11 June 2015
The Fair and Effective Markets Review has published a report proposing a number of policies to prevent misconduct in the wholesale Fixed Income, Currency and Commodity (FICC) markets.
The Review was established in June 2014 by the Chancellor of the Exchequer and the Governor of the Bank of England in an attempt to restore trust in the wholesale FICC markets. The report, published on Wednesday morning, sets out 21 recommendations aimed at achieving this.
The report is based on four principles: that individuals should be held accountable for their own conduct; that firms should take collective responsibility for market practices; that regulators should close gaps in regulatory coverage and broaden the regime holding senior management to account and that coordinated international action should be taken where possible to improve fairness and effectiveness.
The proposed changes include longer jail terms for misconduct, more checks on applicants for new jobs to detect past rogue traders and the creation of a new FICC Market Standards Board to promote adherence to standards.
The Bank of England has acknowledged the urgent need for improvement in the FICC markets, citing a ‘lack of firm governance and controls, acceptable standards of market practice and a culture of impunity’ as being responsible for ‘ethical drift… huge fines, reputational damage, diversion of management resources and the reigning in of productive risk taking’.
Martin Wheatley, Chief Executive of the FCA, commented that the recommendations in the report will ‘be important in rebuilding public trust in (the markets’) integrity’. He went on to say: ‘Driving up global standards needs international cooperation between regulators… We will know the review has truly succeeded when we see these changes being embraced at every level of the industry’.
The full report can be found here.