The Serious Fraud Office SFO recently announced that it had closed its criminal investigation into allegations of fraudulent conduct in the foreign exchange FX market.
This behavior was facilitated by traders at different institutions communicating through messaging services and online chat rooms. They used this information to determine their trading strategies and to attempt to trigger stop loss orders and manipulate the fix in the desired direction for example, to ensure that the rate at which the bank had agreed to sell a particular currency to its clients was higher than the average rate it had bought that currency in the market.
Further, a trader within one group complained in a chat room about another trader in the group not disclosing a large net order to him in advance of a fix: The test here is whether a jury is more likely than not to convict the defendant of the charge alleged - a lower standard to that which a jury in a criminal case must be satisfied of prior to any conviction. The CPS Code stipulates that the SFO must consider what the defense case may be, and how it is likely to affect the prospects of conviction .
What stands out from a reading of the FCA Final Notices are the lack of policies and guidance regarding both the use of chat rooms by traders, and what were acceptable communications. For example, in its findings against one bank, the FCA noted that what limited guidance there was regarding the general use of chat rooms was not specific to the FX trading business and did not explain in sufficient detail the types of chat room communications that were considered to be unacceptable.
Meanwhile at one bank, where the front office had primary responsibility for identifying, assessing and managing the risks associated with its spot FX trading business, some individuals responsible for managing front office matters were not only aware of but also at times involved themselves in the alleged FX market manipulation. Given this prevalent culture and the lack of guidance, some FX traders may have sought to argue that their conduct was simply not dishonest.
However, in the recent failed Libor trial noted below these arguments did not seem to dissuade the SFO from continuing its investigations and bringing prosecutions.
What may have ultimately discouraged, or given the SFO some reservation in continuing its investigation, is the recent acquittal of the six brokers in the second Libor trial at Southwark Crown Court in January Given the nature of those acquittals and the expense of such trials, which are often contested, it is possible that the SFO has decided to take a more cautious approach to prosecuting individuals.
Many other corporate investigations continue. The distinction may well be as a result of the fact that some corporations make admissions for commercial reasons whilst individuals often contest the charges they face, especially where the sentencing guidelines are such that it is worth a fight, no matter the strength of the evidence.
US style plea- bargaining, of course, has no place in the English judicial system. No such promise was made in relation to the FX investigation. Therefore, whilst the third Libor trial of former US Dollar Libor traders recently commenced at Southwark Crown Court, one is left to wonder whether the decision to stop the FX investigation was really based on a lack of evidence or whether budgetary constraints and the reputation of the SFO had a role to play. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
View all Practices by Topic. View All Practices Alphabetically. Investigations, Enforcement and White Collar. Savell , Jonathan A. Graham , Christine Braamskamp. Introduction The Serious Fraud Office SFO recently announced that it had closed its criminal investigation into allegations of fraudulent conduct in the foreign exchange FX market.More...