. The Authority considers it particularly serious that
Mr Rowland, as a person who held a position of significant influence within an
authorised firm, was not only involved himself but also engaged a more junior staff
member at the Firm to work on the Presentation.
2.6.
By virtue of the misconduct described in this Notice Mr Rowland failed to act with
integrity in breach of Individual Conduct Rule 1 (COCON 2.1.1R) and demonstrated
3
that he is not a fit and proper person to perform any function in relation to any
regulated activities.
2.7.
The Authority has decided to (i) impose on Mr Rowland a financial penalty of
£352,000 pursuant to section 66 of the Act, and (ii) make an order prohibiting Mr
Rowland from performing any function in relation to any regulated activities carried
on by any authorised or exempt person, or exempt professional firm pursuant to
section 56 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 swap;
“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;
“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;
“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;
“Individual A” means the individual engaged by the Firm to market its services in
the UAE and the wider Middle East region;
“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;
“Mr Rowland” means Edmund Lloyd Rowland;
“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;
“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;
“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;
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber);
“UAE” means United Arab Emirates;
“Warning Notice” means the Warning Notice given to Mr Rowland 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
Mr Rowland and 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”.
4.2.
During the Relevant Period, Mr Rowland was approved by the Authority to carry out
the EEA branch senior manager function (“SMF21”) at the Firm. Those holding
SMF21 are employees who have 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. Mr Rowland
had considerable managerial influence within the Firm, both in terms of his
retention of the SMF21 role and his day-to-day involvement with the London
Branch, throughout the Relevant Period. Mr Rowland’s responsibilities were,
amongst other things, to generate new business and give approval of new projects,
manage senior managers in the differing departments, and responsibility for day-
to-day decisions.
4.3.
The key individuals involved in this matter were all employed in the London Branch,
namely, Mr Rowland, David Edward Weller and Vladimir Bolelyy. During the
4.3.1. Mr Weller was the Head of Asset Management at the London Branch and
was also approved by the Authority as a SMF21; he reported to Mr Rowland
and to the Firm’s Group Head of Asset Management.
4.3.2. Mr Bolelyy was employed by the Firm as a senior investment analyst and
was Mr Rowland’s assistant reporting directly to him.
4.4.
Throughout the Relevant Period, Mr Rowland, Mr Weller and Mr Bolelyy were
employed by and received salary from the Firm only.
Marketing in the UAE
4.5.
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”. His professional assistance was defined as to expand “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 USD 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 (Abu Dhabi is the capital of the UAE).
The Qatar diplomatic crisis
4.6.
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
7
4.7.
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 a UAE 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
4.8.
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”.
4.9.
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
4.10. 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.
4.11. At the meeting, which appears to have lasted for about a quarter of an hour and
was subsequently described by Mr Weller 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
$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.
4.12. The Authority infers that Mr Rowland intended for the Presentation to be presented
to representatives of the UAE and/or other states in the Middle East region who he
considered might have reasons to want to put economic pressure on Qatar, and
that Mr Rowland was motivated by the potential to earn fees for Rowland Family
interests which included 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 clients that Mr
Rowland and the Firm were willing to countenance improper market conduct in
order to advance their interests.
4.13. 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
4.14. 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”, which the Authority infers meant at least Mr Rowland, who was copied
into this request.
4.15. 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?”.
4.16. 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.
4.17. This version of the Presentation also 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”.
4.18. 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.
4.19. 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 he did not regard the contents of the SFNH Document as
representing a serious proposal and that it was simply reflective of a subject Mr
Rowland wished to explore.
4.20. 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”.
4.21. 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”.
4.22. 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”.
4.23. 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.
4.24. 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.
4.25. 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”.
4.26. 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 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
4.27. 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.
4.28. 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”.
4.29. 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.
4.30. 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 sovereign wealth fund.
4.31. 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). Mr Rowland directed the creation of the Presentation and also
directed the dissemination of the Presentation externally.
Press reports and the Firm’s response
4.32. 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).
4.33. 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”).
4.34. The Indian Article referred to leaked or stolen emails from the Firm allegedly found
in the inbox 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…”.
4.35. At 12.35pm 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”.
4.36. At 3.02pm, Mr Weller sent a further email to Mr Rowland 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…”
4.37. 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 Sovereign Wealth Fund which had been provided with a copy of the
Presentation during the visit referred to at paragraph 4.32 above.
4.38. Neither Mr Weller nor Mr Rowland forwarded either email to the Firm’s Compliance
officer, or to the Head Office, or took any other steps to inform other senior
management of the allegations. In addition, neither individual, nor anyone else at
the Firm, informed the Authority of these concerns.
4.39. 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 have allowed Mr Rowland to discover it on the Firm’s systems, stating
that he should search for “‘Qatar Opportunity’ and ‘Distressed Countries Fund.’ The
Mission Statement includes: ‘Control the Yield curve, decide the future”.
4.40. 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
David Rowland that “our story just has to be it’s purely politically motivated because
of our, because of your friendship with the Crown Prince, leave it, that might bring
us a lot of points.”
4.41. The Firm’s response to the Intercept, as directed by Mr Rowland, was as worded
above.
4.42. However, Mr Rowland took no steps to look for the Presentation on the Firm’s
internal systems or to investigate whether the allegations had any substance.
4.43. 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?”.
4.44. These further questions were shared with Mr Rowland by the Firm’s US lawyer, and
were forwarded on 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, Mr Rowland
failed to notify the Authority that an article containing these allegations was going
to be published.
4.45. 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”.
4.46. 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.
4.47. 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”.
4.48. 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”.
4.49. 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.
4.50. 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.
4.51. On 14 November 2017 Mr Rowland telephoned the Authority on behalf of the Firm,
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”.
4.52. On 13 December 2017 Mr Rowland resigned as an employee, Chief Executive of the
London Branch and member of 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
Individual Conduct Rule 1: You must act with integrity
5.2.
Individual Conduct Rule 1 required Mr Rowland to act with integrity in relation to
the performance by him of functions relating to the carrying on of activities
(whether or not regulated activities) by the Firm. During the Relevant Period, Mr
Rowland breached this requirement, whilst acting as an approved senior manager
of the Firm’s London Branch (SMF21), by creating and disseminating the
Presentation.
5.3. Mr Rowland failed to act with integrity because 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 could be a criminal offence if it took 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. Through the Presentation, Mr Rowland deliberately designed
a manipulative trading strategy intended to serve what he believed to be the political
interests of certain nation states and, in doing so, he put an authorised firm at risk
of facilitating financial crime. He did this in an attempt to produce economic benefits
for the Rowland Family interests (including the Firm) and himself by creating and
enhancing what he believed to be important relationships with influential people in
the UAE and elsewhere in the Middle East.
Not Fit and Proper
5.4. The Authority considers that Mr Rowland’s actions as described in this Notice
demonstrate that he lacks fitness and propriety because he lacks integrity.
6.
SANCTION
Financial penalty
6.1. The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of DEPP.
DEPP 6.5B sets out the details of the five-step framework that applies in respect of
financial penalties imposed on individuals in non-market abuse cases.
Step 1: disgorgement
6.2. Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual 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 Mr Rowland derived directly
from his breach.
6.4.
Step 1 is therefore £0.
Step 2: the seriousness of the breach
6.5.
Pursuant to DEPP 6.5B.2G, at Step 2 the Authority determines a figure that reflects
the seriousness of the breach. That figure is based on a percentage of the
individual’s relevant income. The individual’s relevant income is the gross amount
of all benefits received by the individual from the employment in connection with
which the breach occurred, and for the period of the breach.
6.6.
As Mr Rowland’s breach lasted less than 12 months, the relevant income will be
that earned by him in the 12 months preceding the last day of his breach, being 13
November 2017. The Authority considers Mr Rowland’s relevant income for this
period to be £44,000.
6.7.
In deciding on the percentage of the relevant revenue that forms the basis of the
Step 2 figure, the Authority considers the seriousness of the breach and chooses a
percentage between 0% and 40%. This range is divided into five fixed levels which
represent, on a sliding scale, the seriousness of the breach; the more serious the
breach, the higher the level. For penalties imposed on individuals in non-market
abuse cases there are the following five levels:
Level 1 – 0%
Level 2 – 10%
Level 3 – 20%
Level 4 – 30%
Level 5 – 40%
6.8.
In assessing the seriousness level, the Authority has taken into account various
factors which reflect the impact and nature of the breach, including that he held a
senior position in the Firm and caused more junior employees at the Firm to commit
breaches; and whether it was committed deliberately or recklessly. DEPP
6.5B.2G(12) lists factors which are likely to be considered ‘level 4 or 5 factors’. Of
these, the Authority considers the following factors to be most relevant:
6.8.1.
Mr Rowland actively encouraged conduct which potentially could be a
criminal offence, and financial crime, were it to take place in the UK in
the hope that the Firm and/or the Rowland Family would profit;
6.8.2.
Mr Rowland failed to act with integrity; and
6.8.3.
his breach was committed deliberately.
6.9.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. Of
these, the Authority considers the following factors to be relevant:
6.9.1.
Mr Rowland made no profit as a result of the breach.
6.10. 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
40% of £44,000.
6.11. Step 2 is therefore £17,600.
Step 3: mitigating and aggravating factors
6.12. Pursuant to DEPP 6.5B.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.
6.13. The Authority considers that there were no factors which aggravate or mitigate the
breach.
6.14. Step 3 is therefore £17,600.
Step 4: adjustment for deterrence
6.15. Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after Step
3 is insufficient to deter the individual who committed the breach, or others, from
committing further or similar breaches, then the Authority may increase the
penalty.
6.16. In light of the seriousness of the breach and the position held by Mr Rowland during
the Relevant Period, the Authority considers that the Step 3 figure of £17,600 is
insufficient to deter Mr Rowland, or others, from committing further or similar
breaches. The Authority has increased the penalty at Step 4 by a multiple of 20.
6.17. Step 4 is therefore £352,000.
Step 5: settlement discount
6.18. Pursuant to DEPP 6.5B.5G, if the Authority and the individual 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 individual
reached agreement.
6.19. Mr Rowland and the Authority did not reach an agreement so no discount applies
to the Step 4 figure. The Step 5 figure is therefore £352,000.
6.20. The Authority has therefore decided to impose a total financial penalty of £352,000
on Mr Rowland for breaching Individual Conduct Rule 1 (COCON 2.1.1R).
6.21. As stated above, the Authority considers that Mr Rowland actions as described in
this Notice demonstrate that he lacks fitness and propriety because he lacks
integrity. As such, the Authority believes that it is appropriate to prohibit Mr
Rowland from performing any function in relation to any regulated activity carried
on by any authorised person, exempt person or exempt professional firm.
7.
REPRESENTATIONS
7.1.
Annex B contains a brief summary of the key representations made by Mr Rowland,
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 Mr Rowland 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 under sections 57 and 67 of the Act 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
The Tribunal
8.3.
Mr Rowland 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, Mr Rowland has 28 days from the date on which this Notice
is given to him 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
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 matter which
identifies 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/
e-mail:
victoria.chaloyard@fca.org.uk.
Chair, Regulatory Decisions Committee
ANNEX A
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 56 of the Act provides that the Authority may make a prohibition order if it
appears to the Authority that an individual is not a fit and proper person to perform
functions in relation to a regulated activity carried on by an authorised person,
exempt person, or a person to whom, as a result of Part 20, the general prohibition
does not apply in relation to that activity. Such an order may relate to a specified
regulated activity, any regulated activity falling within a specified description, or all
regulated activities.
1.3.
Section 66 of the Act provides that the Authority may take action against a person
if it appears to the Authority that he is guilty of misconduct and the Authority is
satisfied that it is appropriate in all the circumstances to take action against him.
1.4.
Section 66A of the Act provides that for the purposes of action by the Authority
under section 66, a person is guilty of misconduct if any of conditions A to C is met
in relation to the person. Section 66A(2) sets out Condition A, which during the
Relevant Period stated that:
“(a) the person has at any time failed to comply with rules made by the FCA under
section 64A, and
(b) at that time the person was –
(i) an approved person,
(ii) an employee of a relevant authorised person, or
(iii) a director of an authorised person.”
1.5.
Section 66(3)(a) and (b) of the Act provides that if the Authority is entitled to take
action against a person under section 66, it may impose a penalty on him of such
amount as it considers appropriate, or publish a statement of his misconduct.
1.6.
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.”
1.7.
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.”
1.8.
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.
1.9.
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.
The Code of Conduct Sourcebook (COCON) was issued under section 64A of the
Act. COCON sets out the rules of conduct which apply to individuals within the
scope of COCON, which during the Relevant Period included SMF managers
according to COCON 1.1.2R(1).
2.2.
COCON 1.1.6R provides that in relation to ’a person (P) who is an approved person,
COCON applies to the conduct of P in relation to the performance by P of functions
relating to the carrying on of activities (whether or not regulated activities) by the
firm on whose application approval was given to P’.
Individual conduct rules
2.3.
Chapter 2 of COCON sets out the Individual Conduct Rules. COCON 2.1.1R
(Individual Conduct Rule 1) provides that a person must act with integrity.
The Fit and Proper Test for Employees and Senior Personnel (“FIT”)
2.4.
The part of the Authority’s Handbook entitled “The Fit and Proper Test for Approved
Persons” sets out the criteria that the Authority will consider when assessing the
fitness and propriety of a candidate whom the firm is proposing to put forward for
approval as an FCA-approved SMF manager. FIT is also relevant in assessing the
continuing fitness and propriety of a person approved to perform the function of an
FCA-approved SMF manager.
2.5.
FIT 1.3.1G states that the Authority will have regard to a number of factors when
assessing the fitness and propriety of a person. In the Authority’s view, the most
important considerations will be the person’s honesty, integrity and reputation;
competence and capability; and financial soundness.
Enforcement Guide (“EG”)
2.6.
The Authority’s policy for exercising its power to make a prohibition order is set out
in Chapter 9 of EG.
EG 9.1 states that the Authority may exercise this power where it considers that,
to achieve any of its regulatory objectives, it is appropriate either to prevent an
individual from performing any functions in relation to regulated activities or to
restrict the functions which he may perform.
Decision Procedure and Penalties Manual (“DEPP”)
2.7.
Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the
Authority’s statement of policy on the imposition of a financial penalty or public
censure. In particular, DEPP 6.5B sets out the five steps for penalties imposed on
individuals in a non-market abuse case in respect of conduct taking place on or
after 6 March 2010.
ANNEX B: REPRESENTATIONS
1. A summary of the key representations made by Mr Rowland, and by the third party,
David Rowland, and the Authority’s conclusions in respect of them (in bold type),
is set out below.
Mr Rowland’s Representations
The Background
2. It is necessary to consider the wider context within which the matters in this case
occurred.
3. Mr Rowland, and David Rowland, often find themselves subject to (unwanted) press
interest and press intrusion. Mr Rowland’s experiences with the press over the
years has left him very cynical of journalists, including when they engage on
matters relating to the Rowland Family’s business interests.
4. Mr Rowland’s priority during the Relevant Period was working on the Financial
Institution, and he stood down as the Chief Executive of the London Branch of the
Firm in April 2017, so he could focus on the Financial Institution, including obtaining
regulatory approval for it from the relevant financial services regulator. This meant
that Mr Rowland had to make himself subject to intense regulatory scrutiny in the
UAE, including by attending numerous long interviews with the relevant regulator.
In circumstances where Mr Rowland was subjecting himself to such intense
regulatory scrutiny, Mr Rowland was particularly alive to the risk of any missteps
that might impact the prospects of the Financial Institution securing the necessary
regulatory approval. The Financial Institution was not a Firm venture (it was non-
Bank Business).
5. Following his resignation in April 2017, Mr Rowland’s executive responsibilities
within the London Branch came to an end, although he continued to work from the
London Branch’s office irregularly and he was therefore available to provide ad-hoc
assistance to anyone in the office who asked for it. On about 26 September 2017,
Mr Rowland accepted a request from the departing Chief Executive to act as
caretaker Chief Executive.
6. Individual A has been based in the UAE for over 20 years; he has been a friend and
close confidant of Mr Rowland and David Rowland for many years. Individual A has
considerable expertise in doing business in the Middle East and is very well
connected. He has been a trusted advisor to Mr Rowland and David Rowland,
particularly in relation to any issues connected with the Middle East. For this reason,
whenever Mr Rowland shared information with David Rowland about wider business
interests in the Middle East, Mr Rowland would generally share the same
information with Individual A.
The Presentation
7. On 30 August 2017, Mr Rowland and David Rowland met by appointment a senior
representative of a UAE sovereign wealth fund in the bar and coffee areas of a
London hotel. The meeting was fairly informal and was intended to cover “Hellos,
Football, the Financial Institution, RDIF, Request”. Towards the end of the meeting,
while David Rowland was in the cloakroom, the senior representative mentioned to
Mr Rowland that UAE banks had holdings in Qatari bonds and that consideration
was being given to ways in which the risks associated with those holdings could be
ring-fenced; the UAE needed to hedge its Qatari assets, because the value of those
assets was being adversely affected by the UAE’s diplomatic actions against Qatar.
He asked Mr Rowland to put together a few pages of ideas on how this might be
achieved. Mr Rowland understood that the senior representative was referring to
Qatari bonds held by UAE banks. The request to Mr Rowland was very general,
vague and high-level and there was no deadline. Mr Rowland therefore considered
the request as an unimportant and low priority matter that would most likely never
be mentioned again.
8. Mr Rowland’s instructions to Mr Bolelyy, on around 11 September 2017, were brief:
he said that UAE banks had holdings in Qatari bonds and were looking at ways of
hedging those investments. Mr Rowland asked Mr Bolelyy to do some research and
put together a note. Mr Rowland emphasised that the project was a ‘non-Bank’
project and that he should not invest too much time or energy in it.
9. On 12 September 2017, Mr Bolelyy sent an email to himself with a number of bullet
points under the heading “Qatar”. Mr Rowland had nothing to do with that email or
the notes contained within it. Mr Bolelyy has stated that this email contained notes
of a conversation he had with Mr Weller. Mr Weller has simply stated that he had
“no recollection” of providing the information but that it was “very unlikely” that he
did. The documentary evidence that does exist supports Mr Bolelyy’s account.
10. Mr Rowland thinks it likely that he met Individual A on 13 September 2017 at the
London Branch office. Mr Rowland does not recall attending this” meeting arranged
by Mr Bolelyy which was occurring at the same time as his meeting with Individual
A. The documentary evidence suggests that Mr Rowland was not one of the
individuals invited to the meeting on 13 September 2017 and that he did not attend
it. As he was not at this meeting Mr Rowland cannot comment on what was
discussed. The recollection of another employee of the Firm that Mr Rowland was
present at this meeting on 13 September 2017 should not be relied on and may
not be impartial; the employee concerned had difficulty in recalling the role played
by Mr Rowland at the meeting, and Mr Rowland’s own account (and Mr Bolelyy’s
account) is consistent with the documentary evidence.
11. Mr Rowland does recall that, later that day, there was another gathering of
employees after a senior individual announced his departure from the Firm.
Towards the end of this gathering, Mr Weller mentioned something about assisting
Mr Bolelyy with the document he had been working on for Mr Rowland, and Mr
Weller was animated in this discussion.
12. Mr Rowland played no role in the drafting of the Presentation after this meeting nor
in the creation of Mr Weller’s SFNH Document. Mr Rowland did not have an
opportunity to review the Presentation at the material time. Had he read it, he
would not have permitted it to go any further. There is nothing which links the
contents of Mr Weller’s SFNH Document with anything that was requested by Mr
Rowland.
13. Mr Rowland asked for a copy of Mr Bolelyy’s draft “Qatar presentation” on 18
September 2017 because he thought that he might be meeting the senior
representative of the Abu Dhabi sovereign wealth fund during his forthcoming trip
to Abu Dhabi; there was therefore a chance, albeit remote, that the senior
representative might mention his earlier request for some thoughts on how UAE
banks might hedge their exposure to Qatar. Mr Rowland had not reviewed the draft
document but would have done so before permitting it to be disseminated. He may
also have wished to discuss it with Individual A and David Rowland, hence his
reason for forwarding the document to them. He forwarded the document to them
immediately because he knew it was a draft that needed to be reviewed and he
was sending it to the people who might wish to review it. The facts that Mr
Rowland’s emails had no covering explanation reflected the fact that he did not
consider the Presentation to be particularly important.
14. Neither the Presentation nor its contents were remotely close to an acceptable
standard for dissemination. It was not intended that it should be disseminated to
representatives of the UAE and/or other states in the Middle East. Had Mr Rowland
intended to disseminate the Presentation as a marketing tool, he would have asked
for more than two copies. The Presentation was not handed to anyone at the Abu
Dhabi sovereign wealth fund. It is outlandish to suggest that Mr Bolelyy, a junior
employee, would deliver an unreviewed, highly sensitive document to an important
business contact without any clearance whatsoever from his supervisor.
15. There is no evidence of any reaction to the Presentation from the Abu Dhabi
sovereign wealth fund. Nor is there any evidence, or investigation into, how the
Presentation was subsequently put into the public domain by journalists. The UAE
Ambassador has stated that he did not receive the Presentation and it was never
sent to him.
16. Individual A and David Rowland were not aware of the contents of the Presentation
before it was sent to them on 18 September 2017. There is no evidence to support
the allegation that they were. In addition, Mr Rowland was unaware of the contents
of the Presentation at this time.
17. On 27 August 2017, Mr Rowland referred to the forthcoming meeting on
30 August 2017 in an email to a colleague, stating : “they have another
potential opportunity they want me to look at also” (see paragraph 4.7 of
the Decision Notice). This email appears to relate to the request made at
the meeting for advice with respect to the UAE’s holdings of Qatari bonds.
It is notable that Mr Rowland’s use of the phrase “another potential
opportunity” is consistent with Mr Bolelyy’s subsequent choice of file name
for the Presentation (namely Qatar Opportunity.ppt).
18. On Mr Rowland’s own account, which the Authority does not accept as
accurate, following his discussions with the senior representative of the
Abu Dhabi sovereign wealth fund on 30 August 2017, he asked Mr Bolelyy
to do some research and put together a note on hedging strategies for
Qatari bonds, i.e. he asked him to undertake investment analysis. This
would have involved a regulated activity and within Mr Bolelyy’s job
description as a “Senior Investment Analyst”. Whether or not Mr Rowland
told Mr Bolelyy at the time that it was not a Bank-related matter is not
determinative. 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.
19. On 12 September 2017 Mr Bolelyy sent himself an email with the “Qatar
Opportunity file”, notes and bullet points. The Authority considers that this
first version of the Presentation reflects the intention behind its creation,
namely, to outline potential strategies and actions that would negatively
impact Qatar. In the Authority’s view Mr Rowland must have been the
source of the instructions in light of which Mr Bolelyy drafted the first
version of the Presentation on 12 September 2017. The Authority
considers it highly unlikely, and unrealistic, in the circumstances that Mr
Weller would have taken it upon himself to persuade Mr Bolelyy to go far
beyond what their boss (i.e. the former Chief Executive and son of the
ultimate controller of the Firm) now says that he wanted, namely a
“vanilla” hedging note, and instead produce a highly improper plan about
an “opportunity” aimed at breaking the Qatari currency peg. The Authority
has concluded that only Mr Rowland would have had the confidence (due
to his position in the Rowland Family and seniority within the Firm) and
the motivation (a desire to curry favour in particular in the UAE) to suggest
such obvious impropriety.
20. The meeting on 13 September 2017 was convened by Mr Bolelyy on the
direct instructions from Mr Rowland. The Authority has considered the
evidence from the other employee of the Firm and Mr Weller, together with
the evidence from Mr Bolelyy and Mr Rowland, as to what took place at
this meeting. The other employee stated that Mr Rowland began the
meeting asking how one might, hypothetically, devalue Qatar’s currency.
In the notes of his interview conducted on behalf of the Firm the other
employee is recorded as stating, “the meeting was clear about the plan
‘how can we undermine the Qatar economy’”. Mr Weller’s account was
similar “the question asked by Edmund was how could a George
Soros/GBP type situation from the 1990s be applied to Qatar today”. The
other employee did not get involved with the Presentation and the
accounts of him and Mr Weller align reasonably closely with the two emails
sent by Mr Bolelyy that day. The other employee admitted that he could
not remember every specific detail. Admitting this does not, in itself, make
his recollection unreliable. The Authority considers that he appears to be
a credible and reasonably objective witness. Having considered all the
relevant evidence, the Authority has concluded that Mr Rowland was
present at the meeting on 13 September 2017.
21. Mr Weller has stated that he only discussed ideas (which led to the
preparation of the SFNH Document on 14 September 2017) as to how
undermine the Qatari currency peg with Mr Bolelyy after the meeting on
13 September 2017. The Authority considers that Mr Weller’s account of
the reason for preparation of the SFNH Document is a credible explanation.
The SFNH Document was not the sole source of the Presentation. Following
receipt of the SFNH Document, on 14 September 2017, Mr Bolelyy created
drafts of the Presentation which contained additional material that was
not included in the SFNH Document. For example, the SFNH Document
makes no mention of the use of a “protected cell company”, yet that
concept appears in the Presentation.
22. The contemporaneous documentary evidence shows that Mr Rowland
continued to play a role in the creation of the Presentation after the
meeting on 13 September 2017. This is demonstrated by two emails sent
by Mr Bolelyy to Mr Rowland soon after the meeting on 13 September 2017
and on the following day, the latter stating: “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?” This indicates that Mr Bolelyy was
requesting further input from Mr Rowland. Mr Bolelyy followed this with
an email to Mr Rowland on 18 September 2017 attaching a copy of the
Presentation and stating: “Sure. Attached is the latest and same version I
gave you this afternoon for review”. These emails contradict Mr Rowland’s
assertion that he did not show and real interest in the Presentation or its
contents, and instead show his continuing oversight of the work he had
tasked Mr Bolelyy with.
23. Mr Rowland asked Mr Bolelyy to print out the latest version of the
Presentation on 18 September 2017 before his upcoming trip to Abu Dhabi
and shortly afterwards, on the same day, Mr Rowland requested it to be
emailed to him. He then forwarded the Presentation, without a covering
message, to Individual A and David Rowland. The Authority considers that,
given the absence of any covering message, it is likely that Individual A
and David Rowland already had some awareness of what the Presentation
was about.
24. The Authority considers that Mr Rowland did authorise Mr Bolelyy to give
the Presentation to the Abu Dhabi sovereign wealth fund for the reasons
set out in the section below: Was the Presentation given?
Press reports and the Firm’s response
25. On 12 October 2017, the Indian Article was published. Mr Rowland did not read the
article at the time of its publication. His reaction to the publication (responding to
Mr Weller’s email by saying “made me laugh”) is consistent with him (i) not drawing
a connection between the Indian Article and the hedging document that he had
asked Mr Bolelyy to produce and (ii) not knowing about the content of the
Presentation. If Mr Rowland had known of the content, he would not have found
the article humorous but instead considered it to be very serious.
26. On 13 October 2017, Mr Rowland received a telephone call from a journalist from
an online media outlet called ‘The Intercept’. Mr Rowland recalled that at the time
he instinctively connected the request to discuss Qatar with the work he was doing
in the Middle East, in particular with respect to the Financial Institution rather than
the Presentation. After the journalist contacted the Firm’s US lawyers, Mr Rowland
considered it to be appropriate for there to be a formal response and a form of
words was agreed, reflecting the fact that Mr Rowland now thought that the
journalist might be referring to the hedging document that he had asked Mr Bolelyy
to produce. The proposed press statement1 made it clear that the Firm did not deal
in the type of instruments that would commonly be used for hedging purposes.
27. Mr Rowland had a telephone call with David Rowland on 13 October 2017. During
the call, neither Mr Rowland nor David Rowland said anything about the actual
content of the Presentation. This is consistent with neither of them knowing about
it. David Rowland’s primary concern was that his mobile phone might have been
hacked whilst he was in Abu Dhabi. When Mr Rowland’s father referred to a
presentation that he thought the journalists might have had, he was not referring
to the Presentation but to a different presentation he had been sent regarding the
Financial Institution.
28. Mr Rowland had a further telephone call with David Rowland on 19 October 2017.
At this time, Mr Rowland had still not read the Presentation. This is clear, as Mr
Rowland tells David Rowland that, if he were to look at the Presentation, he would
see that all it contains is information about hedging strategies to protect an
investment. Mr Rowland would not, and did not, lie to his father about the content
of the Presentation.
29. Mr Rowland was shocked when he finally read the Presentation on 9 November
2017 (after the Intercept published its article). It was not what Mr Rowland had
asked Mr Bolelyy to produce.
30. The Authority considers that Mr Rowland was aware of the contents of the
Presentation at the time of the publication of the Indian Article for, inter
alia, the reasons set out in the above section: The Presentation and in the
below section: Was the Presentation given? This second section details the
Authority’s conclusions arising from the telephone calls between Mr
Rowland and David Rowland.
31. The Authority also refers to the contact which Mr Rowland, and the Firm,
had with the Firm’s US lawyers following the contact from the Intercept
journalist. Mr Rowland’s assertion that he assumed the telephone call with
1 See paragraph 4.40 of the Decision Notice
the Intercept journalist related to the work he was doing in relation to the
Financial Institution is not reflected in the subsequent press statement2,
which makes no reference to the Financial Institution or the sort of work
it would have done.
32. The Authority also notes the list of questions that the Intercept journalist
had prepared, which had been forwarded to Mr Rowland on 18 October
2017, and considers it highly unlikely that Mr Rowland could have believed
that the Presentation was simply a “vanilla” hedging document.
33. In addition, during a telephone call Mr Rowland subsequently had with
another senior employee of the Firm, shortly after the publication of the
Intercept Article on 9 November, the senior employee said: “I was [good]
before I read that thing on the Intercept… So I think we can agree that
there is nothing good in this article”. Mr Rowland replied “No, nothing
good, nothing bad. I would just say that it’s not”. The senior employee
then stated: “No, it’s very bad, Edmund, it is very bad. It’s – it’s very bad”.
The Authority infers from this exchange that Mr Rowland was trying, even
at this late stage, to persuade the senior employee that there was nothing
wrong about the contents of the Presentation.
34. The Authority also considers as relevant the following undated notes
(which had been deleted but were subsequently recovered) made on Mr
Rowland’s telephone:
“Reframe the agenda Q attacks pattern over last 6-9 months Macro note
hedging No named security No reply back Hubris, embellished Work was
not reviewed Took responsibility resigned with immediate effect No trades
have ever been done, attempted to be done, have accounts that can even
trade them or have attempted to open accounts that can trade
Instruments we do not know what they our, in an entity that does not
exist, with asserts we Do not they have, by entities we do not know.
Regulated banks No meetings, discussion, face to face or electronic has
ever occurred on the matter, and it was never mentioned again We where
2 ibid
38
never to be involved as bank, company or individuals in any way [the Abu
Dhabi sovereign wealth fund] is a large swf had just committed 75 million
to new bank short macro hedging note”. [sic]
These notes demonstrate Mr Rowland’s thinking (and how he sought to
“reframe the agenda”) over the Relevant Period.
Regulated activity
35. 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 (Integrity)
or, indeed, any of the Principles for Businesses part of the Authority’s Handbook of
Rules and Guidance.
36. 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.
37. 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.
38. The Presentation was not given to anyone; and it was not intended to be given to
an investor or potential investor (or agent thereof).
39. 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.
40. 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”3. Advice
“requires an element of opinion on the part of the adviser. In effect, it is a
recommendation as to a course of action”4. 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.
41. 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”.
42. 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)5] (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.
3 Lord Hoffman in South Australia Asset Corp v York Montague [1996] 3 All E.R. 365 at 372j,
4 PERG 5.8.8 G
5 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.
The Application of COCON
43. COCON 1.1.6R provides that for a person who is an approved person, as
Mr Rowland was during the Relevant Period, COCON applies to his conduct
in relation to his performance of functions relating to the carrying on of
activities (whether or not regulated activities) by the Firm. The Authority
considers that the creation of the Presentation was an activity carried out
by the Firm (see the section Bank Business below).
44. COCON applies to the conduct of Mr Rowland, whether or not the
Presentation was regulated (as the Authority has concluded it was), or
unregulated, activity. Accordingly, Mr Rowland’s arguments with respect
to whether the Presentation was regulated advice do not affect the
application of COCON to the performance of his functions relating to the
carrying on of activities in question by the Firm, since this would be the
case, even if the activities were not regulated. Notwithstanding this, since
Mr Rowland has argued at length that the Presentation was not regulated
advice, the Authority sets out below the reasons why it does not agree
with that argument.
Was the Presentation given?
45. As requested by Mr Rowland, Mr Bolelyy printed off two copies of the
Presentation to take on their forthcoming 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.
46. 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.
47. 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 Firm’s internal 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.
48. 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 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 appeared to see publication of the Firm’s
involvement as “a badge of honour” with respect to the Abu Dhabi
sovereign wealth fund.
49. 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?
50. 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.
51. The Authority considers that the Presentation was given to an Abu Dhabi
sovereign wealth fund 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 assisting 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?
52. 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.
53. The fact that advice was not implemented (or even could not be
implemented) does not stop it from being advice. So, for example, an
incompetent failure to implement advice does not turn that advice into
mere information.
54. 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).
55. 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.
56. 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.
57. 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.
58. 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 was “advice on the merits”.
Did the advice relate to a “particular” or a specific investment?
59. 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”6.
60. 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); (iii) wash-trading with an affiliated party;
(iv) buying CDS on Qatar “to move the price” of the bonds; and (v) 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”).
61. 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.
62. 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
6 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.
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.
63. 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 Authority
considers that the advice about the Underlying Investment was advice in
relation to a specific investment.
64. The Authority further 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
65. Mr Rowland 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).
66. 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 Mr Rowland’s submissions the Authority makes the
following observations.
67. 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).
68. 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.
69. Mr Bolelyy’s Presentation was a non-Bank project and therefore Mr Rowland’s
actions in relation to it were not connected with the activities of the Firm. As a
result, there can be no regulatory breach and the Authority does not have
jurisdiction to impose a penalty on Mr Rowland. COCON 2.1.1R applies to a person’s
conduct only “in relation to the performance [by the person] of functions relating
to the carrying on of activities … by the firm on whose application approval was
given to [the person]”.
70. The non-Bank nature of the Presentation is clear from, inter alia, the following:
•
The Presentation was not produced on the Firm’s materials; in fact, an early
draft of the document appears to have been produced on the Financial
Institution’s materials.
•
Mr Bolelyy was assisting Mr Rowland in relation to matters outside of the
Firm, including in relation to the Financial Institution. It was in that capacity
that Mr Bolelyy came to produce the Presentation.
•
Mr Rowland was not the Chief Executive of the London Branch when he
tasked Mr Bolelyy with preparing the document.
•
The Presentation was produced following a request from the senior
representative of the Abu Dhabi sovereign wealth fund with whom the
Rowland Family were doing business through the Financial Institution joint
venture.
•
There is no evidence that Mr Rowland, or anyone else, attempted to use the
Presentation to market the Firm.
•
The Presentation was so absurd that it would have been a useless marketing
tool and the Firm could never have been a vehicle for carrying out the plan
in the Presentation.
71. 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, 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.
72. Mr Bolelyy was not a “personal assistant” for the purpose of COCON
1.1.2R(6)(r)7. 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.
73. 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 spent 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.
74. In the same way, meetings with representatives of an Abu Dhabi sovereign
wealth fund, to discuss, inter alia, the Financial Institution project, did not
preclude discussions occurring on other matters, including matters which
7 COCON 1.1 Application: COCON 1.1.2R(6): Persons to whom COCON applies
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.
75. Prior to the meeting on 30 August 2017 Mr Rowland had mentioned it 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 request for advice which led to the
creation of the Presentation.
76. Working on the proposed establishment of the Financial Institution did not
preclude Mr Rowland, or indeed anyone else, from separately working on
Bank Business.
77. 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, 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.
78. The Presentation 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];
and David Rowland said that “we can capitalise on this”.
Integrity and Financial Penalty
79. Mr Rowland did not act with a lack of integrity. The Presentation was very different
to the document Mr Bolelyy had been asked to produce by Mr Rowland. Mr Bolelyy,
a junior individual, was instructed to produce a document about how UAE banks
could hedge their exposure to Qatar but he ended up producing a very different
document, in part assisted (or encouraged) by others, including Mr Weller, who
were seeking to impress Mr Rowland and who may have sought to ‘read between
the lines’ as to the true nature of the request (or who may simply have found the
whole thing humorous). Mr Rowland was not responsible.
80. As a matter of jurisdiction, the FCA cannot impose a financial penalty on Mr Rowland
in relation to his conduct as regards the Presentation because it was a non-Bank
project. Mr Rowland did not act with a lack of integrity and therefore he did not
breach COCON 2.1.1R. It is therefore inappropriate to impose any financial penalty.
81. The proposed penalty is grossly disproportionate. This is particularly so given the
penalty proposed in relation to Mr Bolelyy, who was the creator of the Presentation,
and the penalty proposed in relation to Mr Weller, who created the SFNH Document
and therefore was key to a large part of the contents of the Presentation. Mr
Weller’s culpability is, at a minimum, on a par with Mr Rowland’s culpability, if not
greater. The Warning Notice purports to apply the five-step penalty process, but at
Step 4 of that process a very substantial uplift is applied. There is no basis for
requiring such a disproportionate uplift at Step 4 in relation to Mr Rowland,
particularly given the limited role he played at the London Branch (his work at the
time being focused on the Financial Institution) and his low salary. In addition, the
seriousness of Mr Rowland’s alleged misconduct is not ‘Level 5’, particularly with
Mr Weller’s misconduct being proposed at Level 4. The justification for a very
substantial Step 4 increase to reflect Mr Rowland’s misconduct in “creating and
disseminating” the Presentation is baseless as Mr Rowland did not “disseminate”
the document nor did he “create” it (as this was drafted by Mr Bolelyy with
significant assistance from Mr Weller and the non-Firm employee).
82. The Authority considers that the Presentation was Bank Business and
contained regulated advice and that Mr Rowland acted without integrity
and breached COCON 2.1.1R. Accordingly, it is permitted to impose a
financial penalty on Mr Rowland.
83. The Authority considers that Mr Rowland was the instigator and the driver
behind the creation and the dissemination of the Presentation. He took
steps to cover up his conduct throughout the Relevant Period. His level of
personal culpability was more serious than the culpability of Mr Weller and
Mr Bolelyy and justifies the most serious Level 5 finding.
84. The Authority considers a significant deterrence uplift is justified at Step
4. Mr Rowland’s relevant income in the 12 months preceding the last day
of his breach (i.e. 13 November 2017) was £44,000. This relatively modest
figure covered Mr Rowland’s time being the Chief Executive of the London
Branch for much of this 12 month period. The Step 2 figure, with a finding
of the most serious Level 5 misconduct, becomes £17,600. The Authority
considers that this would be insufficient to deter Mr Rowland, or others,
from committing further or similar breaches.
85. The Authority considers that the financial penalty at Step 4 should be
increased by a multiple of 20. The financial penalty is therefore £352,000.
David Rowland’s Representations
86. 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”.
87. 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.
88. 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.
89. 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.
90. 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.
91. 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.
92. 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.
93. 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.
94. 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”.
95. 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.
96. 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.