This really is a tricky time for the
foreign exchange industry. The chat room scandal has truly opened a can of
worms and it seems there is rarely a month that goes past without yet another
case of unfair dismissal being brought and, more often than not, won.
What strikes me, however, is how so many of
these cases are different – and how they highlight the atmosphere of fear that
existed (exists) in FX circles when the banks were very quick to pull the
trigger on anyone they suspected had stepped over an imaginary line.
I use the word ‘imaginary” deliberately
there because it is clear that in some institutions there was a cultural issue
in that management at all levels did not make clear to traders and salespeople
what was, and was not, acceptable practice.
The information sharing aspect of this
sorry mess has been gone into enough times previously, and the Code of Conduct
deals adequately with that, but we also have had cases where traders have
allegedly (or actually according to a judge) been dismissed for pointing out
other peoples’ transgressions; making an inappropriate (but not market
sensitive) comment on a chat line; warning of misconduct elsewhere in the
institution; and now, for not being aware that a bank had changed its policy.
The subject of partial fills is a tricky
one so last
week’s judgement on JP Morgan salesperson Patrice Ktorza was one of the
more delicate issues an employment tribunal has had to consider. The judge
sounds to have got the verdict about right – Ktorza was not apparently seeking
to gain a market advantage, make money or work against his customers – rather
he was unaware of a change in policy at the bank.
Given the number of rule changes that come
in, or came in in 2013-15, one could even feel a trace of sympathy for the bank
in that keeping everyone informed about the changes is no easy task. I don’t
have much (any) sympathy if I am honest, however, because I feel the bank, as
so many of its peers did, over-reacted.
I note that during testimony a
representative of the bank referred to Kortza’s action as a “basic error”, if
that is the case it seems to be accepting there was no deliberate malpractice
on his part.
The waters are muddied, as they always seem
to be – nothing is clear in this whole sorry mess – by revelations that Ktorza
was on a final warning for reasons that were not made clear, but it seems to me
that if the proper procedure was followed and a staffer was dismissed after a
transgression on a final warning, then an employment tribunal would see that?
Not for the first time I find myself feeling
that something is wrong and once again I find myself asking are all these wins
against the banks the result of careless procedures or a deep-rooted,
industry-wide, cultural problem?
The answer is probably a bit of both, for
example when a judge has to find in favour of the dismissed on a technicality,
but cannot bring themselves to award any compensation there has been a
procedural error at the bank. Equally, it can be argued that being too quick to
suspend and fire people is a judgement error.
But underpinning everything that has gone
on is the sense that banks collectively rushed to catch up on years of lazy
management and oversight and, as is the industry’s wont, dealt with the real
problem but then rampaged through the ranks of the FX desks like a runaway
steamroller. It really looks like the banking industry collectively took a
blunt instrument to a problem that needed delicate surgery and – importantly –
an acceptance that they, the management, had contributed to the problem.
That admission of complicity was not, and
has not, been forthcoming sadly, which I think demonstrates what happens when
the law takes over and people get scared. The decision making regarding
behaviour in what was a culturally grey area for the industry is being run by
people – typically from the law profession – who don’t understand it and never
will. The problem is, if a hypothetical senior manager was willing to accept
error, the lawyers probably wouldn’t let them!
The problem it, though, that is exactly
what the industry needs – strong management from someone who is willing to
stand up and admit that several – not all – of the people that were dismissed,
were done so in error. The settlement process may be painful but it would be the
right thing to do, because too many people are having their livelihoods ruined
due to the cultural deficiencies tacitly accepted by management regimes.