Interest Rate Hedging and Swaps

Hello. My name is Rachel Coyle. I'm embarrassed to hear a 36. Great. When I'm part of 36. 17 I do walking several. The cramps is on property and commercial constipation. I'm has talk to you today about interest rate hedging its waas on what has happened and what can be done. Actually, at sea interview is concluded. I will be dealing principally with what can we apply? Possible to learning financial mis selling? We're going to be addressing you or Rose. So financial mis selling on interest rate swaps. Well, what is necessary had your product. It is a complex financial derivative. Andi know. Although no swaps, they do have wonderful exotic names. You'll see that on the notes I've done for you on The important thing is to know what these different types mean There are full. There is a cap swap collar structure, color. The swap enables the customer to fix the interest rate so they swap. They're very, very cap places, a limit on interest rate rises. So if you say you work within a margin solids, if interest rates go a ball so you have a cap of 7%. You only have to play, uh, collars. They cost Mr Newman interest rate fluctuations within a simple rain. So you might say I wanted to have interest rate between 2%. And what not margin, dos Odd is if you go, if it strikes grappling. Right. So, um, then you mean whereas if it goes both that almost single stick with him. Not bad, that's also noticed. Or Jakarta. This enabled across my limit interest rate fluctuations within a specified range, but involves arrangements where, if their interests, if the reference interest rate for loaded range Did you just write probiotic was mine creates both of awesome rain. That's kind of the trump. That's what he wants. A clean up may have paid again. An example of what a swap contract looks like kind of involved in the paper that I have given to you on. I'm not going to go through that now. If you do. You have any questions about that? You know, I get me now. I'm a 36. Great. But equally just contact dates yours. Well, they'll be onto also in the right direction. Interest rate products. They they are have been identified as being this sold the reasons why? Because the following one that have been inappropriate. Sign of more complex where I saw him. Straight hair products number to remember poor self practices using used in the stunning all the interest rate products. Thirdly, cells wars, incentive scheme exactly at risk for sales. So it's not just about the money day. We're not in a lot of companies and businesses and high net worth individuals. They have been to 30 back to buy this because what happens is you would have to pay a premium to break out arrangement out swap, for example, you have to pay a premium in my family. No, accounted for that in your cash. It might be that you don't have working capital me forwards. Doing your business is only and you'll have weakened balance sheets. Your personal depth that she might be increased majority personally funnels the company to keep it going. You might have more over drops, not have increased cash flow pressures. And of course there is, But that now as well, obviously notice you're seen the leaked report about geology. Garvey out G. R. G is a specialist banking part which deals with basically, cos this is high net worth. Individuals who are in difficulty and actually a lot of the reasons why difficult because these products. So the problem is with these is you end up effectively paying more than you expect to pay the interest. The example like structure, quality matched, end up paying the actual rate that it is because it's actually the race for the world. You may have to pay a breakout premium, which is often more than me now. And of course, the great difficulty was at the time. In two 1007 when Young 78 started, it was anticipated that was anticipated. Interest rates go up, not down on. That's where people being called, because if it goes down, then the problem is you are a Kozma have breached turns. Which can it'll intimate recoup costs to you? Those finances those won't sort. Contracts are effectively, oh, betting on more interest rates are going to do. But then you may find that you might just be better to sticking with what it is. When does one fix Reiter Whatever. It's a self help upset for stupid and margin Teoh protect against any potential rate rises to find that rates of all, 25%. So then I structure over a period of overturned and solve them coming very long within the longest one I saw when I was doing it knows that Seneca waas 25 years. That's a long time. So it was a great thought that the interest rates going to go there. Patch agree, screaming That man now turned down my settle that case on the basis that erupted, it looks from the readings ridiculous weight with advertised and solved them not least with the issue that cream no actually mentioned. I'm at what point that one finds them. If they wanted to get out of the agreement ready my retired and right on time, you'd expect that bm needs discuss invention that screams would be but both under somebody's life when I find old fashioned case. So what happened when basically these products came to night being not very important to custom of National Good Bank was the FBI. What? The time Bandit Assists Authority decided to settle the score to review that Thank all the wonderful attributes that was set up in 2014 15 that if you have now finish but essentially what they're demonstrated. Waas I waas that there were about nine lines that were responsible for the for the swaps. Um, so we'll swap these interest rate hedging products. I've listed them for years. If you do have any customers, clients and so on have still outside imports with the bank. Um, I haven't picked up by the year that please do consider addressing them on these. Some of the most people have been contacted by the CIA a scheme. But some people and companies are not happy with what's being offered it. On the other hand, we want so much to accept that off that by banks scheme your changes, so should still happy is to go Spanish ombudsman service white spots on then Obviously there is litigation. The question is, on what basis are you to go to him? Well, that's first. Look at what's about business relationship should involved. Okay, there is a regulatory framework which yes, see, a has encouraged. Obviously thanks to comply with on this is known as this coming from your hammock. These noticed actuals on these couples turning this situation focus on retail clients. Oh, Private Christmas as a uniting in the old couples, mostly couples, have been updated since they number 2007. This isn't the same residential mortgage products because there is regulated with M crumbles. Getting to you well, basically what you're investigating. Claims are important with settings, which is an interest rate hedging products. You have to make sure you're correct such a rule that applies to travel action out of date your day Because, demonstrates marketing, a breach of the conduct of business rules is impulsive. Step to stop the ship or marketing. So the key cried of business rules that you want to fix on any management side, particularly Nation Teoh branch Important just hedging products following the first Israel 2.1 point one are, which requires advisors to act honestly, fairly and professionally in accordance with the best interests of the client. The second is also 2.2 point one, which obliges in your advisor to provide a perfect information. The comprehensible wall do that kind about any investment being recommended, along with guidance on warnings off the risks associated with that investment. We'll wait 2.1 that specifies of any communication the client must be fair. Play on is not miss leaving you then have 4.5 point to. This requires that any information given to a client is accurate does not emphasize any potential benefits of a product without also giving their on prominent indications on your parents. You also have 9.2 point one. That's probably one of the two most important laws. But this battle cries that the adviser must take reasonable steps to ensure that any recommendations product is suitable for a client. The second portable is 14.3 point two. When did this rule that of either must explain risks off a specific time from best with being recommended, including the risk, particularly that time investment on do so in sufficient detail to a lot of crying, making warm decision as to whether or not to Hersi's I. Finally, there's also 9.4 point one, which requires applies to provide receipts, bills, reports client why products has been recommended on a plane on accurate, but also you got nine point to point to. This specifies that the fines and must obtain his client. Such information is necessary to understand the sexual facts about them. Tough result basis. We're leaving with equity transaction. Music arts OBJECTIVES So there's the rules that you have to consider in any jittery, huh? Jim Polk Lane on also in any financial mis selling climb. So what about potential courses of action? Potential positive action are noble, while Richard's doctor duty in major back off all regulatory duties just outlined course to create the potential cause of action their own right. The new generic heading off reaches Doctor Juicy. It is possible that transaction dates and took a case may have fallen before the first to 70,000 once when the efforts away commencement date waas. Now you may see that's the cause of action arise in such a case. May not be statute barred, though in its entirety in particular and depending on the date of the night, the cause of action negligence makes obliged the present time. But this is a case, even situations where someone had got through Yes, year of you very recently on I don't You recently had knowledge off a touch. Of course of action. We're now okay. So tight that three days to garland one the right of actual breach of duty rose from section 60 to section 60 to pay the Fastest Services Act of 1986. But the subsequent cases I am cases out of 1st 70,001 right of action called from the F S. M a Section 150 which is actually the damages that has been the place which is not surprised by such morning 38 de off the efforts A in 2012 and that now states in subsection two. A contravention final thrives person of a rule made by the CIA is actionable at the suit of a private person. It suffers losses resulting contravention. So just defenses, other instance applying to actions for breach of statutory duty. But here is a private person. Leominster is described by the 2001 regulation any individual, unless he suffers the Noxon question in course, of carrying on any organized activity or any activity which will be a regulated activity apartment exclusion laid by a lot of sadness to regulated activities, order, pregnancy presence, missing completion. I have that the definition goes further than a mere individual. So it's include, and I quote any person who is not individual. When he saw this allots in question, of course, carried on business of any kind, so that provision in embraces a corporate body. But the important Bizot in the second part, however big, is that the loss of not sort, of course of business in name limited companies are afforded no statue called direction. And if you want to get Kate that it is tightened Steel Wheels Limited and Royal Bank of Scotland PLC. You'll see the citation notes that you have. Arguably they a partnership would also fall within the definition of private personal Mr Can't Power A but must instead, last paragraph. I think this was raped in reality and Green on Royal Bank of Scotland began. You'll see the Citation nights, but it's not being perceived by independent banks in that case, which leads to treat the partnership playing it as individuals, Little paragraph. So it is possible partnership to also fall within that definition. Now, the claims, sir, 12 such 1 50 on Titan ability are the A Section 138 D off the S a 12. Obviously, acquired and dedication are specific rules, so that term and should alia because of these rules, the ones are said to be broken in each case which that identify the nature of the bridge. So you've got 2.1, which is acting honestly, fairly and professionally, or was knows the client's best interest rules. It also got way to your 0.1, which is back clear, not Miss Meeting room 9.2 point one Assessing Z's birthday. The obligations you have bought Word 14.3 point to stop by description of nature interest designated investments those are the main rules would be relying on. But you still have to consider. Once I mentioned previously as well and actually claimed, Let's give quite the best chance to provide the basis, which has been on a bridge that's on these obligations have attracted particular attention because they do imports of absolute like a standard, rather enquiring, simply recent steptoe care. For example, the bad, clear and not misleading rule seems to import absolute standard of that time. But that apart, do you see the frame of the staff would expect to see in the more old fashioned common war due to cat? So what about pre contractual misrepresentations? Did they factor into any breach touching duty ground? Well, uh, yes. It might be thought that pretty contractual misrepresentations is the first call of action due to be considered. I'm chronologically. It is the first course of action, like materialize. The client told you that story event. But in the nature of things, the violent stuff, I would have made a representation cause of those sessions which did genuinely injuries to contract in the case of or representation. It is obviously frantically important to see if thou echoed in any sort of correspondence. But course just reported not to get power on implying meditation, and I missed the case. There were greatly properties and Barclays Bank of CB citation there on Essentially that was a that was a libel rate rigging case on the issue are quite a plantation, the purposes of establishing a breach of statutory duty, incorporating stuff to that argument that was considered by long haul at paragraph 27. Quite likely. However, I will read this out to you in the present case, however, the banks did propose the use of libel, Then it must be arguable that at the very least, there representing that own participation set setting up tonight with an honest form, just in my mind, surprising that banks do not appear to be prepared to accept that even back them to Proposition is arguable. It was also submitted that do nothing child amount of representation. But it is arguably the case that the base did not do nothing. In that prepares. Transactions are governed by libel that is, conduct just as much. The cost was confident. It's sitting down a restaurant, Matt straps and taste that he is prepared papers me on the banks. Submissions brought down to saying that they were prepared to accept that they would do nothing dishonest or manipulative joining Turn the contract. And that should be enough for any counter party. I can only stay that remind you. It is arguably not enough. If the day after contracts had to be made, the bags told that counter parties, but they had been manipulating liable in the past in time to design a future. It would be happy to pay any loss that their borrowers could prove. The bar would arguably be sufficiently horrified, so to think he would be a title. Tourists in the deal the law should strive took hold the reason expectations of honest men and women. In the end, it can do so that should only be after a proper trial. All that said, the allegations of pre contract for misrepresentation are liking Teoh repair breaches of duty, statue and or otherwise, such as occurred in the course of their presence. So we will find any pleaded misrepresentations repairing a particularly breached you've done. Even so, what about the common knowledge et car? Well, this is beyond doubt, but Financial advisor does allergic to scatter his of her trial. It is e quickly started, careful to be assessed. Bar is the standard. Did you get a better man listed on the nights and citation Well known case to audibles? I know The major practical consequence, though, is that the use of expert evidence is always inevitable for financial experts. Little girl into the color, your duty off care. It's like it's require compliance with the conduct of business rules and social. Where the transaction advisory I contacted that duty will be four by content call rules. Interesting, you know that have being coastal doing with this just in the case of Rubinstein and HSBC thes citation now is 2011. Either you hate to see 2304 queens branch beats and Jace of death is common ground that the vanished advises both the claimant and common law duty off care to act with Skilling car to be expected of a reasonably competent financial advisor, determine the extent of his duty, but not my place in determining extended its duty. It is used to start with the requirements of the rabbit regulatory regime. In this case, yes, I'm a principal of the I am alright rules this because skill and cash expected off reasonably competent financial advisor class with relevant regulatory rules. So what this demonstrates is that frequently in financial service cases, the claim and discos attachment more damage that he or she has suffered during early years. Collusion, contacting no circumstances, all other causes of action. They already become stuck to God, including reach of regulatory duty on breach of contract. So the common law duty can may be the only sold two Bible by virtue of section 40. No limitation on the claims data night. You can also, when bringing a claim for breach of statutory duty, consider express implied contract returns invariably the pleated playing when include allegations under this house, but in practice it has to be said that there were like 12 months, Of course of action. We have a course usually by turns, agrees with care skill implied by cardinal construction to 13 backwards, its exact 19 to There's also additional duties which come he considered under a breach of statutory duty, ground or head cause head off or potential court action. Actually, she stated, I fired you. Three is not subject to faddish obligations because he or she is my do Cherie because he or she is suggested that yes or she is the audition. Applying this approach two personal lines is managed. Defines is a voluntary obligation to my client not to place them in a position where maybe a comp it's of interest would also not worked enough for their own benefit without focus and off. But now what? My anticipated conflicts potentially arrives on its head or no expressly identified. Controlled during country regime, good requirements of disclosure Commissioner Prop 6.3 and six point full. There are some decisions based on on this as well, but it's actually would get that you're probably already aware wrong in the conflict. Spanish Duties is a case of bristling once building society and Nothing. 1988. See page one page team so summary that completes a factory survey. Right man Technical direction arising Branch mis selling claims. But you also need to be able to write that to five huge vanities. Now, in the case of a direly poor financial advice, there is no difficulty conventional common more by current responsibility spices. Likewise, where the advisor in question, it was clear that since the agent of another who wants the authorised person for FC Aaron practices the conventional common responsibilities devices, but the final preparation often depend, appointed representatives have been created attentional trip, you know. So this has been addressed by the professor May in Social 39 3 which now provides that the principal of an appointed representative is responsible to the same extent as if he had expressed the commission right in tournament so far since two in kind on the business which he has accepted responsibility on the face of the this world provides complete protection for individual claimant you may receive, gives the principal your Internet attacks, a professional dance teachers, so I have to drive In case this will indeed be the case if a genuine product with assault, you pointed out, planted with certainly current on this principle except, well, the business, which the principal likes. That responsibility is a business after prime by an appointed representative agreement, which of course, will be unseen by the claimant until the complaint arises. If, therefore, the appointed reputations to watch straying into cell horrible varieties products he or she may have been outside the ambit of authorized business. And in those circumstances, the Stock Street. For if I carry in my ability may not apply. You will see that I have named two cases as examples off this one is mine, the Mining PLC and the other is Martin. Every time your life limited, see citations there, do you take it up? In those cases, this wasn't always really don't commit todo go into too much detail about those. But I do want to put in your question. I'm happy to get through. It used to look like, um, so turning now to what's called one regulated collector from close substitutes. Now I am only going to keep this very brief because the thing is with these, they are subjecting themselves, so I'm just going to tell you what they are, Really? These are a four. They ultimately some kind of product. He recorded that essentially, to put it simply See, I efs about investing teams. There are two kinds of regulating them is the unregulated so a regulated scheme you defined off on investment company with variable capital? I don't imagine it's risky or recognise scheme. Where regulates view that is do not is not regulated. Now thing is with them when I got to clapped investment schemes is that they didn't tell Hyde Green Investment ribs and I searched the promotion investment into such schemes. It's having restricted with the ingenuity provides in creating investment skiing structures. Kobe City has born outside of strict definitional collective investment schemes. What have exposed investors to like to probate regulatory concern In 2010 this little consultation paper called simply want to slash 19 in over 2012 then led to a policy published by the CIA in 2013 on it in that decided to define such investments as a unit don't get into Collective Investment scheme unit in a qualified investors scheme, but security issued by special purpose vehicle although the next great of security traded like horse investment all rights to interested any off the bar that I would like to really like to go through the more detail. But I don't really have the means to talk about it. But essentially the way to understand what constitutes the CIA s do look at section 235 to section one. The fattest services exact 1000 because I don't actually find multitudes and also what the arrangements could gay. There are other conditions of touch which you'll find that section 235 Section two and section 235 Section three as well. The same act. Um, do you worry for exclusion regulations free All the protesters markets at 2000 investors from Ward to Ward. We set our exclusions are doing construction to review 36 office in 2000 efforts and act on a gun I would like to go into more detail about, but don't really have to do that. The reason why my records go to these schemes because these are these are in themselves financially complicated products on Weston may not be the same as hedging. They do forward in same very similar rules. So a lot of the causes of actually you can you can rely on. I reach such duty in the context just red headed beast. Equally applicable. Do you want a united collective schemes on a close substitute? What are I mean? This thing could be said. Also your insurance on irrigation. P I It's not person drink. It's oppression. Don't insurance these obvious on the base of claims made and not arrived in constant year acclaim, probably notified a multi year, therefore, tracked coverage. Here's another thing. Proceeds. Proceeds of respect. Whether to settle for a while so courage is invariably provided subjective. Best 500 limit on the application defined policy, except and then maybe that claim a writer's, which gives rise to multiple losses, for example, might be Explosion Factory, which major cause lost a major individuals you combine to make any claim than expected U two losses. He wants that proceeding, But what constitutes claim is important because this it is critically important in ensuring time. Identification of plane given US insurance determined by claiming to be over 11 cover, determine whether the claim Portland Insurance Access again this goes beyond the limits of off this webinar straight into any more detail. But essentially what this demonstrates is began another type of product you area that sold the turning out limitation, which is driving toward financial portals, included hedging. Aside from the four poster attack on the claim that sounds obviously anything had available the use of a range of defenses on one of those could be defensive limitation Act 1918. No rules apply to prime time limits on six years and contract on the date of anybody advice or six years from the date the investor Accidental Dutchman Relying on that matter buys you Martin and Brittany. Life challenged earlier notes. The court held that time ran for this purpose for the date of polity accepted and not the end of any period. The 60 year time at all. Surprised to clients agreed to stop duty where the primary time limits have expired. But most came into one seat academically in simple negligence. Elaine, by relying on Section 14 a off limitation act 1980 his obviously requires claiming to show that they did not better knowledge over Los labored to attribute it to an actual mission until, I don't know during the three years before bringing another kind. The correct approach to take to the issue of knowledge in this respect wasa sink me put by certain lock having Ocalan Q C. In the case of Rain Burns and Rainbow Allied Dunbar shows PRC its citation for that being monitored and reported the chance division second order to go to that. He said that, you know, case such as the present when the allegations one off negative financial price directed degree of night until he appreciates my resume being expected. Appreciate. Firstly, the nature of Nazis suffered the second. How the advisory team that lost that necessary means that claim should to understand. But then fighters should have acted differently, giving him mines on high about it should've acted on, and I don't have either had acted in that way. It's position fast like this. There is also another case authorization for Rubinstein. You just be seat back PR seen. You'll see the citations there in your night here. The Court of Appeal had to consider relationship between the scope of Patrick fines duty. So I don't if I if I run the risk posed by recommended investment. I have biases, leak, responsibility, loss experienced by the customer. He relied on the recommendation. Finally, we have a call contract with Stopfel again is a topic so keeping it short and sweet. If we look at the case of PK into Mark Limited, an Australian using banking green, those records to the principle of contractual a Stopfel reel I mentioned Is it because again it's another way defending in case to do financial stomach? And in that case, the Court of Appeal rejects the claim by commercial investment vehicle resigned. Complex Spanish product. Reverse Seductive. George. You have held that the bank had fundamentally misrepresented the nature of the financial product by describe minutes privately invested in Russian bombs, whereas in fact, it was a derivative. We'll stretch deposit contract because appeal attach much great reporting back to the contract documentation on a signed declaration by investors Agent Mr Poor knee off a risk disclosure statement that he understood the nature, the investment on the wrist, the description of the investment concerned was not buried in a mass of small print. It appeared on the face of documents are clearly has a problem baffle. Equip your best churches fighting inducement. The best up had allowed his own misunderstanding. The coordinate claim failed and its entire city well, the quote of you in just another film, it actually indicated that it may be prepared to hold that the contract documentation gave rise to contractual stuff or more Big Round goes into some detail 67 and 60 on exactly that point. Essentially, if you consider that risk disclosure statement in that case about emerging markets and signed separation, whereby the investor had assented to Proposition that had satisfied himself that the transaction suitable with mean another word is tough, you signed it. You accept responsibilities that come with that. You accepted the risks. So according the PK is an example of a case where the Court of Appeals prepared to hold contract documentation in that case gave rise to contract with Stopfel. So actually, it's like Get out, girls. So the two things to keep an eye on your defending his firstly limitation was second. Many contractually, Stopfel perhaps urges well, whether the unified in breach, how far you're going to find what you should do TV and again, this might also depend on the contract documentation. It might even be also that there are contract provisions excluding any common or duty can. But of course, there is Judas reluctance to characterize such terms have being exemption floors, which would be a bad contractor that 0.77 on also restricts in total 1967. So, in a nutshell, that's a whistle stop tour are firstly, what had problems are, secondly, what the risks involved were on. Thirdly, where can you go next? Now? Yes, your used clothes. Essentially your main ground is that the breach of statutory duty by way of a backup, a breach, any common or duty ocher and the first record ship point of view to embarrass called rules. Actual main basis for establishing that duty, cat and stomach is almost as I said earlier is what you would expect to find new quantum Boland in the next higher tomorrow. Expanded it, of course. Establishing what breaches We're actually localization. What is that noise? And then how do you contemplate it? The nose awaiting which try and build a case would do. Beware defenses, which is invitation The surgeon, my finishing any contractual or contract re stopfel, and also probably even fighting treated due to speak up. Um, those are things to be where I'm allowed us. We might Nuts. She probably at that U minus typically punished for selling claims this actually treat any case concerning particularly touching hedging problems? Yeah, you finished as being all to do is talk no student contract this boy reuse. But of course, you do need to be dealing with the case ball on that. How these products work in practice. You will probably next to help your client with such cases, whether you're fat side on claim inside. So that's I consistent. Further. Do you think that's being up some benefit? I know there's a lot to take him, and I know I rushed over, for example, the p I insurance of aggregation above the unregulated collective schemes. But the reason why I mentioned I was just give you another example. Our report, which have bean assault over the years, I think this is no just isolated to her to parts unknown. So I do hope that's been of benefit again. Do you let me know if you have any questions? Contact a two door built opinion email to me with your question