I won’t go into it again in any depth as I did that on Thursday, but the Mark Johnson trial was a hot topic at Forex Network Chicago last week and there was no real consensus on what the outcome will be.
The jury will decide for itself how the trial ends, but having complained about some of the reaction at the start of the trial, I now find myself (once again) wondering at how things work in the US when it comes to regulatory interference in the legal process.
Back in August 2016, the Fed issued a fine and a ban against Chris Ashton the former Barclays trader just weeks before he was due to attend a hearing for his claim of unfair dismissal. Ashton lost his claim, and while few were surprised there were a few eyebrows raised as to the role the timing of the Fed’s announcement may have been.
Those eyebrows are now giving it the full “Roger Moore” because this time the Fed’s timing surrounding the announcement of a fine is, arguably, even more controversial. On Friday, as reported by Profit & Loss, the Fed announced a fine on HSBC for unsafe and unsound practices in its FX business.
According to the order, “HSBC’s deficient policies and procedures prevented it from detecting and addressing unsafe and unsound conduct by certain of its FX traders at HBEU and HBUS, including in communications by traders in multibank chatrooms, consisting of: two of its senior traders, including the Bank’s global head of FX cash trading, misusing confidential inside information to conduct FX trades in a manner that benefitted them and their trading desk to the detriment of HBEU’s corporate client [my italics], which resulted in the traders’ indictment by a federal grand jury on multiple counts of wire fraud and conspiracy to commit wire fraud.”
The order lists other deficiencies but it is this one that bothers me the most because it is clearly referring to the Mark Johnson trial which, rather than about to start, is ongoing.
As I have stated before, I don’t know which way this case will go, that is for the jury – and whatever the US legal process decides in the end we, as an industry will have to deal with it. I have, though, real concerns with a central bank issuing such a statement and claiming the conduct of Johnson and Stuart Scott was “unsafe and unsound” at this time. Surely due process should be observed and the Fed should await the outcome?
I have to assume that there is nothing wrong with this happening, for if there was I am sure the Fed would have delayed the announcement and said nothing, but I do find it unfair.
One other thing bothers me about this whole affair as well. The Fed has fined HSBC for failing to adequately manage its FX business and clearly believes there were serious problems. How then, can an HSBC spokesperson say, as one did on September 18 to Reuters, that the trial had nothing to do with HSBC?
Technically I suppose this is right, the case is against Johnson, but when I read things like the Fed’s order on Friday it is hard to separate the two – Johnson was working for HSBC and the Fed has an issue with how the bank handled an order and specifically mentions the court case.
The bank may feel content to throw Johnson under the bus, but I am less sure the US authorities will view matters the same way.
Speaking to people in the industry and especially at last week’s Forex Network, I genuinely sensed a mood that traders generally have been treated unfairly, both by the banks and the authorities who seem content to fine the bank, accept the traders’ dismissals, but not question the cultural issues that clearly pervaded the industry.
If this observation is correct, this week’s trial – and the Fed’s unintended intervention – could, in the future, be seen as the moment that things turned, because as well as make a public statement on the actions surrounding an ongoing legal process, the Fed has also, again probably unwittingly, re-opened links between the cases and the culture that existed in banks when the alleged offences took place.
Responsibility works both ways.