The FCA was the first agency to say, in June 2013, that it
was looking at whether the... Read More
The Financial Conduct Authority is poised to reach a settlement as soon as this week with six banks, which together have set aside about $5.3 billion in recent weeks for legal matters including the currency investigations, people with knowledge of the talks have said. That’s less than a year and a half since the agency disclosed it was looking into the matter.
By contrast, after more than two years fining firms piecemeal for manipulating the London interbank offered rate and related benchmarks, the FCA and its predecessor have reaped 532 million pounds ($849 million) from seven firms. Chief Executive Officer Martin Wheatley said last
month it’s “not a good message” the agency is still investigating Libor. The FCA is working to produce a different narrative on currency rigging, according to the people, who asked not to be named because the talks are private.
“There can be little doubt that the FCA has learned lessons from its protracted Libor investigations,” said Jason Mansell, a London-based trial lawyer involved in Libor cases. “The much rumored multi-institutional global settlement will enable the FCA to present itself publicly as providing a tough response to global misconduct.”
FCA First
The FCA was the first agency to say, in June 2013, that it was looking at whether the $5.3 trillion-a-day currency market had been manipulated. Investigations soon opened on three continents as authorities probed allegations that dealers at the world’s biggest banks traded ahead of clients and colluded to rig benchmarks used by pension funds and money managers to determine what they pay for foreign currencies.Barclays Plc, Citigroup Inc. (C), HSBC Holdings Plc (HSBA), JPMorgan Chase & Co. (JPM), Royal Bank of Scotland Group Plc (RBS) and UBS (UBSN) AG are in settlement talks with the FCA, people with knowledge of the negotiations have said. Lara Joseph, a spokeswoman for the FCA, declined to comment, as did representatives for the six banks.
The British regulator already has reached Libor settlements with three of the six banks -- Barclays (BARC), RBS and UBS -- levying 307 million pounds in fines.
A two-page FCA document outlining interview protocol for currency investigations, sent to lawyers advising banks last year, was one of the first signs the agency was taking a different tack, according to three people who saw the letters and asked not to be identified because they were private.
‘Greater Control’
The document set out a series of requirements for lawyers, including recording employee interviews and sending them to the FCA, one of the people said. That request hadn’t been seen before, according to four lawyers who regularly work on FCA investigations and were involved in Libor cases. After getting pushback about attorney-client privilege, the regulator agreed to accept detailed notes instead, they said.“After Libor, the FCA realized it needed to have greater control over banks’ internal investigations, rather than just accepting evidence,” said Richard Burger, a London-based lawyer who has worked for the regulator. “The more prescriptive approach taken with FX investigations was probably the regulator’s attempt to remedy this.”
The FCA has benefited from improved communications with overseas counterparts, according to an agency official involved in the case. A lack of understanding about different legal systems hampered the Libor investigation, the person said.
Agency Cooperation
The British markets watchdog received 52 requests for help from other agencies on foreign exchange through March, according to its annual report. The U.S. Federal Reserve, the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission are pressing to reach accords with some of the same banks at the same time the FCA does, people with knowledge of the matter have said.The FCA may still issue settlements on its own, other people said last week. That willingness to go it alone differs from the agency’s approach on Libor, in which it mostly has coordinated fines with the CFTC and U.S. Department of Justice.
The CFTC is striving to announce settlements along with the FCA, as are the Fed and OCC, while the Justice Department probably will take longer, people with knowledge of the probes have said. The Justice Department is pressing to take action against one bank before the end of the year and planning to file criminal charges against individuals next year, the people said. Spokesmen for all four U.S. agencies declined to comment.
Libor Fines
The FCA isn’t planning to levy fines against individual traders, two people with knowledge of the discussions said in September. In contrast, 11 anonymous warning notices outlining wrongdoing over Libor and related benchmarks have been published by the FCA against traders. The regulator has proposed penalties of as much as 10 million pounds. The fines have been delayed because of possible criminal proceedings.The FCA was created in April 2013, two months before the regulator said it was looking at currency markets. Its predecessor, the Financial Services Authority, was split up after being criticized for its handling of the 2008 financial crisis. The foreign-exchange probe has provided the regulator with a chance to leave behind that criticism, which included the way it handled Libor, and prove itself, according to lawyers.
“The FCA needs to be seen to be taking action” to improve banking culture, said Peter Bibby, a London-based lawyer at Brown Rudnick LLP. The FCA vowed when it was formed that “it would take decisive action where it found fault, and FX is the first real test of that commitment.”
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