Member Article

FOREX fines lack perspective and favour the Treasury, warn legal experts

The Financial Conduct Authority’s (FCA) decision to fine five major banks for rigging FOREX has failed to acknowledge the true scale of the issue, legal experts have warned. According to independent law firm, Berg, the FCA’s handling of the issue has allowed banks to continue with business as usual.

The latest set of fines come after it was uncovered that banks were using customers’ confidential information to push customers into selling their currency holdings in order to make a profit, in spite of a loss for the client.

FCA favours Treasury over small business

Following a day of debate over the fines, Berg believes that this only goes to show the FCA is clearly more committed to funding the Exchequer than it is to fighting for a fair deal for small businesses. The fines imposed by the FCA have reached a record-breaking sum, which will now go to the Treasury.

Continued arrogance by the banks

Whilst the review into the Foreign Exchange Market was started by the then Financial Services Authority, many were prepared for significant failings to be uncovered. Yet the fines imposed relate to manipulation by the banks for the period January 2008 to October 2013. Berg’s experts question how manipulation was able to continue as late as October 2013.

Lack of punishment

In addition, Berg has pointed out that the fines themselves are relatively low when viewed in comparison with the financial gains made by the banks as a consequence of the manipulation. Similarly, no prosecutions are being brought against the individuals involved.

“In spite of an investigation by the regulator, the banks did not stop rigging FOREX, even though the must have known the fines were coming imminently,” comments Alison Loveday, managing partner at Berg. “The FCA should be asking why this happened.”

Berg would therefore question why the regulators are simply imposing a monetary sanction that will ultimately be paid by the UK tax payer and/or the banks’ customers and shareholders. Until the regulators start prosecuting individuals at these banks, Berg believes that the banks are likely to believe that they can “get away with it”.

Alison continued, “There appears to be a complete lack of individual accountability around this case, which is not fair, particularly for the people that have been impacted.

“Bonuses continued to be paid at the end of the 2013/14 financial year and directors continue to take significant drawings. As yet there appear to have been no public announcements of individuals being dismissed from their roles. As such, following these fines nothing will change and it will be business as usual for the banks, once again.”

Berg continues to represent clients that have been the subject of behaviour by bankers that has been detrimental to the economy and to our clients’ businesses. We are continuing to question why the Financial Conduct Authority has been unable to assert itself properly and enforce the regulations and legislation that it has at its disposal.

This was posted in Bdaily's Members' News section by Berg .