RegulationOct 3 2017

Commissioner finds 'serious error' in FCA Libor probe

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Commissioner finds 'serious error' in FCA Libor probe

The Financial Conduct Authority has changed the way its investigations are handled after a complaint against it was upheld.

Complaints Commissioner Antony Townsend said the regulator had made “considerable” failings in the case of two former UBS traders involved in the Libor-rigging scandal.

The issue centred around whether the FCA deliberately suppressed evidence relating to its limitation period.

Under rules in place at the time the FCA had three years from the point of being made aware of alleged wrongdoing to make initial findings against an individual if it wanted to impose a financial penalty.

The two complainants – Panagiotis Koutsogiannis, a senior UBS trader, and Arif Hussein, a junior sterling rates trader – alleged that the FCA deliberately withheld and/or failed to disclose material relevant to the question of limitation to persuade the regulatory decisions committee to issue a warning notice.

At the centre of this issue was whether the FCA made a mistake in handling evidence provided by a US regulator which may have triggered the limitation period.

The pair requested an apology, compensation and a “full, independent and detailed explanation of what went wrong”.

Mr Koutsogiannis was a colleague of Tom Hayes, the first person in the world to be convicted by a jury for Libor-rigging.

In his decision, Mr Townsend found there was no evidence the FCA deliberately withheld evidence or acted in bad faith.

But he said: “Having said that, I consider that this was a serious error.

“This was a major series of investigations, on which a significant number of people, including relatively senior people, were employed.”

Following Mr Townsend’s preliminary decision the FCA has said that a board of senior members of staff now regulatory review the progress of all investigations.

It has also improved its processes so when limitation is considered at the start of each investigation, the possibility of relevant international requests is considered.

The regulatory has also accepted its failings in how the limitation issue was handled and apologised for the inadequacy of a previous apology.

In a response the FCA said: “The FCA accepts the commissioner’s recommendations and his findings that mistakes were made, for which we have apologised to the complainant.

“We welcome the commissioner’s conclusion that the evidence shows no bad faith on the part of the FCA.

“Relevant improvements have been made to our processes and procedures since 2014 and we are consideration whether further lessons can be learned in light of his decision.”

Mr Hussein is challenging an FCA attempt to ban him while the regulator dropped its investigation against Mr Koutsogiannis.

damian.fantato@ft.com