‘Let’s discuss kickbacks over lunch’: conversations reveal culture at brokerage firm

Regulators in the US and UK have fined Icap Europe Limited, a brokerage firm, US$87m for ‘manipulation, attempted manipulation, false reporting, and aiding and abetting derivatives traders’ manipulation and attempted manipulation, relating to the London Interbank Offered Rate (LIBOR) for Yen.’ The real juicy details of emails and messages sent by employees of the brokerage revealed in the regulators’ reports on both sides of the Atlantic, throw the much talked about culture of compliance into sharp relief.

According to the Final Notice from the UK’s Financial Conduct Authority on the fie imposed on Icap Europe Limited (IEL), the firm ‘through its Brokers, colluded with traders at UBS AG (“UBS”) as part of a co-ordinated attempt to manipulate JPY LIBOR submissions made by Panel Banks. IEL Brokers’ misconduct risked undermining the integrity of the JPY LIBOR benchmark reference rate.’

In December 2012, UBS agreed to pay a USD$1.5bn penalty to UK and Swiss regulators for its part in the Libor fixing scandal.

The US Commodity Futures Trading Commission‘s report breaks down how ICAP brokers disseminated false and misleading suggested LIBORs in an effort to manipulate yen LIBOR to benefit panel banks, at times successfully’ .

The ICAP yen brokers, the report continues, made false reports to assist the senior yen trader at UBS (and later at another banlc) in his nearly constant efforts to manipulate Yen LIB OR to benefit his Yen derivatives trading positions that were valued based on the Yen LIB OR fixings.

Recorded conversations between ICAP brokers and the senior yen dealer reveal the brokers ‘willingness and significant efforts’ to help the yen dealer and how the yen dealer eventually compensated the brokers with champagne and ultimately commissions, referred to in messages as ‘kick-backs,’ as in this example:

‘As for kick backs etc we can discuss that at lunch and I will speal{ to [Senior Yen Trader] about it next time.’

The cavalier attitude to manipulating the markets, slammed by both regulators, has resulted in three former Icap employees charged with conspiracy to commit fraud and wire fraud by the US Attorney. Each charge carries a 30 year sentence.


Comments on the Independent’s article claim that manipulation at this level is far from unusual in markets:

‘ I can tell you from personal experience ,this is not just in the YEN market ,its in every currency and has been going on for years,’ writes one commenter who goes onto explain how his client’s reported suspicions of yen market manipulation to the police and regulators fell on deaf ears. I’ve heard this complaint before from compliance officers, who in the past have claimed that regulators were not interested in dealing with whistle-blowing.

Clean up

The CFTC has made a few requirements as part of its order against Icap, which will certainly keep the compliance team busy and may even see the department expanded.

They are:

• Base written benchmark interest rate-related predictions on certain factors;

• Document and retain basis for market publications;

• Require certain disclosures, including that certain market information reflects the opinions of the author, sources of information or data upon which opinion is based; and use of any models, correlated markets or related trading instruments;

• Review certain electronic and audio communications;

• Implement auditing, monitoring and training measures;

• Report to the CFTC on its compliance with the terms of the Order; and

• Continue to cooperate with the CFTC.


Michael Spencer, Icap’s Group Chief Executive gave this statement:

‘We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate YEN Libor. ‘


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