The ongoing antitrust lawsuit filed by several investors including hedge funds, public pension funds, the Philadelphia city and other market participants in 2013, accusing 12 banks of manipulating WM/Reuters rates through chat rooms, e-mail and instant messaging since Jan 2003, has been put on hold. WM/Reuters rates are a benchmark for determining closing prices in the foreign exchange (FX) market.
A letter filed in the Manhattan federal court by the lawyers stated a six-month stay on the case by plaintiffs amid a related U.S. government probe. Though U.S. District Judge Lorna Schofield in Manhattan rescinded the banks’ bid to dismiss the case in Jan 2015, the recent stay on the lawsuit follows ongoing investigations whether banks’ manipulation in the currency markets continued for more than a year. Notably, a hearing on the case is scheduled for Mar 26.
Background
The plaintiffs alleged that the banks’ manipulation of WM/Reuters rates impacted the value of financial transactions in the U.S., including the foreign exchange trade. Further, the plaintiffs claimed that these also negatively affected the pension and savings accounts that are dependent on global foreign exchange rates.
Notably, in a separate litigation in Jan 2015, JPMorgan Chase & Co. JPM agreed to shell out around $100 million as settlement in response to the U.S. antitrust lawsuit. A letter filed with the US district court in Manhattan revealed the settlement between both the parties.
Along with JPMorgan, the accused banks included other Wall Street giants like Bank of America Corp. BAC, The Goldman Sachs Group, Inc. GS, Morgan Stanley MS and Citigroup Inc. C as well as foreign banks such as UBS Group AG UBS, Credit Suisse Group AG CS, HSBC Holdings plc HSBC, Barclays PLC BCS, The Royal Bank of Scotland Group plc RBS, BNP Paribas SA and Deutsche Bank AG DB.
Conclusion
Forex market rigging is not new to the banking industry. Recently, in Nov 2014, amid the widespread global investigation by U.S., British and Swiss regulators into alleged FX market manipulation, six major global banks have been fined $4.3 billion. Manipulation of currency rates by major financial institutions triggered thorough investigations by regulatory bodies across Europe, Asia and America.
Globally, banks have faced more than $200 billion in penalties in recent years following investigations into malpractices including interest-rate manipulation, violation of agreements and inadequate selling of a number of financial products.
Regulatory authorities are investigating scandals further related to the heightening foreign exchange rate fixing and are determined to put forward a landmark judgment to terminate such practices in the future, bring justice to the sufferers and punish the wrongdoers. While the settlement of such issues will put to rest a long-drawn investigation and bring reprieve to the banks, this comes as a huge blow to their financials.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment