Giambrone on the news: Gabriele Giambrone comments on the latest FCA Report

Gabriele Giambrone interviewed by Law360 on the recent FCA statement.

More than 30 firms working on the U.K.'s forex market and enrolled in a corrective program after the forex manipulation scandal are showing “real improvements,” the Financial Conduct Authority said Thursday, urging the firms’ peers to learn similar lessons.

The unidentified firms, representing around 70 percent of the U.K.’s foreign exchange market, started on a “remediation program” in 2014 after the Financial Conduct Authority slapped five banks with fines totaling £1.1 billion, according to the FCA.

That was the highest penalty the FCA or its predecessor, the Financial Services Authority, had ever levied, the FCA said at the time.

That followed an international investigation involving regulators in Europe and the U.S. that uncovered international manipulation of benchmark forex rates lasting until 2013. Some £3.3 trillion was traded each day on the global forex markets that year, according to the Bank for International Settlements.

After fining Citibank, HSBCJP Morgan Chase, the Royal Bank of Scotland and UBS over forex manipulation in late 2014, the FCA launched an industrywide program to drive up standards and ensure firms addressed the root causes of the problem, tasking senior management with proving that changes had been made.

While the participants make up the bulk of the U.K.'s forex market, the project is something of a mystery, with the FCA unable to immediately identify the exact nature of the participants' business, how they were picked or whether they participated voluntarily.

The agency's statement said participants conducted detailed assessments of their recruitment policies, financial incentives, communications monitoring and benchmarks. Also under the microscope were compliance and audits, training and performance management.

The program dealt with various free-wheeling practices on the trading floor, from attempts to manipulate or control fixes to misleading clients into thinking they were getting the best rate, and using “layering” or “wash trades.”

“The firms have concluded their work, and we are now starting to see real improvements in their control environments, as well as in their overall culture and the quality of their governance arrangements," the FCA said in a statement. Its press office added that participants still needed to do further work to build on improvements as the market evolves.

“We now expect firms who were not involved in the remediation program to carefully consider the details of the program … and to implement remediation programs that are appropriate for their FX business.”

Firms should take account of future developments in the forex market, including the FX Global Code of Conduct, which the Bank for International Settlement’s Foreign Exchange Working Group is expected to publish by May, the FCA said. The group was established in July 2015 to strengthen code of conduct standards and principles in foreign exchange markets.

Gabriele Giambrone, a lawyer representing clients seeking to recover money lost to forex manipulation, said the announcement was a good sign. His law firm, Giambrone, which operates in Europe and the U.S., represents several hundred international clients trying to claw back funds.

“The FCA does not appear to have a very effective approach to regulating wide-ranging international scandals” and has reported being understaffed, he said. “Ideally we’d expect to see the FCA to be as proactive as [the U.S. Securities and Exchange Commission], which is known to be very intervening where there is fraudulent activity or allegations are lodged.” This sometimes leads to firms being shut down, unlike in the U.K., he added. “We’ll have to see what this means in practical terms,” he said of the program. “It could just be a reaction because there’s a lot of press attention.”

The FCA, the British Bankers’ Association, the Royal Bank of Scotland and HSBC did not immediately respond to requests for comment Thursday. 
The forex scandal shook already wobbly public faith in finance, particularly coming so soon after the Libor scandal, in which investigators discovered that the London interbank offered rate had been systematically rigged by traders and brokers. Last year, Barclays, Citigroup and three other of the world's largest banks were hit with criminal charges and agreed to pay more than £4.26 billion ($5.6 billion) to settle U.S. and U.K. claims that they manipulated the global forex markets.

Four of the banks, which also included JPMorgan and the Royal Bank of Scotland Group PLC, agreed to plead guilty to criminal antitrust violations over traders' colluding to rig benchmark forex rates.