The small company based next to a chip shop in Essex, sucked into a dispute with one of the world’s most powerful central banks, said it was “vindicated” by the UK financial regulator’s decision to close an investigation without charge.
Encoded Media, whose registered address is at a small accountancy firm next to a Chinese takeaway and the Crispy Cod chip shop in Hornchurch, was thrown into the spotlight shortly before Christmas, when the Bank of England alleged its affiliate Statisma News had misused an audio feed intended as a back-up in a “wholly unacceptable” way. Both the central bank and the UK’s Financial Conduct Authority launched investigations.
But after nine months, the FCA this week closed the file and said it would take no further action. In an unusually short announcement, the agency said it had concluded that the audio feed contained no inside information, and it had not found “any activity of concern or misconduct”.
“We feel vindicated by their judgment that we’ve done nothing wrong and our customers have had their confidence in us fully restored,” said Philip Wand, a director at Encoded Media, who had not spoken publicly about the incident while the FCA looked at the matter.
Mr Wand said customers who had shied away while the FCA inquiry was open were already making inquiries again. “At this point we’d really like to put it all behind us,” he said. Statisma also broadcasts material from other press conferences, such as the World Health Organization.
The incident, rooted deep in the technological systems of the BoE, has proven to be an embarrassment for the central bank, revealing its loose grasp of how broadcasts — a crucial part of how it communicates with traders and with the wider world — actually work.
Various feeds — on TV, on online video and in online audio — reach users at slightly different speeds, just as they do with sports broadcasts. A user of Statisma’s advertised audio feed could expect a lead of up to five seconds on some other services, giving a potential edge for trading when listening to BoE press conferences. Statisma publicly said its clients could “hear first” what policymakers had said.
Since December, and again this week, the central bank has said Encoded’s actions represented “misuse” of its audio feeds. It was the “presence of an audio stream that it didn't know about . . . that was the matter of concern”, the BoE said in its own report published this week.
But the BoE itself admitted to several mis-steps, and indicated it should have been aware of how the feed was used.
Oversight of its press conferences and technical equipment fell between the BoE’s technology, communications and security units, with insufficient clarity over their individual roles and responsibilities, it said. The Bank’s Court of Directors — its board — has laid out a series of recommendations to tighten up standards.
An external complaint about possible misuse raised with the Bank in 2018 was not fully investigated as officials did not believe a superfast audio feed was possible. “This was based on the Bank’s understanding of the facts, but it was incorrect,” it said this week.
The BoE also failed to notice that other fast audio feeds were advertised and offered to clients, and it did not follow practice elsewhere. From September last year the European Central Bank began distributing its own audio feed of its press conferences, aiming to give listeners “almost real-time access” to what was being said.
This free ECB service curbed the cottage industry of broadcasters trying to sell lucrative high-speed alternatives. But its UK counterpart admitted in its report it did “not routinely monitor the web for evidence of companies that advertise inappropriate access to press conferences”.
Mr Wand said nothing was hidden, and added that the central bank appeared to have misunderstood how broadcasts are transmitted.
An Encoded contractor installed an audio feed at the central bank in 2017 and asked BoE staff to ensure the link was active during press conferences, the BoE said in its report.
But Mr Wand said that feed was not used to pump audio information out to customers ahead of the competition. Instead, it was converted for broadcast on YouTube, as its contract with the BoE had set out, he said. Internet broadcasts are bounced off satellites and can lag up to 15 seconds behind live action. Statisma’s audio feed, meanwhile, is separate to that, according to Mr Wand and supported by company contracts seen by the FT. Though Encoded was immediately shut out of the Bank’s activities last December, Mr Wand said Statisma broadcast another BoE press conference to subscribers in January.
Many companies compete with Statisma in selling fast audio services to their users, including Bloomberg, Newsquawk and LiveSquawk. They all take their pictures and sound from one pooled feed, run by Bloomberg, according to Mr Wand.
“Risks overlooked, unsure management, weak controls and red flags missed: all the elements of a multimillion-pound regulatory fine — but not when it’s the Bank of England at fault,” said Simon Morris, a financial services partner with law firm CMS. “This is a remarkable catalogue of fundamental errors.”
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