Insurers will not be bankrupts, if you were worried , don’t be

According to the FCA press release:

The Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues. 

Many policyholders whose businesses were affected by the Covid-19 pandemic suffered significant losses, resulting in large numbers of claims under business interruption (BI) policies.

Most policies are focused on property damage and only have basic cover for BI as a consequence of property damage. But some policies also cover for BI from other causes, in particular infectious or notifiable diseases (‘disease clauses’) and non-damage denial of access and public authority closures or restrictions (‘denial of access clauses’). In some cases, insurers have accepted liability under these policies. In other cases, insurers have disputed liability while policyholders considered that it existed, leading to widespread concern about the lack of clarity and certainty. 

The judgment says that most, but not all, of the disease clauses in the sample provide cover.  It also says that certain denial of access clauses in the sample provide cover, but this depends on the detailed wording of the clause and how the business was affected by the Government response to the pandemic, including for example whether the business was subject to a mandatory closure order and whether the business was ordered to close completely.

The test case has removed the need for policyholders to resolve a number of the key issues individually with their insurers. It enabled them to benefit from the expert legal team assembled by the FCA, providing a comparatively quick and cost-effective solution to the legal uncertainty in the business interruption insurance market.

Good job done by the FCA team, while good job done by the insurers.

Why insurers made a good job? they will claim to the government that those policies were not designed to bring them into bankruptcy, and they will request and get compensation, where needed. Therefore, if you were worried, don’t be, most probably, we will pay for it, it will still come from your pocket. When the system is smarter than us, it may be…

Insurance which works for you is something that yet to be invented

The FCA case study page 17:

Rob, 44, lives is a large detached house in the countryside, with his wife and his 2 children. Rob is now a wedding photographer, after previously being an aerospace engineer.
Rob only recently changed professions, as three years ago his contract as an aerospace engineer came to a sudden end. Unfortunately, this happened just after he had committed to buying a new house, a house which was a significant step up from his previous home (£150,000 more than the current property at the time). He was out of work and without an income for a year, so his financial situation was impacted,
also affecting his mental health and relationship.
The loss of income did not impact on the house purchase as Rob and his wife had a large savings pot and did not have any outstanding debts. However, it did impact on their lifestyle, as they had to avoid some of the previous luxuries they had been used to.
Rob sees himself as very financially savvy and does tend to shop around for financial products. However, he hasn’t reviewed his mortgage, current account or his car insurance for some time, as he feels he already has the best deals.

In October 2017 Rob’s property was damaged by a storm. The storm caused considerable damage to his large electric gates. Rob contacted his home insurance provider to make a claim.

The initial call hander he spoke to informed him that the repairs to his gates would be covered by his policy. Rob sent a claim for the cost of restoring the gates to the insurer when he was then informed that they would not cover the costs, as the gates were classed as fencing which is  not included under the policy. He later realised that this was mentioned in the small print of the policy documents.

If you want to replace the insurer, instead of paying the premium for the insurance companies, make a monthly provision. In case something goes wrong, you can always trust yourself.

Modernizing is always the best practice

3,476,141 non-professionals were monthly subscribers to data for NYSE-listed securities in the fourth quarter of 2019. These users generally are retail investors, obtaining data by requesting quotes from their brokers.

National Best Bid and Offer (NBBO) is a regulation by the United States Securities and Exchange Commission that requires brokers to execute customer trades at the best available (lowest) ask price when buying securities, and the best available (highest) bid price when selling securities, as governed by Regulation NMS.

On physics, there are unavoidable limitations due to the speed of light—and the speed of fiber optic cable.  This means that, as long as users are not all in the exact same location—which they are not—information cannot reach all users at exactly the same time.  As a result, the NBBO at one location will vary slightly from the NBBO at another location.

Today, hundreds of firms are located in different locations.  Some buy NMS market data, some aggregate proprietary data.  Some get their data over fiber.  Some get their data over microwave towers.  Anyhow, you get the point. There is no one NBBO in a world where markets are quoting and trading in nanoseconds.

According to Director Brett Redfearn, today, the best-priced offer for a higher-priced stock in NMS market data may be 100 shares for $400.50, while the exchange proprietary data feeds may have a 20-share offer at $400.45.  If a retail investor places a 20-share buy order and it is executed at $400.48, the executing venue is entitled to report that the retail investor received two cents for price improvement.  This is true even though an odd-lot quote on the exchange proprietary data feeds was readily available at a price that was three cents better than the “price-improved” execution supposedly provided to the retail investor.

The SEC have hard work ahead, plenty of responsibilities, and they are doing it for us, in order to keep our funds safe. The future for sure will be different and modernize. Maybe, blockchain technology can assist, once it will become faster, only god knows. Hopefully, we get better prices in the future.

When the future is not connected to reality

On April 20th, the day prior to the last day of trading and expiration of the May futures contract for WTI, the price of the May futures contract fell from $17.73 per barrel at the market open to a closing settlement price of negative $37.63 per barrel.  In the last 20 minutes of trading, buying was scarce as the price dropped approximately $40 per barrel. As a result of this unprecedented collapse, the price of the May crude oil futures contract became disconnected from the price of crude oil in the physical market and other derivative instruments.

According to the CFTC, The WTI contract is a key benchmark in the energy and financial markets. Businesses use the contract to manage their risks arising from energy prices.  The contract also is used by financial market participants to manage inflationary and other risks correlated to energy prices.  The extreme divergence between the price of the WTI futures contract and prices in the physical market particularly affected the market.

According to the Energy Information Administration, the “extreme market events” just prior to the expiration of the May WTI futures contract were caused by a variety of factors, including “the inability of contract holders to find other market participants to sell the futures contracts,” and the “scarcity and high cost of available crude oil storage,” which forced market participants who were unable to take delivery to pay counterparties to take their contract—in essence, negative prices.

Do we need contracts who disconnected from its underline commodity? do we have too much financial innovation and we went too far? the CFTC will provide more answers soon, stay tune.

Who do you favour insurers or insured?

According to the FCA, most SME (small medium entities) insurance policies are focused on property damage (and only have basic cover for business interruption (BI) as a consequence of property damage) so, at least in the majority of cases, insurers are unlikely to be obliged to pay out in relation to the coronavirus pandemic.

Some customers’ policies also cover for BI from other causes (for example in relation to infectious/notifiable diseases, non-damage denial of access and public authority closures/restrictions) and may in some cases provide cover. Whether there is cover for the business interruption related to the pandemic crisis will depend on a number of factors including the policy’s wording. The range of wordings and types of coverage are sufficiently broad in the BI market that it is difficult to determine at a general level the degree to which any one individual customer may be able to claim.

There are BI policies where firms have determined an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly. Firms still need to do more work to agree, process and pay these claims as promptly as possible in all cases, including using interim payments where appropriate.

However, in relation to other policies, firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.

The issues around BI policies are complex and there are significant differences in policy wording between policies and across firms. These complexities have the potential to create ongoing uncertainty for a lengthy period.

It is clear that decisive action is appropriate given the severity of the potential consequences for customers in the current coronavirus emergency.

In this context, FCA will work actively and promptly to seek to resolve issues causing uncertainty over BI coverage, to provide greater clarity for parties and help ensure there is not undue delay to payments where there are valid claims.

The FCA intend to do this by seeking to bring relevant cases to court as soon as possible for an authoritative declaratory judgment regarding the meaning and effect of some BI insurance policy wordings where there remains unresolved uncertainty. The FCA is  working to identify a sample of cases representative of all the most frequently used policy wordings that are giving rise to uncertainty, where it would be appropriate for them to bring such proceedings.

Who will side insurers (except their fully paid lawyers)? should they be protected? did they sell unreasonable policies? who will side SME? time will tell.

Signaling? you may need a licence

You should signal where needed, but some signals may require a licence and regulation.

The Financial Conduct Authority (FCA) has commenced proceedings in the High Court against 24HR Trading Academy Ltd (24HTA). 

The FCA alleges that from 2017 onwards, 24HTA and/or its director, Mr Maricar, have been advising on investments and arranging deals in investments without FCA authorisation, and engaging in financial promotions without being an authorised person or having the promotions approved by an authorised person. The FCA alleges alternatively that Mr Maricar has been knowingly concerned in 24HTA’s contraventions.

24HTA/Mr Maricar had been transmitting ‘trading signals’ and making other investment recommendations to clients via WhatsApp and other social media platforms. Clients were told that if they followed these trading instructions, they would make significant profits.

In addition, consumers were induced to sign up with a ‘partnered’ broker to place their trades. 24HTA/Mr Maricar would receive sign up and other commissions from the brokerages in addition to the monthly payments from clients for the signals.

The FCA is seeking final orders including a declaration from the Court that the defendants carried on regulated activities without the required FCA authorisation and unlawfully made financial promotions as well as an order preventing them from carrying out these activities in the future.

 

Is someone may not fairly disclose about China?

China is challenging place, base on the following SEC statement you should carefully review your Chinese/emerging markets investments.

The PCAOB’s Inability to Inspect Audit Work Papers in China Continues

In many emerging markets, including China, there is substantially greater risk that disclosures will be incomplete or misleading and, in the event of investor harm, substantially less access to recourse, in comparison to U.S. domestic companies. This significant asymmetry holds true even though disclosures, price quotes and other investor-oriented information often are presented in substantially the same form as for U.S. domestic companies.

The PCAOB’s Inability to Inspect Audit Work Papers in China ContinuesInvestors and financial professionals should consider the potential risks related to the PCAOB’s lack of access to inspect PCAOB-registered accounting firms in China. Issuers should clearly disclose the resulting material risks. Auditors should have appropriate quality controls in place related to executing quality audits.

The Ability of U.S. Authorities to Bring Actions in Emerging Markets May Be Limited. Accountability, for issuers and gatekeepers, including individual accountability, is a key aspect of U.S. securities law. The SEC, U.S. Department of Justice (“DOJ”) and other authorities often have substantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China. Issuers should clearly disclose the related material risks.

Shareholders Have Limited Rights and Few Practical Remedies in Emerging Markets. Shareholder claims that are common in the United States, including class action securities law and fraud claims, generally are difficult or impossible to pursue as a matter of law or practicality in many emerging markets. Issuers should clearly disclose any material limitations on shareholder rights.

It is important that investors, funds, financial professionals and index providers consider carefully the issues, risks and uncertainties associated with investing in emerging markets, including China, the world’s largest emerging market and second largest economy.

UK, information on current account services, or more simply banking services

Current account providers are publishing better information about the services they offer consumers and small businesses. This follows action by the FCA and the Competition and Markets Authority (CMA), and a voluntary commitment by banks and building societies.

This information helps consumers and small businesses find the right service for them, get the most out of it, and get help if things go wrong. It will also help others such as comparison services and the media to compare current accounts.

Please find attached a link for the data, enjoy.

https://www.fca.org.uk/data/mandated-voluntary-information-current-account-services

Some banks will allow you to open an account, issue a debit card, take an overdraft in just 1 day. Or you can just start using crypto-currencies.

Old and not secure

Congrats, but you are in risk. The risk of losing your life, your money and your love-ones.

You need to keep fighting, it does not end until it ends.

Five Red Flags of Investment Fraud

Promises of High Returns with Little or No Risk.  The promise of a high rate of return, with little or no risk, is a classic warning sign of investment fraud.  Every investment carries some degree of risk, and the potential for greater returns generally comes with greater risk.  Avoid putting money into “can’t miss” investment opportunities or those promising “guaranteed returns.”  Remember – if it sounds too good to be true, it probably is.

Unregistered Persons.  Always check whether the person offering to sell you an investment is registered and licensed, even if you know him or her personally.  Unregistered/unlicensed persons who sell securities perpetrate many of the securities frauds that target older investors.  Researching the background of the individuals and firms selling you investments, including their registration/license status and disciplinary history, is free:

  • Search the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck online database.

Red Flags in the Financial Professional’s Background.  Even if an investment professional is in good standing with his or her regulators, you should be aware of potential red flags in the professional’s background.  SEC, FINRA, and state securities regulator records can be used to identify red flags for potential problems, including: (1) employment at firms that have been expelled from the securities industry; (2) personal bankruptcy; (3) termination; (4) being subject to internal review by an employer; (5) a high number of customer complaints; (6) failed industry qualification examinations; (7) federal tax liens; and (8) repeatedly moving firms.

Pressure to Buy Quickly.  No reputable investment professional should push you to make an immediate decision about an investment, or tell you that you’ve got to “act now.”  If someone pressures you to decide on an investment without giving you ample time to do your research, walk away.

Free Meals.  Be wary of “free lunch” seminars.  The ultimate goal of free meal investment seminars is typically to lure new clients and to sell investment products, not to educate the public.  If you decide to attend one, commit to yourself before the seminar that you won’t purchase anything or open an account while at the seminar.  Even if the free meal does not come with a high-pressured sales pitch, you should expect the “hard sell” in subsequent contacts from the person selling the investment.

Distributing or selling contracts for differences (CFDs) to retail clients

According to ESMA statement it has serious concerns about firms’ marketing, distribution or sale of CFDs to retail clients and considers it necessary to remind CFD providers about some of the requirements connected with the offering of CFDs. 

ESMA has identified undesirable practices related to:

  • Professional clients on request; and
  • Marketing, distribution or sale by third-country CFD-Providers.

Ensuring investors are protected necessitates that all CFD providers respect all applicable requirements and do not circumvent them using professional client status or third country entities.”

Professional clients on request

ESMA is aware that some CFD providers are advertising to retail clients the possibility to become professional client on request. Investment firms should strictly refrain from implementing any form of practice that incentivises, induces or pressures an investor to request to be treated as a professional client. In this respect, any form of promotional language in relation to the status of professional client shall be seen as incentivising a retail client to request a professional client status. This includes providing a comparison between leverage limits available to different types of clients and the provision of any form of rewards for becoming a professional client.

In order to mask wrongdoing, in some cases, CFD providers will change the client categorization status according to their needs (first from retail to professional, and then from professional to retail once you lost your invested capital), with no compliance justifications.

ESMA is also aware that some third-country firms are marketing CFDs that do not comply with ESMA’s measures to retail clients.

ESMA notes that firms should not incentivise retail clients to start trading with an intra-group firm established in a non-EU jurisdiction.

You can control your faith, don’t be tempted to change your categorization status from retail to professional, and/or open an account with non-EU firms.

EU rules are here to protect you, and reduce your risk. Please rest assured that the regulator does not like it when you lose your invested capital. Protecting you is part of the regulator missions.