LIBOR

Former Rabobank Traders Face First U.S. Libor Trial

By Kevin Castillo, J.D. Candidate 2017 | Posted on

On October 14, 2015, Anthony Allen and Anthony Conti, two London-based former Rabobank traders, were the first to stand trial for criminal charges in the U.S. for allegedly manipulating the London Interbank Offered Rate (Libor) to benefit their colleagues’ trading positions.

Libor is the average interest rate at which banks borrow from one another. It serves as a key benchmark for interest rates around the world, and is widely used as a reference rate for many financial contracts including mortgages, student loans, and other consumer lending products. Trillions of dollars in derivatives and other financial instruments are tied to Libor.  The benchmark rate is calculated as an average of daily bank submissions to the British Bankers’ Association (BBA).

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Theme in Big Banks’ Latest Earnings: Legal Costs

By Erika K. Solanki, J.D. Candidate 2017 | Posted on

In the past few years, banks have combined to pay more than $5 billion in fines related to manipulation of the London interbank offered rate, or Libor, and other benchmark interest rates. In 2013, regulators in the United States, Britain, Germany, Switzerland, and Hong Kong started investigations into the currency markets. Dozens of foreign exchange traders, from some of the largest and most prestigious banks, including Barclays, UBS, and JPMorgan Chase, have been placed on leave over questions regarding collusion to manipulate benchmark currency rates.

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DOJ Launches Forex Probe

By Nahal Bahri, J.D. Candidate 2015 | Posted on

In a recent announcement, the Department of Justice, along with the FBI have begun investing the alleged rigging and manipulation of the foreign exchange (“FX”) market. The FBI is already “looking into alleged rigging of interest rates associated with the London interbank offered rate, or Libor.”

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Investigation Into Libor Scandal Heats Up In UK, US

By Justin Taylor Arabian, J.D. Candidate 2016 | Posted on

The Libor scandal continues unfolding as British prosecutors have identified twenty-two individuals as potential co-conspirators in an investigation of suspected London Interbank Offered Rate (“Libor”) manipulation. Libor, the estimated average interest rate charged by London banks for inter-bank borrowing, is linked to over $300 trillion in loans, financial products and contracts.

The individuals, who were also named in criminal charges brought earlier this year against former Citigroup trader Tom A.W. Hayes and two former brokers at RP Martin Holdings, were notified of the investigation in mid-October. Some of the individuals identified could face additional criminal charges in the United States.

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Recent Developments in the LIBOR Scandal

By Michele Collu, LL.M. Candidate 2014 | Posted on

In the last two weeks there have been important developments in what is commonly referred to as the “LIBOR Scandal,” a scam concerning the manipulation of the London Interbank Offered Rate (LIBOR). Britain’s Serious Fraud Office  has notified twenty-two people at various banks of potential prosecution.

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Firm Advice: Your Weekly Update

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

The DOJ recently entered into its first deferred prosecution agreement with a financial institution related to the LIBOR-fixing conspiracy.  We’ve written about the LIBOR scandal here and here.  While deferred prosecution agreements are common in white collar criminal prosecutions, this was a first for the DOJ in an antitrust prosecution.  Instead, the DOJ historically has used its leniency program as its primary investigative tool.  In a recent Client Alert, Cadwalader, Wickersham & Taft explains the DOJ’s recent shift and its implications for financial antitrust enforcement.

Many large corporations are sitting on stockpiles of cash.  Options for these companies include investing the money, returning it to investors through dividends, or a stock buyback program. Holding on to the stockpile can pose serious headaches for corporations.  In a recent Corporate Finance Alert, Skadden explains the strategic considerations for different types of share-repurchasing programs, including their advantages and legal implications.  The Alert also presents an FAQ-style, how-to guide for implementing the various options.

Wilson Sonsini recently published its “Entrepreneurs Report: Private Company Financing Trends.”  From the Report:  “[T]he percentage of up rounds increased during Q4 2012 from the prior quarter.  Also, while median pre-money valuations in Q4 declined somewhat from earlier in the year, they still remained higher than those in 2011 and 2010.  Finally, preferred stock terms continued to be more company-favorable in 2012 than in prior years.  For example, the percentage of deals with senior liquidation preferences was lower in 2012 than in 2011 and 2010, and the percentage of deals with non-participating preferred stock was higher in 2012 than in the two prior years.  In sum, although total venture dollars raised in 2012 decreased from the previous year, the venture funding environment continues to be strong for entrepreneurs and early-stage companies.” 

Firm Advice: Your Weekly Update

By Joseph Santiesteban, J.D. Candidate 2014 | Posted on

Regulation FD mandates that issuers disclose material nonpublic information through “a Form 8-K, or by another method… reasonably designed to effect broad, non-exclusionary distribution of the information to the public.”  As the SEC’s recent investigation of Netflix shows, a disclosure by the CEO of such information on Facebook likely is insufficient.  In a similar incident earlier this year, Francesca’s Holding Corp. terminated its CFO after he tweeted, “Board meeting. Good numbers = Happy Board.”  This incident, however, did not result in an SEC investigation.  Despite these and other similar incidents, the SEC has provided no guidance on the applicability of Regulation FD to social networking.  In a recent Client Alert, Weil, Gotshal & Manges makes the case for additional guidance and explains how the SEC’s 2008 guidance on corporate website disclosures could be applied to social media.

UBS has agreed to pay a total of $1.5 Billion to regulators in the U.S., U.K., and Switzerland to resolve claims that it manipulated LIBOR.  The fine includes $1.2 Billion to the DOJ and CFTC.  The remainder will be paid to U.K. and Swiss regulators.  As part of the U.S. agreement, UBS must “take steps to ensure the integrity and reliability of UBS’s future benchmark interest rate submissions” and have its Japanese subsidiary plead guilty to one count of wire fraud.  The DOJ also filed a criminal complaint against two former UBS traders.  In a recent Client Alert, Goodwin Proctor has a full summary of the actions and links to the complaint and settlement agreements.

Fiscal year 2012 was significant for criminal cartel enforcement in the U.S.  The DOJ extracted $1.1 billion in fines, more than double that of 2011.  The average prison sentence for individuals also increased to 28 months from 17 months.  The banner year for the DOJ included investigations of 1) a five-year conspiracy to fix the prices of LCD panels, 2) an international conspiracy to fix LIBOR, and 3) a conspiracy among automotive part manufacturers, which has become the broadest antitrust investigation in U.S. history.  In the recently published U.S. Chapter of “Cartels: Enforcement, Appeals & Damages Actions,” Skadden succinctly explains U.S. antitrust laws regarding cartel enforcement and summarizes their application in 2012.

LIBOR Consultation Document Opened

By Flore Poughon, LL.M. Candidate 2013 | Posted on

In response to the recent LIBOR scandal, Michel Barnier, the European Commissioner for Internal Market and Services, has opened a consultation document on the continuing viability of the benchmark rate.  The move is unsurprising to many observers of European financial markets, where multi-state collaboration is essential to the outcome’s perceived legitimacy.  As mentioned in a previous post, U.S. CFTC Chairman Gary Gensler recently commented on the LIBOR’s future.  The issue is undisputedly important, as rate manipulations may seriously impact market integrity, result in significant losses to consumers and investors, and distort the real economy.  The consultation document, which will be open through November 15, follows an initial legislative proposal period, and sets the stage for the EU’s final response to widespread concerns regarding LIBOR.  This post will discuss the now-completed proposal process, newly adopted amendments, and the European Commission’s response to persistent criticisms and concerns.

On July 25, 2012, the European Commission adopted amendments to the proposal for a Regulation and a Directive on insider dealing and market manipulation.  The long-awaited initial legislative proposal to revise the Markets in Financial Instruments Directive (“MiFID”) was made on October 20, 2011.  The original MiFID came into force in November 2007—intended to enhance investor protection, improve cross-border market access, and promote competition in the financial markets across the EU.  Although MiFID has arguably achieved some of these aims, many commentators have suggested that the system ought to better reflect the lessons learned from the financial crisis and developments in the markets.

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