If one had to produce a tag-line for 2014 a la Chinese Zodiac (2014 was apparently The Year of the Horse), The Year of the Financial Scandal, might just win the honour. We have endured stories of bankers fiddling key rates such as Libor; the Gold Fix; Forex Spot Fix; and the on-going saga of misrepresentation of the investment quality of sub-prime products. These scandals, which have been brewing for a considerable time, have racked up record fines levied by financial regulators around the world. A few individuals have lost their jobs and even been fined, but nobody has gone to jail (unlike the fate of “rogue traders” reputedly acting without senior management blessing).
The vast majority of the public would regard these “cutting edge” financial exploits as what they are: out and out fraud. In every country, fraud is regarded as a serious criminal offence which can attract significant jail time - or even death in the world’s second largest economy if you were well enough placed prior to your fall from grace. Therefore, it will bemuse many that the UK Chancellor of the Exchequer intends to make such rigging a criminal offence which might carry seven years in the klink.
Announcing the “new crime”, George Osborne commented: "The integrity of the City matters to the economy of Britain. That's why the government is determined to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them." As a consequence, anybody caught fiddling the rates (erm, in the future) will be "subject to the full force of the law".
The new crime will be manipulation “a relevant benchmark”. This is akin to letting a murder go on the basis that there wasn’t a specific statute covering murder with a rare poison. To the best of my knowledge, conspiracy to defraud, fraud, false accounting and insider trading are already criminal offences. This “new law” will do nothing to dispel public concern that financiers enjoy rather too cosy a relationship with government and are not really subject to the same laws that we would face if doing what they had done in a different walk of life. But no, surely we are all equal before the law – as George Orwell pointed out “some are more equal than others.”