Is FICC review based on pragmatism or politics?
Opinion is divided on whether the Bank of England-led Fair and Effective Markets Review (FEMR) is driven by policy, or a belief that more needs to be done to improve market discipline.
Some City lawyers have praised the review as pragmatic and well timed, noting that the authorities are embracing an industry-led response. Others find it hard to look past the political overtones.
The FEMR was launched by the Chancellor in June. Its consultation document, released on October 27, asks 49 questions on how to reinforce confidence in the fairness and effectiveness of fixed income, currency and commodity (FICC) markets.
The paper borrows from many themes established by the Parliamentary Commission on Banking Standards in its 2013 paper Changing Banking for Good.
Some say section six of the consultation, which looks at surveillance and penalties, is an area in which the consultation falls short.
The questions and recommendations are presupposed on the fact that criminal law is only to be used against individuals and shouldn’t be used to incriminate companies.
David Corker, of Corker Binning, queries if this is the best way to achieve deterrence.
“The review should consider whether there needs to be a corporate offence for lack of control, or failure to prevent fraud by your employees,” he said. “In my view, that is a signification omission from the consultation.”
“When they ask what more can be done to have a clean market, I think it is arguable that if you are serious about this, you must criminalise more acts by legal persons/companies,” Corker added.
Benchmark manipulation is a case in point. “If that became a criminal offence for the corporation, I believe that could lead to a much more effective internal policing and compliance culture,” he added.
The consultation closes on January 30 2015. Its recommendations will be published in June 2015.
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