I’m still catching up from a short break followed by a business trip so this is brief. I would encourage anyone who believes that the chat room issues we continue to deal with as an industry were not cultural to read the charges against RBC and TD Bank by the Ontario Securities Commission.

The documents are available here and here, and highlight quite clearly to me that not only did management in the banks generally (and I think this is a factor affecting far more than just these two institutions) know about the problem, but they either didn’t know what to do about it, or chose, foolishly in my opinion, to do nothing. Repeatedly, the OSC alleges that the banks’ policies and procedures at the time “did not provide sufficient guidance to FX traders”.

I have argued before that I believe senior managers at the various institutions were asleep at the wheel over this issue and the RBC charges in particular seem to support this as it is reported by OSC that in 2011 a “Compliance Bulletin – Foreign Exchange Markets” was prepared by RBC’s Capital Markets Compliance Canada that alerted employees to the risks regarding insider dealing and market abuse.

The charges also state the same document required, among other things, compliance with the ACI Model Code, which provided specific guidance on the prohibited nature of disclosing confidential information. “However, this appears to have been a Canada-only initiative and it does not appear that the message was effectively implemented,” OSC says in its charges, adding, most damningly, “Consequently, the global head of the business was not advised of the bulletin or provided with a copy and the ACI Model Code was not reflected in policies and procedures.”

So, some questions and observations:

How can the global head of the business not be aware of this memorandum?

Why on earth did the banks more broadly ever think they could get away with firing staff on these grounds when senior management has clearly been made aware of the issues and done nothing?

Will senior management ever be held to account?

The FX industry must redouble its efforts to ensure that the FX Global Code is not ignored as, it appears in this case, the ACI Model Code was (even though the principles and guidelines in both are broadly the same).

There is actually nothing new to see here, it’s just a function of the pace at which Canada’s regulators work, the charges are nothing new and that message needs to be reiterated to the wider world.


Twitter @lamboPnL

Colin Lambert

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