Partner Abdulali Jiwaji comments in FX Week regarding the FCA’s failings to address key issues in foreign exchange markets.
“Regulators are failing to address key issues in foreign exchange markets as initiatives launched since the start of the FX fixing scandal stop short of enforceable rules, show little regard to the unique structure of currency markets and do little to incentivise practices changing, market participants say….
Abdulali Jiwaji, partner at law firm Signature Litigation, says there has been some progress in terms of structures and processes having been put in place, especially in the larger banks, but he also cautions that without strict enforcement there is a tendency for market participants to drift away from structures and processes under the pressures of the marketplace.
“Whether [these structures and processes] translate into effective action on the ground, that remains to be seen. The regulator will keep a close eye on how these processes are implemented and more importantly how the culture which is driven by management is translated down to desk level and whether people’s actions reflect a significant change in behaviour,” says Jiwaji…
Senior Managers’ Regime
In the UK, regulators have extended the regime of personal responsibility, dubbed Senior Managers’ Regime (SMR) to cover currency markets earlier this year in a bid to incentivise heads of trading desks and managers to keep a close eye on their employee’s behaviour.
“Now that the new senior managers’ regime gives more power to the FCA to look at individuals who are responsible for businesses, the FCA will probe to see whether management has taken steps to instil the right culture and reduce the opportunity for irregular behaviour,” says Jiwaji.
“They will also be keen to look into whether they condoned, approved or were aware of any illicit activity. There’s more pressure now on senior managers to have a clean record in the business they are responsible for,” he adds.
And to show it means business, the FCA is likely to use all tools available at its disposal to crack down on any transgression, at the same time as the appointment of a relatively new senior team at the top of the regulator’s hierarchy will increase this willingness.
“It’ll be interesting to see what guidance the tribunals and the courts provide on the level of culpability needed before someone can be sanctioned for failings from a senior management perspective,” concludes Jiwaji.”