Daniel Spendlove comments re FX settlements published in Profit & Loss magazine

By Daniel Spendlove

Questions Remain Following FX Settlements

21 May 2015

As the FX industry starts to digest the latest settlements by major banks for colluding to try and manipulate the FX spot market, questions are being raised about who is responsible for the behaviour within the banks and who will ensure that it changes in the future.

Unlike in a number of other recent bank settlements, the authorities have extracted guilty pleas from a number of the banks as part of the agreements announced yesterday.

The regulators appear to be claiming this unusual admission of guilt as a victory for justice and the integrity of the financial system – the Department of Justice (DoJ) was keen to stress that these pleas came from the parent-level entities, not subsidiaries – but with no banking licenses being revoked or jail sentences handed out as a result of these pleas, it could be viewed as nothing more than a PR win for the regulators.

Profit & Loss reported earlier this week that, following the latest round of settlements with the banks in the criminal cases, the authorities were likely to go after the individuals that have already been dismissed by the banks for allegedly conducting the collusion and market manipulation for which the banks have now been fined.

But Daniel Spendlove, a senior associate at Signature Litigation, warns that the banks could find it challenging to disassociate themselves with these individuals if the authorities do bring cases against them.

“There is of course pressure on the DoJ and the FCA to hold individuals found culpable of wrongdoing to account. And whilst the banks may well try to distance themselves from these individuals, this may be difficult to do if it’s shown that the practice was widespread within that particular organisation,” he says.

As part of the settlements announced today the banks have agreed to a series of remediation efforts to improve their ability to effectively monitor, detect and report any future market abuse by their employees. This is another area where there is a lack of clear responsibility, because with five different regulatory authorities issuing fines today it is has not been established which one is responsible for enforcing these remediation measures.

“In a sense we’re in unchartered territory here. FX trading is becoming more closely regulated but the regulators will still be highly reliant on the good conduct and practices of the banks to stop this sort of thing from happening again,” says Spendlove.


Read the full article here.

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