JPMorgan Chase & Co. agreed last week to pay approximately
$100-million to settle a United States antitrust
lawsuit in which investors accused 12 major banks of rigging
prices in the US foreign exchange market. The settlement occurs
amid increasing international scrutiny into currency manipulation
by regulatory bodies and follows on the heels of massive fines
imposed by international regulators. In November, JPMorgan and
several other banks were collectively fined $4.3 billion by U.S.,
British and Swiss regulatory agencies. Given the potentially severe
consequences for financial institutions caught in the regulatory
and class actions web, and an apparently heightened focus on this
issue north of the border, directors and officers of Canadian
issuers must ensure that robust systems are in place to prevent or
detect any improper activity of this nature.
The JPMorgan settlement, which is subject to court approval and
will be filed with the court this month, is pursuant to a suit
accusing banks including Bank of America Corp, Barclays PLC, BNP
Paribas SA, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank
AG, Goldman Sachs Group Inc., HSBC Holdings PLC, Morgan Stanley,
Royal Bank of Scotland Group PLC and UBS AG of swapping
confidential orders and setting prices through manipulative
The Bank of Canada conducted an internal investigation last year
into potential for currency fixing in Canada as a result increasing
global pressure into the issue. The noon rate methodology used by
the Bank of Canada for the Canadian dollar has been considered to
leave foreign-exchange markets open to manipulation, and the Bank
noted it viewed possible collusion between dealers as a
Bank of Canada governor Stephen Poloz urged markets late last
year to do their part in preventing currency manipulation, noting
that manipulating the Canadian dollar would create economic
"havoc". His predecessor Mark Carney similarly noted to
members of Parliament in 2013 that Canada's economy was
"particularly vulnerable" to a widespread currency war at
the government policy level.
Charges faced by international banks have stemmed largely from
traders and their supervisors rather than at the executive level;
as such, the onus is on executives and directors to monitor the
actions of their firms' employees. In light of increased
attention and potential exposure, Canadian firms need to be mindful
of intensifying scrutiny into currency manipulation, including
close oversight to ensure exchange rate fixing is not
Firms should accordingly implement compliance programs ensuring
employees are properly educated regarding the regulation of and
risks associated with currency manipulation, and ensuring any
impropriety will be caught by the company. In the absence of proper
compliance measures, firms face exposure to substantial liability
both from regulatory bodies and litigation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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