My father used to say ‘ when all is said and done, use common sense and do the right thing.’
The Bank of England’s Fair and Effective Market Review set out 21 recommendations to try and regulate market misconduct. BOE Governor Carney is on the war path pledging stiffer penalties for those who commit market misconduct. He also wants to broaden the scope of those who can be found culpable to include senior managers overseeing staff members who abuse the system. The bosses who allow criminal activity on their watch will incur civil penalties, and if found to have taken part in the actual infringements will also face criminal enforcement.
Let’s talk about some of the ideas Governor Carney and the Effective Markets Review brought forward. The market review process started its meetings in 2014 and its chairs will present a new implementation report to the Chancellor and the BOE Governor by June 2016. This is another year from now just to present the plan. Seems to me like this is taking an awful long time.
Anyhow, on June 10, 2015, they published their report and here are some of their recommendations along with some of my thoughts.
a) Raise standards, professionalism and accountability of individuals. No argument here, sounds like good old common sense. Raise standards and professionalism? Sounds a lot like doing the right thing.
b) Improve clarity, quality and market wide understanding of FICC practices. Sounds like a solid idea. Improve clarity.
c) Strengthen regulations in markets in the United Kingdom. Strengthening regulations should result in raising the standards, professionalism and accountability of individuals. Where have I heard this before? Oh yes, 2 recommendations ago.
d) Launch international action to raise standards in global markets. Wait, haven’t I already read something about raising standards? I’m beginning to understand why this is taking so long.
ACY Securities’ Sponsorship of Australian Turf Club off to a Flying StartGo to article >>
e) Promote forward looking conduct risk identification and mitigation. Surely this is a good idea. I have no issues with this as you would want people who will do the right thing.
f) There should be common standards for trading practices in markets, written in language that can be readily understood and can be consistently upheld. I’m all for language that can be readily understood. Common sense.
I will leave you with my 2 favorite recommendations –
g) The FCA and the PRA should consult on a mandatory form for regulatory references, to help prevent the recycling of individuals with poor records between firms, with a review to having a template ready for the commencement of the Senior Managers and Certifications regimes in March 2016. In due course, the FMSB should consider whether there is scope to reach an industry-wide agreement to disclose further information.
Wow, what happened to the language that can be readily understood? They say they should consult on a mandatory form to help stop the recycling of blah blah blah blaaaaaaaah. Yes, people who have committed infractions should be recognized and firms should communicate with each other to make sure they are not hiring people who have committed market misconduct elsewhere. Thank goodness for the improved clarity and the readily understandable language.
h) Introduce legislation to lengthen the maximum sentence for criminal market abuse from 7 years to 10 years imprisonment. I’m all for punishment of individuals who commit criminal violations, but seriously doubt there is a trader who is sitting around considering some kind of misconduct, thinking to himself he could do the 7 years but not the 10.
So, thanks for reading this long-winded rant about a long-winded Fair and Effective Markets Review. I have had a little fun with it but obviously there is a need for more guidelines and transparency in global markets. In the end, the Wisconsin born highway worker who raised me was right all the time and he had only 2 guidelines. Common sense and doing the right thing. It would be nice if we could make them the only guidelines used by everyone in the financial markets and in life.