HM Treasury today published the Wheatley Review of LIBOR (and press release here), commissioned by the Government as a response to the Barclays LIBOR manipulation affair. The recommendations of particular interest from a legal perspective are that (see section 2 of the Review):
- “administering LIBOR and submitting to LIBOR become regulated activities under the Financial Services and Markets Act 2000 (Regulated Activities Order);
- controlled functions are created in connection with both of these activities;
- the UK supports efforts in the EU to proceed swiftly with developing and implementing a new civil market abuse regime and open and transparent access to benchmarks; and
- section 397 of the Financial Services and Markets Act 2000 is amended to enable the FSA to prosecute manipulation or attempted manipulation of LIBOR”.
On section 397, the Review concludes that:
“Section 397 [should be amended] so that it applies to individuals who intentionally or recklessly make a false or misleading statement in relation to the setting of a benchmark. The scope of the offence could be limited to false or misleading statements in relation to the setting of a specified benchmark, or relevant financial instruments or relevant agreements as currently defined in FSMA. This would retain the necessary connection to the financial markets. Consideration should be given as to whether it should be necessary to show that the person acted in order to obtain a profit or benefit, or avoid a loss, and to whether the offence should also cover undertaking an equivalent course of action (for example, undertaking transactions at an artificial level in order to manipulate a submission based on these transactions).
It would also be appropriate at this time to review the workability of Section 397 as a whole, so that the scope of the market manipulation provision for benchmarks is consistent with the scope of market manipulation of financial instruments.
By creating this offence, the actions of others who attempt to persuade submitters to submit false figures, or who attempt to manipulate benchmarks through collusion, should be caught as encouraging or assisting others to commit this offence, or conspiring with others to commit the offence.”
The Review rejected the views of the FTSE 100 GC100 lawyers lobby group that section 397 should not be amended.
The ten principal recommendations of the Review are set out on pages 8 and 9.