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U.K. to Criminalize Manipulation of Financial Benchmarks
From the Wall Street Journal of Mon, 22 Dec 2014 07:46:51 EST

LONDON—Manipulating financial benchmarks, including a key currencies benchmark, is set to become a criminal offense that could carry a prison sentence of up to seven years, Chancellor George Osborne said on Monday.

Mr. Osborne confirmed that legislation originally introduced to regulate the Libor interest-rate benchmark will be extended to cover several other instruments, including the 4 p.m. London foreign-exchange benchmark rate and some key gold and silver fixes. The ICE Brent index and the Sterling Overnight Index Average, known as Sonia, is also included along with the ISADFix, which is used to price swaps transactions.

The government plans to implement the new rules from April 1. It had originally laid out this cleanup plan in June.

“The integrity of the City [London’s financial district] matters to the economy of Britain,” Mr. Osborne said in a statement.

U.K. regulator the Financial Conduct Authority will consult on draft rules and then publish final rules ahead of the implementation.

Manipulation is difficult to define in relation to benchmarks that reflect snapshots of traded rates, such as in currencies, rather than rates determined by panels of traders, such as some in the interest-rate market. Attention is likely to center on any intention by traders to place trades or share information in a way that serves their own interest at the expense of clients’—the types of activity that has proved central to previous fines on currencies-trading banks.

In November, authorities in the U.K., Switzerland and the U.S. dished out a total of $4.3 billion in fines to six banks for their failure properly to supervise currencies traders and their activities, including those surrounding benchmarks.

On Friday, British police made the first known arrest in relation to the continuing investigation into this matter. The Serious Fraud Office confirmed the arrest of a man in Essex.

Write to Katie Martin at katie.martin@wsj.com



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