What can only be described as a frisson of excitement ran through the FX market in London last week when word spread of former Barclays head of automated trading services David Fotheringhame launching a new website that – and this is putting it delicately – analyses the bank’s response to a fine imposed on its FX business in 2015 for what was found to be a too liberal use of last look.
Fotheringhame won an unfair dismissal claim against the bank last year, however Barclays defied the employment tribunal’s edict to reemploy him, resulting in a second hearing this year at which he was awarded nearly £1 million.
Having been busy running around London last week I only had a chance to look at the detail on a plane over the weekend and while some content on the website would have me worried if I were legally-minded there isn’t too much to disagree with. I certainly don’t disagree with much because the gist of the case put forward very much reflects my thoughts on the case in March last year, and reading that column again now I certainly haven’t changed my mind – we had a regulator that overstepped the mark, a bank with a weak response and a victim, whom the courts have found to be exactly that.
I can’t count how many times I have expressed the opinion in these columns that the banks rolled over on too many occasions when faced with a fine or lawsuit, but I have to say that my sense talking to senior people in the FX businesses now is that those days are over. Of course, some banks have chosen to fight some lawsuits and have had some success, most notably, last year when Deutsche successfully had a lawsuit linked to last look thrown out, it now seems that other banks are either wishing they did the same, or are determined not to go so quietly next time.
The problem is that horse has surely already bolted? Without wishing to predict the legal process, I am struggling to understand how a bank, that previous accepted a huge fine from a regulator (whether it was fair or not) can now turn around and fight a lawsuit on the grounds it did nothing wrong? Yes, in all cases the banks neither admitted nor denied culpability, but the sheer act of signing the cheque doesn’t look great does it?
Someone said to me the other day that they believed the banks paid the fines and then dismissed staff to make it look like they were the ones responsible for the alleged misconduct (which often wasn’t that at all). If that is the case then someone needs to ask who was responsible for such an approach? Not only has it landed the banks with a bunch of legal actions that for the most part they have lost around unfair dismissal, but it has also seen them concede and pay out fines rather than go through the process of legal action.
Whoever made the decision, it reeks of panic, as I noted in a recent column, and there is where the real fault lies – when people paid a lot of money to make the right decision lose control and have a knee-jerk reaction to events. What these people have left the FX banking industry with is a legacy of unending lawsuits (with power to add) and very thin trading and risk taking ranks thanks to multiple senior traders being sawn off at the knees.
As I said in a recent podcast, I certainly don’t buy the idea that some of the traders involved in this whole sorry episode were whiter than white, but I most certainly do accept the suggestion that they were allowed to carry on as they did by management that should have known better. This was a cultural issue, and not one of individual misdemeanours – and that means the fault lies at managerial level.
Given that, I wonder if, especially following the victories by Fotheringhame and John Banerjee in recent months that have led to larger payouts, some other FX traders who were dismissed for what were found to be the wrong (and often trivial) reasons, start to think about returning to the civil courts? After all, the banks have shown their willingness to avoid legal action over issues pertaining to FX – at least when it comes to regulators or the customers.
And it is that factor that really bothers me – why did the banks on one hand say they didn’t want to fight expensive legal actions against a regulator who clearly had over-stepped the mark (as I noted in March 2018) or customers seeking hundreds of million of dollars in compensation – but then spend countless resources on fighting unfair dismissal claims that at worst could cost them £85,000?
Perhaps this is the ultimate example of the customer always being right?