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Barclays’ reputation took another battering on Wednesday when a US regulator imposed a $m fine on the bank for the way it treated its foreign exchange customers.

The New York Department of Financial Services (NYDFS) released a cache of emails to support its finding against Barclays, including one in which a managing director tells staff to “obfuscate and stonewall” if asked questions about the currency trades.

The penalty, which also requires Barclays to fire an unnamed senior individual involved in its electronic global foreign exchange trading business, is related to a computer system the bank devised to reject orders from customers that would not be profitable.

The system, known as Last Look, operated by introducing a hold period between a customer order being received and it being executed by Barclays. It allowed the bank to root out trades where the price had moved against them, often in just milliseconds.

Customers – who were sophisticated users such as hedge funds – would receive messages saying “NACK” (not acknowledged). One customer questioned the receipt of such messages on one day in December but did not receive a response.

Anthony Albanese, the regulator’s acting superintendent of financial services, said: “This case highlights the need for greater oversight and action to help prevent the misuse of automated, electronic trading platforms on Wall Street, which is a wider industry issue that requires serious additional scrutiny.”

The fine is a reminder of the reputational issues still facing the bank in the wake of the fine for rigging Libor, which sparked a wave of recriminations against Barclays and the entire industry. It also comes just two weeks before the bank’s new chief executive, Jes Staley, takes on his £8m-a-year role. When his appointment was announced last month Staley, a US banker, said: “I feel keenly we must continue to strengthen trust in Barclays.”

It is the second NYDFS fine imposed on Barclays for foreign-exchange-related matters this year and takes the total paid by the bank to the New York regulator to $m. The first was part of a £bn fine on Barclays announced in May, when regulators in the US and UK announced record-breaking fines for manipulating foreign exchange markets.

The risk of ongoing fines for banks was raised by ratings agency Moody’s in a report this week that put Barclays, HSBC and Royal Bank of Scotland at high risk of further penalties. Moody’s calculated that 15 major banks had set aside £bn to pay legal costs and settle fines and compensation since the onset of the banking crisis.

Barclays admitted it faced further penalties. It said it “continues to co-operate with other ongoing investigations and to manage related litigation risks as previously disclosed”.

The NYDFS said the problems with Last Look took place on certain occasions between and The regulator added that Barclays had made changes to the system in September and October as result of the broader investigation into foreign exchange market rigging, but that 7% of the activity pushed through the trading platform had continued to benefit Barclays until August

June 26 (Reuters) - Barclays (BARC.L), opens new tab named new heads of foreign exchange trading on Monday in the latest senior appointments at its investment bank as the British lender strives to break Wall Street rivals' hold on global rankings.

Torsten Schӧneborn and Jerry Minier have been appointed as co-heads of G10 FX trading, the bank said.

Schӧneborn is the sixth recent senior hire at Barclays and joins from BNP Paribas where he was the global head of electronic platform and global head of quant prime broking.

His departure from BNP Paribas was reported by Reuters earlier this month. Schӧneborn had joined the lender from Deutsche Bank, after the French lender acquired its rival's prime finance business in a deal first announced in

Minier had joined the bank in and is now taking on an expanded role. He was previously the global head of FX options trading at Barclays.

The duo will be reporting to Michael Lublinsky, the Global Head of Macro.

“We have made great progress growing our Global Macro business and remain relentlessly focused on the areas where we can be consistently excellent," Lublinsky said.

For the British lender, fixed income, currencies and commodities (FICC) was a bright spot in its first quarter earnings after income rose by 9% to billion pounds ($ billion).

($1 = pounds)

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This is the largest financial penalty ever imposed by the FCA, or its predecessor the Financial Services Authority.

The bank’s failure adequately to control its FX business was deemed particularly serious in light of the potential impact on the systemically important spot FX market.

The failings occurred throughout Barclays’ London voice trading FX business, extending beyond G10 country spot FX trading into emerging market spot FX trading, options and sales; undermining confidence in the UK financial system and putting its integrity at risk.

Georgina Philippou, the FCA’s acting director of enforcement and market oversight, said that this is another example of a firm allowing unacceptable practices to flourish on the trading floor.

“Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm’s interests ahead of those of its clients and which undermined the reputation and integrity of the UK financial system.”

Between 1 January and 15 October , Barclays’ systems and controls over its FX business were inadequate, the FCA said.

Barclays and other firms are already participating in an industry-wide remediation programme to ensure that they address the root causes of the failings in their FX businesses, with senior management at the bank taking responsibility for delivering the necessary changes.

Going into more detail on the failings, the FCA said Barclays’ primarily relied on its front office FX business to identify, assess and manage the relevant risks – however the front office failed to pick up on obvious risks associated with confidentiality, conflicts of interest and trader conduct.

Barclays engaged in collusive behaviour, according to the regulator, in which traders from different banks communicated through electronic messaging systems, with one chat room participant referring to himself and others as “the 3 musketeers” and commented “we all die together”.

The information obtained through these groups helped traders determine their trading strategies, attempting to manipulate fix rates and trigger client ‘stop loss’ orders, which are designed to limit the losses a client could face if exposed to adverse currency rate movements.

The FCA also found examples of inappropriate sharing of confidential information by spot FX traders and sales staff, including sharing client identities and information about client orders.

The failings in Barclays’ FX business persisted despite similar control failings in relation to Libor and gold fixing, which were the subject of previous FSA and FCA enforcement actions.

Barclays settled at stage two of the FCA’s investigation, qualifying for a 20 per cent discount – without this, the FCA would have imposed a financial penalty of £m.

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On July 25, in Evans v. Barclays Bank PLC,[1] the Court of Appeal of England and Wales ruled that an opt-out collective proceedings order was the appropriate order, thus allowing the collective proceedings to continue.

The decision reversed a March 31, , decision by the Competition Appeal Tribunal&#;s, or CAT,[2] in which it refused to certify the opt-out collective proceedings, ruling that opt-in collective proceedings were more suitable instead.

As the opt-out collective proceedings were chosen because the claimant had struggled to find enough eligible class members who were willing to opt in to a claim, the CAT&#;s decision effectively struck out the claim.

The Court of Appeal&#;s decision to allow this case to be brought on an opt-out basis is significant, paving the way for more class actions to be brought, and it will be welcomed by prospective claimants who have previously been unable to bring individual claims.

As Phillip Evans commented in his press release, &#;the opt-out approach is crucial to ensure that claims may be pursued on behalf of all affected individuals and businesses.&#;[3]

Background

On May 16, , the European Commission determined that various banking groups[4] had infringed on Article of the Treaty on the Functioning of the European Union and Article 53 of the Agreement on the European Economic Area by participating in a single and continuous infringement covering the whole EEA in foreign exchange spot trading of G10 currencies.[5]

Foreign exchange traders from these banks had been discussing sensitive information and coordinating their trading plans, thereby creating a cartel over the FX market.

Evans, former panel member and inquiry chair at the Competition and Markets Authority, sought to bring collective proceedings against the banks in the CAT on behalf of the alleged 40, claimants, who had suffered loss when trading FX instruments as a consequence of the infringements.

Pursuant to Section 47B(4) of the Competition Act , collective proceedings may only be continued if the CAT makes a collective proceedings order, or CPO.

Further, pursuant to Section 47B(7)(c) of the Competition Act , a CPO must specify whether the proceedings are opt-in collective proceedings or opt-out collective proceedings — both of which are defined in Sections 47B(10) and (11) respectively.

Opt-in collective proceedings require eligible class members to permit the proposed class representative, or PCR, to represent them in proceedings.

In contrast, class members in opt-out class proceedings are automatically represented and eligible for compensation. They would need to actively opt out of the same if they did not wish to partake.

In view of this, Evans made an application to the CAT in December , seeking an opt-out CPO pursuant to Section 47B of the Competition Act with the intention of being the PCR, though not a class member himself.

The Competition Appeal Tribunal&#;s Decision 

The test for whether a claim is eligible for the opt-out procedure is set out in Rule 79(3) of the Competition Appeal Tribunal Rules

Notably, the CAT may have consideration to (1) the strength of the claims — the so-called strength test — and (2) whether it is practicable for the proceedings to be brought as opt-in collective proceedings, having regard to all the circumstances, including the estimated damages that individual class members may recover — the so-called practicability test.

The CAT itself had recognized that, in circumstances in which there were unlikely to be enough class members opting in, the proceedings would fail. This was not, therefore, a choice between opt-in and opt-out collective proceedings, but rather &#;between opt-out collective proceedings and no proceedings at all.&#;[6]

In respect of the strength test, the CAT found that the claim brought by Evans was so weak as pled that it should be struck out,[7] albeit the respondents had not made an application for the same. In particular, the claim had failed to particularize the harm suffered and the causation between the infringements and said harm.

The strength test was therefore not satisfied, and the CAT considered that this weighed heavily in favor of opt-in proceedings. However, the CAT did not explain why a weak case was more suited to opt-in collective proceedings than opt-out ones.

In respect of the practicability test, the CAT considered the efforts that Evans&#; legal team had made over the previous four years to persuade class members to opt in to collective proceedings.

In circumstances in which only 14 advisory retainers had been obtained, the CAT inferred that the class members, who were mostly sophisticated corporate entities, simply did not want to litigate.

This was a crucial distinction because it meant that the CAT considered that the access to and administration of justice factor, which otherwise would have leant in favor of an opt-out collective proceeding, was not as important. Indeed, the CAT held that &#;access to justice should not be forced on an apparently unwilling class.&#;[8]

The CAT therefore concluded with a majority of 2 to 1 that the claim was not suitable for certification on the opt-out basis. The application for a CPO was stayed and Evans was given permission to submit a new application for an opt-in CPO.

The practical effect of this, of course, was that no new application could be brought as there would not be enough class members opting in to bring the proceedings.

However, Justice Paul Lomas dissented. He argued that a CPO should be granted on an opt-out basis.

While in agreement that the pleadings had been poorly defined, he felt that more weight should have been attributed to access to justice considerations.

Further, Justice Lomas considered the practicability test to have been misinterpreted and was critical of the majority&#;s speculation as to the class members&#; reluctance to opt in, noting that there could be many factors, including risk and administrative costs, that had led to low engagement.

The Court of Appeal&#;s Decision 

Evans appealed the CAT&#;s decision to the Court of Appeal.[9]

The issues to be decided included the criteria the CAT used to determine whether the CPO should be certified on an opt-in or opt-out basis.

Evans argued that, inter alia, (1) there was inconsistency in the CAT&#;s analysis of the pleadings, (2) there was a failure to explain the linkage between opt-in proceedings and the merits of a case, and (3) the CAT had wrongly applied the practicability test.

The Court of Appeal agreed with the appellant that the CAT had erred in its decision making.

Firstly, in relation to the strength test, it held that it was illogical for the CAT to determine that the weak pleadings were reason enough to be a decisive factor to rule in favor of opt-in collective proceedings, yet was prepared to await amended pleadings before making a provisional view on the merits of the case.

Further, referencing the decision of the Court of Appeal on May 6, , in BT Group PLC v. Le Patrourel, the court held the CAT had attributed too much weight to the strength test when it should be a neutral factor.

In respect of the practicability test, the court held that where there would not be enough class members to issue opt-in proceedings. This was a powerful factor in favor of an opt-out certification.

For the most part, Justice Lomas&#; dissenting judgment was supported by the Court of Appeal on the basis that, inter alia, to disallow proceedings would be inconsistent with the statutory objectives of the collective action regime and that it would be wrong to take a &#;sliding scale&#; approach to the strength of a case, whereby weaker cases are deemed more suitable for opt-in certifications

The court concluded by ordering the CPO to be certified on an opt-out basis.

Significance and Future Considerations

The Court of Appeal&#;s decision has important implications for future collective proceedings.

It is evident that the interests of justice should be considered as one of, if not the most important considerations in favor of an opt-out CPO.

In circumstances in which, as in the Evans case, an opt-in CPO would effectively result in a strike out of proceedings, it is likely an opt-out CPO will be ordered.

PCRs can thus be less concerned with the reluctance of potential claimants to opt-in to collective proceedings.

Eligible class members who may for a variety of reasons, including reputational and commercial relationship concerns, be unwilling to join collective proceedings may still benefit from any compensation awarded.

Crucially, the court disagreed with the CAT&#;s interpretation of the strength test and the weight that should be attributed to the same.

It was held that the merits of a pled case at the point of a CPO application will not necessarily be a factor in favor of opt-in proceedings and may not even be a relevant consideration at all.

However, claimants should be alert to judicial discretion toward this.

If the CAT can explain how the merits of case make it more suitable to opt-in or opt-out proceedings, then more weight may be attributed to this. Relevant reasoning may include case management perspectives, judicial efficiency and vindication of claims.

The judgment is likely to significantly widen the scope of opt-out collective proceedings that can be brought. There are currently 11 collective proceedings issued in the CAT that are awaiting their CPO hearings. All 11 PCRs are seeking opt-out CPOs, and thus likely welcome the Evans judgment as they now may be more likely to receive opt-out certification than before.

Further, prospective claimants may take a more optimistic approach and be more willing to bring claims where they previously would have been concerned about their CPO certification.

Notwithstanding, PCRs should not automatically assume that they will receive opt-out certification. The CAT still has judicial discretion and there are other factors at play that, albeit not as relevant in Evans, may prevent other PCRs from achieving opt-out status. It will be interesting to see how the CAT will approach future collective proceedings in light of the Court of Appeal&#;s new guidance.

This article was first published by Law on August 24

By Nupur Anand

(Reuters) -Barclays named new heads of foreign exchange trading on Monday in the latest senior appointments at its investment bank as the British lender strives to break Wall Street rivals' hold on global rankings.

Torsten Schӧneborn and Jerry Minier have been appointed as co-heads of G10 FX trading, the bank said.

Schӧneborn is the sixth recent senior hire at Barclays and joins from BNP Paribas where he was the global head of electronic platform and global head of quant prime broking.

His departure from BNP Paribas was reported by Reuters earlier this month. Schӧneborn had joined the lender from Deutsche Bank, after the French lender acquired its rival's prime finance business in a deal first announced in

Minier had joined the bank in and is now taking on an expanded role. He was previously the global head of FX options trading at Barclays.

The duo will be reporting to Michael Lublinsky, the Global Head of Macro.

“We have made great progress growing our Global Macro business and remain relentlessly focused on the areas where we can be consistently excellent," Lublinsky said.

For the British lender, fixed income, currencies and commodities (FICC) was a bright spot in its first quarter earnings after income rose by 9% to billion pounds ($ billion).

($1 = pounds)

(Reporting by Nupur Anand in New York; Editing by Mark Potter)

Hausfeld acts for Phillip Evans, formerly an Inquiry Chair at the CMA and a Senior Policy Adviser at Which?, in his application to pursue an opt-out collective action against six global banks seeking damages in respect of unlawful practices in the FX market. 

The claim arises from two decisions of the European Commission adopted on 16 May in which the Commission found that the banks exchanged commercially sensitive information and trading plans and occasionally coordinated their trading strategies, contrary to EU competition law.  The Commission imposed fines of over €1 billion.  The European Commission’s full press release can be read here.

The claim

Mr Evans has applied to the UK’s Competition Appeal Tribunal for permission to bring collective proceedings on behalf of two “classes” of persons comprising participants in the FX market who entered into spot trades and/or FX outright forward transactions in the EEA involving the so-called “G10 currencies” with entities in the Barclays, Citigroup, JPMorgan, MUFG Bank, RBS/NatWest, UBS banking groups, and/or other relevant financial institutions, between and

Mr Evans seeks the Tribunal’s permission to pursue opt-out proceedings under which UK-domiciled members of the proposed classes will automatically be included in the proposed classes unless they opt out and foreign domiciled class members, whilst not automatically included, will be entitled to opt in.

The claim is factually and legally complex given the size and global nature of the FX market and the scope of the proposed classes.  It was included in The Lawyer’s top 20 cases of the year for

Specialist team

Hausfeld has a wealth of experience in collective actions and is co-lead counsel in the US FX class action, which has so far recovered billions of dollars for those affected by FX misconduct in the US.

Mr Evans is also supported by a consultative panel chaired by Lord Carlile of Berriew QC, a crossbench member of the House of Lords who was previously a part time judge in the High Court and a member of the Competition Appeal Tribunal. 

Mr Evans and Hausfeld are working with a specialist litigation funder, Bench Walk Advisors, to bring the claim.

The latest

Another party, Michael O’Higgins FX Class Representative Limited, made a similar application which also sought to combine follow-on claims for damages arising from the infringements identified in the Commission’s decisions. As such, the Tribunal had to consider which of Mr Evans and Michael O’Higgins FX Class Representative Limited would be the most suitable representative to act as class representative. This is known as a ‘carriage’ dispute and, whilst a common feature of other jurisdictions with mature class action regimes, this is the first time that it has been considered by the Tribunal.

Timeline

• On 11 December , an application to commence an opt-out collective action, “FX Claim UK” as described above, was launched at the CAT.
• On 6 March , the Tribunal handed down a judgment in which it decided that the carriage dispute should be resolved at the same time as the main certification hearing.
• Following a case management conference on 15 January , the Tribunal listed the certification hearing for five days between 12 and 16 July
• On 31 March , the CAT decided that the case should only proceed on an opt-in basis for class members. That meant the case wasn’t viable. On carriage, the CAT preferred the Evans claim over the O’Higgins claim.
• Both decided to appeal the CAT’s decision to the Court of Appeal which was heard during a four-day hearing from 25 to 28 April
• On 25 July , the Court of Appeal ruled that FX Claim UK, the collective action brought by Phillip, can proceed as opt-out collective proceedings. The ruling overturns the CAT’s earlier decision to limit the claims to 'opt-in’. In addition, the Court of Appeal dismissed an appeal by the competing applicant for certification, thereby confirming the CAT’s decision that Mr Evans should have carriage of the claims. This is the first opt-out collective action primarily on behalf of businesses that has been allowed to proceed by the courts.
• The Court of Appeal has handed down a revised version of its judgment, which supersedes the version handed down on 25 July The revised judgment does not alter the reasoning in the earlier judgment and confirms the Court of Appeal’s authority to make or vary a CPO.

Further information

There is a dedicated website for this action, eunic-brussels.eu, which is regularly updated.