Bloomberg
Traders facing penalties from British regulators over their involvement in rigging Libor may avoid being fined after the UK Financial Conduct Authority missed a deadline to take action, three people with knowledge of the matter said.
The FCA pulled at least one fine it planned to levy after conceding the three-year statute of limitations for civil enforcement actions had passed, according to one of the people, who spoke on condition of anonymity. At least two more traders are preparing to challenge the penalties they’re facing, saying the regulator missed the deadline, two people said.
The development is a blow to the FCA, whose chief executive officer, Martin Wheatley, has already said the lengthiness of the proceedings is “not a good message.” Since 2012, seven firms have paid the British regulator about £532mn ($839mn) over interest-rate rigging.
“After such a drawn-out investigation it will be disheartening for the FCA if they have nothing to show for it in some cases,” said Richard Burger, a lawyer at RPC in London who used to work for the regulator. “There will be a number of lessons learned that will inform a different approaches in future.”
Earlier this year, the regulator said publicly it planned to take action against individuals over the manipulation of the London interbank offered rate. That includes fines of as much as £10mn, a person with knowledge of the matter said in June.
Former Deutsche Bank traders Christian Bittar and Guillaume Adolph, and ex-Royal Bank of Scotland Group trader Andrew Hamilton are among those who have received so-called warning notices detailing the potential penalties they face, according to people with knowledge of the probe. They haven’t been accused of criminal wrongdoing.
The notices can be contested, though that process has been put on hold for some at the request of the Serious Fraud Office because of possible criminal proceedings. That delay doesn’t affect the FCA’s statute of limitations, one of the people said. If their appeals fail, the former traders could still be prohibited from working in the industry.
FCA spokesman Chris Hamilton declined to comment. Bittar, Adolph and Hamilton didn’t respond to requests for comment either directly or through their lawyers.
The FCA’s statute of limitations starts from when the regulator first knew of a possible offense and runs until the warning notice is sent. The government extended the deadline for the regulator to take civil enforcement action to six years from three effective from July. The time limit had already been raised to three years from two in 2010. There’s no statute of limitations for criminal proceedings.
In question is how long the British regulator has been aware of allegations against individual traders.
US investigators told the regulator - then called the Financial Services Authority - they were looking into allegations benchmark interest rates were being manipulated in 2008.
The British regulator started its formal investigation in 2010, according to people with knowledge of the cases, and hasn’t said publicly when it first began looking into it.
While banks began turning over information to the UK regulator as early as 2009, much of the material wasn’t produced until late 2011 as their internal investigations uncovered new evidence, the people said.
The SFO, which is leading the British criminal probe, has charged 13 individuals in relation to Libor manipulation with more charges planned, according to people with knowledge of the matter. The first trial for a trader accused of rigging the interest-rate benchmark is set to start in May.
