The UK financial watchdog has been taken to task by a tribunal for its apparent attitude to pursuing senior managers over the Libor rigging scandal.
The Upper Tribunal, which hears legal challenges to actions taken by the Financial Conduct Authority, said in a decision on Wednesday that it found “troubling” a suggestion that senior managers were not being pursued because they were not in the UK or that they were not implicated by readily available evidence.
The tribunal was deciding a case brought by Arif Hussein, a former junior sterling rates trader at UBS, the Swiss bank that paid more than $1.5bn to settle Libor-related penalties.
The FCA wanted to ban Mr Hussein on the grounds that he was reckless. He challenged that decision at the tribunal, arguing that the regulator had scapegoated him, relying on incomplete evidence and doing a “cosy deal” with the bank.
The tribunal dismissed Mr Hussein’s case. It found that he had not acted dishonestly or without integrity in relation to internal UBS messages that were the key evidence in the FCA’s case. However, it did find that he had misled not only the watchdog but also the tribunal so recommended a ban for a period of time.
“We should, however, add that there are other aspects of this case which are troubling,” the decision reads. “Mr Hussein was a relatively junior trader at UBS and he was put under investigation in relation to a limited number of chats which took place over a very short period. This was against a background of widespread manipulation of Libor within UBS for which senior managers bear ultimate responsibility and which, as shown by the Final Notice was widely condoned.”
It cites an explanation by the FCA’s lawyer during the tribunal about why senior managers at UBS were not investigated, in which he said it was often because they were not in the UK or “the senior people somehow manage to keep their fingerprints off the relevant documents sometimes”.
The decision continues: “It is hoped that the observation referred to above is not a true reflection of the Authority’s attitude to pursuing senior management either in this jurisdiction or elsewhere when it is necessary to do so.”
Mr Hussein said in a statement on Wednesday that he did not ever seek to personally manipulate Libor.
“I welcome the Judge’s serious criticism of the FCA’s decision to pursue me but not the senior managers, whom he described as bearing the ‘ultimate responsibility’ for Libor manipulation at UBS,” he said.
“I ask the FCA to observe the Judge’s findings and investigate and bring to account those senior managers at UBS and reconsider its policy of pursuing only the most junior, impecunious and vulnerable.”
The remark will be a boon to another former UBS trader embroiled in the Libor scandal, Tom Hayes. He became the first trader in the world to be convicted by a jury over Libor manipulation and is taking his case to the commission that hears alleged miscarriages of justice. He has consistently alleged that senior managers knew of and condoned his behaviour.
