Malcolm Sheehan QC to lead independent review into regulation of Football Index

The Government has today (7 June 2021) confirmed the appointment of Malcolm Sheehan QC to lead an independent review into the regulation of Football Index.

The review will report on the period from the granting of BetIndex’s gambling operating licence in September 2015 to its suspension by the Gambling Commission in March 2021. The report will focus on the role of the Commission and other relevant regulatory bodies (including the Financial Conduct Authority) in order to provide “an objective account of their actions, identify any lessons, and inform the government’s Review of the Gambling Act 2005“.

You can find a detailed explanation of the background to this appointment in our previous website posting entitled “Football Index operating licence suspended (plus a summary of what led up to that & what has happened since)”.

Today’s DCMS announcement of the appointment reads as follows:

Government appoints Malcolm Sheehan QC to lead independent review into regulation of Football Index

Ministers have appointed Malcolm Sheehan QC to lead the independent review into the regulation of collapsed gambling firm BetIndex, the providers of the Football Index product.

The review will cover the period from September 2015, when BetIndex’s licence was granted by the Gambling Commission, to March this year when the licence was suspended.

Malcolm Sheehan QC will review the steps taken by the Gambling Commission and other regulatory bodies regarding BetIndex. As set out in the terms of reference published today, it will examine the regulatory environment around the novel football betting product which collapsed earlier this year leaving thousands of customers out of pocket.

The review will examine the actions of the Commission in assessing, licensing and monitoring the operator. In addition, the review will examine the actions taken by the Financial Conduct Authority in determining whether the product should be regulated under the Financial Services and Markets Act.

The Gambling Commission is carrying out a separate regulatory investigation into BetIndex’s licence and the review is also independent of the ongoing administration proceedings, which are looking at the assets and liabilities of the firm.

Malcolm Sheehan QC will report on the findings of the review in the summer. Alongside any lessons learned for the regulators, the report will feed into the government’s ongoing Gambling Act Review. The government intends to publish a white paper following the call for evidence on the Gambling Act Review before the end of the year.

Notes:

  • Malcolm Sheehan QC is experienced in commercial and common law practice, with a particular focus on product liability and group actions, as well as public and regulatory law.
  • The Gambling Act Review Call for Evidence closed on 31 March, but former customers can continue to provide information to DCMS ([email protected]) about the Football Index case where it falls within the Act Review’s scope. Where relevant to the independent review, these will be passed onto Malcolm Sheehan QC. Customers can also continue to contact the Gambling Commission with evidence related to the regulatory investigation.
  • Football Index, operated by BetIndex Ltd, had a model that allowed customers to bet by buying ‘shares’ in footballers and receive returns based on their performance. The Gambling Commission suspended the firm’s operating licence in March, and it entered administration shortly after.

This review is intended to provide an independent expert account of what happened in this case and consider the lessons to be learnt for the future. We expect the review to report on:

1. The actions taken by the Gambling Commission in:

(a) Licensing BetIndex, including its assessment of the company’s financial circumstances as part of their suitability to hold a licence.

(b) Monitoring changes to the product offer and ensuring the operator’s compliance with the gambling licence conditions.

(c) Responding to concerns raised about the product and operator in the course of internal compliance activity and/or following interventions from third parties including customers and the Advertising Standards Authority.

(d) Reviewing BetIndex’s gambling licence from May 2020, including how it cooperated with other regulatory bodies.

(e) Deciding to suspend BetIndex’s licence in March 2021.

2. The actions taken by the Financial Conduct Authority in:

(a) Responding to the Gambling Commission following their initial approach.

(b) Considering whether the product amounted to a regulated activity under the Financial Services and Markets Act.

3. The degree to which the Gambling Commission and other regulatory bodies work together in relation to licensed gambling operators offering novel products, and if better working between regulatory bodies can be facilitated in future.

4. What, if anything, the Gambling Commission and other relevant regulatory bodies could have done differently to better deliver their statutory responsibilities and the three licensing objectives set out in the Gambling Act, and whether this could have:

  • prevented the product from being offered in the form that it was
  • avoided the collapse of the product and related losses to customers.

The intended outcome is that “the report should provide recommendations, if required, as to changes to regulatory practice or to gambling legislation so as to provide necessary and proportionate protection for the public in relation to complex betting products”.

UPDATE: On 29 June 2021, the Gambling Commission published the following “Football Index update”:

Due to the understandable and ongoing interest from consumers around BetIndex and its Football Index platform, we are publishing this further update which will be of interest to the company’s customers.

The Gambling Commission has certain powers as a regulator and sometimes it is assumed we can do things which we cannot. This does not mean we do not recognise the distress and clear upset that many Football Index customers will be feeling.

BetIndex – administration proceedings

Whilst our investigation is ongoing our priority is that BetIndex focuses on treating its customers fairly and keeping them fully informed of any developments which impact them.

BetIndex remains in administration, and we continue to be in close contact with them. They also post updates on their website (opens in a new tab).

Ultimately, alongside the courts, it is for the Administrators to resolve the return of funds to affected consumers from the financial resources still held by the company. This is not something that can be directed by the Gambling Commission, but we are in contact to make sure any legal obligations covered by our remit are met.

In respect of ‘Trust Deed monies’ – the money put aside by the company to cover customer stakes in the event of financial difficulties – these funds are currently being held by the Viscount of Jersey. Following a decision in the courts earlier this month, repayment of the monies to customer wallets is continuing as planned with a court hearing having taken place on the 22 June in Jersey to recognise the High Court Order.

The next steps will see customers being notified by email when the monies are released. At that point customers will be able to log into their Football Index account and make a withdrawal request.

Many Football Index customers are very concerned about the ‘share portfolio’ part of the product. At the present time, there has been no valuation by the Administrators of ‘share portfolios’. The Gambling Commission is not involved in this valuation and it is unconnected to our powers as a regulator.

Whilst there will be limitations on what information we can publish whilst our regulatory investigations are ongoing, we will continue to provide updates whenever we have further information to share.

Independent review and previous statements

We have welcomed the Government’s independent review and the focus it will bring to the way that complex products, which to consumers can have the appearance of both gambling and financial characteristics, are currently regulated.

The Government published the Terms of Reference for the independent expert review (opens in a new tab) on 7 June 2021.

We are fully engaging with the review, which is being led by Malcolm Sheehan QC, to find forward-looking solutions that can also be fed into the Gambling Act Review.

For further background on our ongoing investigation you can read our previous update (opens in a new tab) .