Legal Aspects of Corporate Finance

Question

You work in the corporate finance department of Global Universal Bank Plc incorporated in the UK. Your department is engaged in a ‘price support operation’ on a series of notes issued by a special purchase vehicle (SPV) set up to purchase a pool of motor finance receivables issued by Uniglobal Motor Finance Plc a major UK finance company. The support operation is described as ‘perfectly legitimate’ and‘ market friendly’ and is described as only being intended to avoid any unnecessary market volatility in the SPV’s share price or the share price of the originating finance company. It is specifically revealed that you are to approach the proprietary trading division within Global Universal Bank Plc and ask it to purchase a new forthcoming tranche of SPV notes. However you meet up with a friend of yours David Stream who works for a London stockbroker and tells you that there are persistent rumours concerning the possible financial stability of Uniglobal Motor Finance Plc . Armed with the information from your friend David you approach your head of department about the matter but he dismisses the rumours as idle gossip and nonsense and he says that he is very anxious to ensure a smooth placement of the new notes by the SPV. Further another colleague in your department tells you that he has heard rumours that the proprietary dealing desk maybe under investigation by the Financial Conduct Authority “FCA” in connection with another unrelated SPV issue where similar assistance was provided with other pre- crisis structured finance deals. Your colleague urges you to ‘watch out’. You are now so concerned about the matter that you approach your legal and compliance officer for advice.

(a) Describe the general legal and regulatory issues that could arise in connection with the proposed transactions.

(b) Identify and discuss the principal offences, penalties and defences that may apply under the Financial Services and Markets Act 2000 “FSMA” and outline any separate criminal law provisions that might apply, as well as commenting upon the situation if the notes issued by the SPV were to be listed on the London Stock Exchange (LSE). 

Summary: This question belongs to corporate law and discusses about legal aspects of corporate finance based on the events in the case study.

Total word count: 2620