Whistleblower alleges ethics breach at FMSB
Source: https://ftalphaville.ft.com/2019/09/03/1567541192000/Whistleblower-alleges-ethics-breach-at-FMSB-/
A whistleblower has accused top executives at the body set up by the Bank of England to guide financial market behaviour of perverting the course of justice, alleging that they put pressure on him not to testify as an expert witness in a case against a member bank.
The hearing against the FMSB -- the fixed income, currencies and commodities markets standard board -- could be a blow to the Bank of England and the Financial Conduct Authority, which recommended the establishment of the FMSB in 2015 to improve ethical standards in the sector after the Libor and foreign exchange rigging scandals rocked the City of London from 2011 onwards.
Craig Beevers, former technical adviser at the FMSB, used an employment tribunal hearing on Tuesday, on grounds of unfair dismissal, to accuse senior executives of serious misconduct. Mr Beevers claimed that his employers buckled to pressure from Deutsche Bank, an FMSB member, to limit his participation in a case brought against the bank in the US by Axiom Investment Advisors over possible abuses in foreign exchange trading.
Mr Beevers had been giving his expert opinion in the case against Deutsche on the practice of "last look" in foreign exchange markets, a controversial tactic in which a bank can renege on a deal with a customer at the last moment even after the latter has agreed to it.
Supporters argue its flexibility allows banks to deal with unforeseen problems like credit checks or shifting market prices. But many institutional investors are wary traders could use advance knowledge of a deal to benefit its own books ahead of clients’ interests.
In his expert testimony to the US district court filed on January 15 2018, Mr Beevers concluded that “Deutsche Bank recorded the behaviours complained of [by Axiom] and identified many instances of price manipulation in each format.”
A New York judge ruled in September 2018 that the case, which was seeking up to $1bn in damages from Deutsche Bank, could not be class-action certified and thus could not proceed. Axiom Investment Advisors is no longer operational.
Deutsche said of yesterday’s hearing: “Deutsche Bank is not party to these proceedings. We reject any suggestion that we acted improperly in any regard in relation to this matter. The FMSB is an independent organization that exercised its own decision making.”
The FMSB denied Mr Beevers’ claims and said he was dismissed for gross misconduct because his role as an expert witness against an FMSB member bank was a conflict of interest that had not been permitted. Mr Beevers, however, saidin documents made public on Tuesday that the FMSB were fully aware of and permitted this work when he was hired.
Mr Beevers began working for FMSB in June 2017, but a written contract was not drawn up until March 2018, the terms and versions of which are disputed by the parties. He was sacked in June 2019.
The unfair dismissal case further revealed that a probe launched by Mr Yallop to investigate Mr Harvey’s knowledge of Mr Beevers expert witness work -- later deemed a conflict of interest -- led to recommendations from an external investigator that Mr Harvey be suspended. Mr Harvey stepped down from his role as chief executive a few weeks later, before disciplinary action was taken.
At the time, the FMSB made no public announcement and the resignation was said to be for personal reasons. Martin Pluves, from LCH Group, was named as Mr Harvey’s successor in July this year, and will take office in October.
“FMSB completely refutes the claims that have been made against it in today’s employment tribunal hearing brought by a former employee, Mr Craig Beevers,” the FMSB told FT Alphaville.
“FMSB itself was made aware of allegations of serious misconduct concerning Mr Beevers during the course of last year. These allegations were thoroughly and independently investigated and that process led to him being dismissed for gross misconduct.”
Mr Beevers, however, alleged that Mr Harvey said to him in the lead up to the case that “fundamentally Deutsche Bank don’t want you to testify”. Mr Beevers alleged that after he informed Mr Harvey that Deutsche stood accused by Axiom’s lawyers, Korein Tillery, of attempting to manipulate a standards body, Mr Harvey said he “ought to resign from his position at the FMSB” and that Deutsche would back down if Mr Beevers withdrew as an expert witness.
Mr Beevers, who was suspended from normal duties on August 17 2018, believes the protected disclosures made to Axiom’s legal representatives about the pressure he was under were in the public interest, given his role as a senior technical adviser to the FMSB was to ensure the maintenance of transparent and effective markets.
Established in 2015, the FMSB’s self-regulating and largely voluntary structure was advocated as a more effective solution to the spate ofpost-crisisscandals than increased formal regulation.
As well as Mr Harvey and Mr Yallop, who has a 20-year history at Deutsche where he was chief operating officer from 2002 to 2004, the respondents to the claims brought on Tuesday were Stephen O’Connor, director of the FMSB as of December 2018, and Charles Nichols, FMSB board member and chair of the nominations committee.
Mr Beevers, who regularly made presentations on behalf of the FMSB about the nature of financial misconduct to bodies such as the New York Federal Reserve, is claiming for interim relief, which would require the FMSB to continue to employ or pay a salary to him until a formal judgment is made by the court.
A decision is due on whether to grant interim relief within six weeks.
Additional reporting by Thomas Hale, Jemima Kelly and Philip Stafford
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