Abdulali Jiwaji’s comments on FX fines published in WSJ and in Law Society Gazette

By Abdulali Jiwaji

WSJ: Giant $5.6 Billion Bank Fines Pave Way for Clients to Sue

1:37 pm ET, May 20, 2015 | By Phillipa Leighton-Jones

“Primed like a coiled cobra…concentrating so hard…[as if] made of wax…[haven’t] even blinked.”

The colorful trader chat, including  the above example of a Barclays BCS +3.44%trader attempting to execute a client order, is being hung out for all to see once more today after five global banks were fined over allegations of foreign exchange benchmark rigging. The giant $5.6 billion settlement involves Barclays PLC, Citigroup, J.P. Morgan Chase & Co., Royal Bank of Scotland PLC and UBS AG being fined variously by the Department of Justice, the Financial Conduct Authority, the Commodities Futures Trading Commission and pleading guilty to various criminal charges.

Four of them (all but UBS UBSN.EB -0.48%) will also plead guilty to conspiring to manipulate the price of dollars and euros.

The fine handed out to Barclays by the FCA was the largest in the history of the regulator or that of its predecessor, the Financial Services Authority.

What’s apparent, as in other settlements, is that the banks’ systems and controls were seriously wanting, as were front line management and appropriate ethical standards.And they worked together to suppress competition in the FX market.

The chat rooms, as we already know, were used as a kind of closed community in which traders from different banks revealed positions to one another in an attempt to manipulate the markets and inappropriately disclosed client order flows. There, traders discussed attempts to move rates one way or another depending on positions. And not everyone was guaranteed entry. From the CFTC notice to Barclays:

“After further discussion of whether the Barclays trader would “add huge value to this cartell,” the traders decided to invite the trader into the chat room for a “1 month trial,” with the Bank X Trader warning him, presumably facetiously, “mess this up and sleep with one eye open at night.”

What’s apparent, though, is that the trickery was not all high-tech.

In its notice to UBS, the Justice Department said UBS traders communicated using hand signals during open calls with customers to conceal mark-ups and coordinated on pricing ahead of time when clients requested an open call in which they would hear communications via an internal communication system known as a hoot.

The banks have all promised to clean up, but the evidence that emerged today is likely to spark further litigation against the banks, “particularly from pension funds and other money managers that have suffered losses on forex trades as a result of the market manipulation,” said Simon Hart, banking litigation partner at City law firm RPC.

“Legally it will be much easier to bring a civil claim against a bank for forex manipulation than for Libor manipulation,” he said. “The short-term and one-off nature of forex trades means it will be far easier for firms to prove that they lost money on particular trades during a period one of these banks was manipulating the market.  If a firm aggregates all those trades where losses were suffered, the numbers could well be significant.”

Robin Henry, a financial disputes partner at Collyer Bristow, said: “Potential claimants could be pension funds and investment managers, who have regular currency dealings with banks in large volumes and U.K. businesses who were mis-sold highly complicated forex derivatives by banks in order to manage their exposure to foreign currency. Small changes in forex rates can trigger massive liabilities for businesses. ”

Even more troublesome for banks, he said, is the “threat of claims by customers that, had they known that their banks were manipulating forex rates, would never have entered into those contracts in the first place.”

The fines aren’t the end of the story for banks, said Abdulali Jiwaji, a partner at Signature Litigation.

“Criminal and competition related investigations are ongoing,” Mr. Jiwaji said. “While the larger institutions can comfortably absorb the financial penalties, significant actions against individuals are in the pipeline which will no doubt also provide ammunition for related civil claims.”

– Giles Turner and Lucy Burton contributed to this post.

Read the full article here.


LSG: Forex fines likely to trigger further litigation against banks

21 May 2015 | By

The guilty pleas entered by four global banks for rigging the foreign exchange (forex) market and Libor interest rates could trigger a raft of further civil litigation, commercial lawyers said today.

Citigroup, Barclays, JPMorgan, RBS and UBS yesterday agreed to pay a record £3.7bn to US and British regulators after all but UBS admitted conspiring to manipulate the price of US dollars and euros exchange on the FX spot market. UBS admitted separate charges.

Simon Hart, banking litigation partner at City firm RPC said yesterday’s settlement could make it easier for pension funds and money managers to make claims against banks.

‘There is already a lot of work going on behind the scenes assessing how claims could be brought forward and those potential claimants will be looking to today’s announcement for evidence to support their analysis.’

Andy McGregor, also a partner at the firm, said that a large number of FTSE 100 companies are likely to be investigating potential claims, and that if one large corporate pursues litigation, this could prompt industry-wide litigation against banks.

Anthony Maton, managing partner at Hausfeld, the firm that co-led counsel in the case against the banks in the US, said the guilty pleas were ‘only one side of this story’.

‘European regulators are also investigating these practices. There is no doubt that anyone who traded FX in or through the London market – and there is $5.3tn of business here every day – will have suffered significant loss as a result of the actions of the banks.’

The European Commission is close to ruling on whether the banks were guilty of anti-competitive conduct, with lawyers suggesting that any infringement could open up the potential for more claims in Europe.

Abdulali Jiwaji, partner regulation at financial services specialist Signature Litigation, said: ‘These fines are by no means the end of the story. Criminal and competition related investigations are ongoing.

‘While the larger institutions can comfortably absorb the financial penalties, significant actions against individuals are in the pipeline which will no doubt also provide ammunition for related civil claims.’

Read the original article here.


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