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28 banks now in the crosshairs over rand manipulation case

The case, first brought six years ago by the CompCom, argues there was an overarching conspiracy to manipulate the level of the rand.
Among the nine additional banks alleged to have participated are HSBC USA, FirstRand, Standard Americas, Credit Suisse USA, Merrill Lynch and Bank of America. Image: Mike Hutchings, Reuters

The Competition Commission this week applied to the Competition Tribunal to expand to 28 the number of respondent banks alleged to have manipulated the rand through private Bloomberg messaging rooms going back to September 2007.

Previously, 19 banks were alleged to have participated in a conspiracy to manipulate the rand.

This week the commission asked the tribunal to add another nine banks to the list of alleged conspirators, who are accused of directly or indirectly fixing the US dollar-rand price by way of manipulating bids, offers, the bid-offer spread and the spot exchange rate.

“The participants to the conspiracy sought to benefit through their participation in the conspiracy by receiving assistance from competing traders to profit, reduce risk and to avoid making losses, when engaged in foreign exchange trading with the USD/ZAR currency pair,” says the commission’s court papers.

Allegations

Traders from participating banks are alleged to have been in frequent and regular contact and communication with traders from other banks via Bloomberg chatrooms to co-ordinate their trading activities, provide each other with information and reach understandings on trading strategies.

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The commission’s complaint before the tribunal says it does not know if the “overarching conspiracy” between the banks has ceased to operate.

The effect of the alleged conspiracy between 2007 and 2013 was an absence of random fluctuations and volatility in the forex market over time and across banks, the use of round figures for market quotes, and a consistent spread of between R0.05 and R0.1 charged by SA banks for the purchase of US dollars, with the exception of RMB.

The commission’s complaint accuses traders from individual banks of participating in a conspiracy.

Banks hit back

Legal teams from the banks chipped away at the commission’s case, arguing that it lacked jurisdiction and had not set out a strong enough case to proceed.

Mike van der Nest, representing JP Morgan, this week argued that the commission’s case rests on 158 chats involving 28 banks over a period of seven years, which does little to advance the argument that everyone in the industry knew what everyone else was doing.

“It’s quite something for the commission to launch a case against 28 respondents. The commission needs to explain the glue, and the facts that make up the glue,” he said.

Chris Loxton, legal representative for ANZ, argued that the case against ANZ was “so remote and weak, that we’re surprised we’re still in this process”.

“The commission has not identified those banks against which there is a solid, winnable case,” he said.

He cited the vagueness of claims against ANZ traders Jason Katz and Murat Tezel.

Loxton conceded that Katz was an enthusiastic participant in these chatrooms, but that there was no participation in these chatrooms alleged after 2012, which was before Katz joined ANZ as an employee.

The commission’s complaint against the traders was problematic for its lack of detail as to the chatroom alleged to have been used, and the day when the alleged conspiracy was supposed to have occurred. The commission claims that a conversation from one chatroom was copied and pasted to another, yet there is no single incident of this nature after 2012 involving Katz or Tezel.

“How is it that the commission arrives at its conclusion that the two individuals were complicit and that therefore ANZ was complicit?” asked Loxton. “The way they do it is by making allegations of conclusions, and not allegations of fact.”

‘Unknown individuals’ also involved

The commission also alleges there were other unknown individuals involved in the conspiracy, the vagueness of which undermines a previous ruling by the Competition Appeal Court for more particularity on the part of the commission’s complaint.

In 2018, many respondent banks filed exceptions or objections to the commission’s case. There was also argument that the tribunal lacked jurisdiction over certain of the respondents, and that the commission had failed to plead sufficient facts to sustain a cause of action. Many banks argued the joinder of the additional parties should not succeed.

In 2018, a majority of the parties sought the dismissal of the case against them in its entirety.

Tribunal order

In 2019, the tribunal ordered the commission to provide more particulars in its complaint and confine itself to its claims of a single overarching conspiracy.

The commission was also required to limit the relief sought against respondent banks without a presence in SA to a so-called declaratory order.

This week’s arguments

Arguing before the tribunal this week, both Loxton for ANZ and Arnold Subel, representing Standard Bank of SA (SBSA), pointed to factual inaccuracies in the commission’s referral affidavit that lays out its case against the banks.

Subel added that the commission’s case did not meet the minimum requirement as set out by the Competition Appeal Court ruling of 2019 as it lacked particularity, nor did it come close to establishing a contravention by SBSA.

In its heads of argument, the commission rebutted claims that it had not provided sufficient facts to support its case, and that it was not required to plead the consequence or effect of every instance of conduct between the implicated traders – as argued by the banks.

The full effects of the alleged conspiracy will be fully ventilated at trial, where the commission will argue that the prohibited conduct should be seen as a whole, rather than a series of isolated instances.

Earlier this week, Nedbank objected to its joinder to the proceedings, arguing that the commission did not validly initiate a complaint against it in 2015. The commission replied that there was no merit in this argument as there is precedent to allow for a party to be cited even after the lodgement of the initial complaint.

The banks the commission applied to join to the proceedings this week include HSBC USA, FirstRand, FirstRand Bank, Standard Americas, Credit Suisse USA, Merrill Lynch and Bank of America.

In most cases, the banks objected on the grounds that the commission lacked jurisdiction.

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Big Chief Osuc*’s favourite child, the CompCom, doing what it does best – using specious accusations and the draconian powers granted to it in the Competition Act to bully and extort money to fund the criminal state. In this case the accusations against the banks just keep getting more speculative and far-fetched by the day. But time and money wasted are of no concern to the CompCom – it has from 2015 until forever to pursue this madness and of course also has unfettered access to the total assets of that most submissive victim – the South African taxpayer.
*Open Sandal Uncooked Chicken

This ANC government and it Apparatus is even giving the communists a bad name !!

The banks can argue all they like, they still need to explain why some of the banks admitted guilt and paid large fines. Did Citibank collude with itself in an extended schizophrenic episode?

Something that has long needed an investigation is the buy/sell spread on the runt. We are NOT a minor volume currency, I think in the top ten volume in the world.

@Johan_Buys To understand Citibank’s behaviour you need to be familiar with the “Corporate Leniency Policy”, initially published in Government Gazette 31064 of 23 May 2008 and since amended a few times. The incentive$ to roll over and admit to anything and everything the CompCom want$ are $ub$tantial – if you get my drift.

Aye, I suspect that this is a tree shaking exercise to harvest a fine windfall. Banks need to weigh up legal costs in a wonky justice system initially just outside the usual courts (the CompCom) then the lottery of the main system. Against this is simply to agree and fine and rape the common consumers who will not find a bank that doesn’t fall within the fee structures of all of them (SA banks anyway); completely coincidentally of course.

It seems like the only growth industry in SA is “commissions of enquiry” creating employment for anyone with a vaguely legal background for an interminable period of time.

Meanwhile, in Cape Town the rail network falls apart with constant vandalism, theft and an inability of the Minister of Police to do anything about it.

Is SA a failed state where a R30 billion rand looting spree goes unpunished and where crime closes down a national rail network? The obvious answer is yes.

Is it surprising that anyone with a professional qualification leaves the country? No.

Price fixing in some cases introduces a level of consistency however we can’t forget the “subprime mortgage” disaster where collusion amongst the banks, financial institutions and rating agencies caused mayhem to the worlds economies. Investigating commissions are meant to stabilize and deter future problems or anomalies that arise but should not be protracted until they defeat the purpose of their function. Perhaps getting rid of the Gold Standard paved the way for financial competition?
Nice punt for RMB, by the way!

RMB. That’s my bank! 😉

The US sub-prime mortgage was underpinned by property flipping, from taxi drivers to teachers trying to make a quick buck and yes, assisted by that new industry, “mortgage broker consultants”. The US banks then passed on the packaged debt to other foreign mostly EU banks who got sucker-punched.

We don’t have that scenario here, but just the usual problem of incompetence, corruption and cadre-collusion, driving us into the abyss.

The state occupies (as a squatter) almost half of the economy. Have you ever seen the Comp Com act against any of the state monopolies? No, they target private enterprises that pay all the taxes and employ all the value-adding people in the economy. The state employs the value destroyers and the parasites.

The state shuts down the private mining companies in the rare case of an accident, while a job underground is the safest job in the country. They don’t shut down the police force when policemen are killed on the job. They did not close down the Department of Social Services with the Life Esidimeni massacre. They don’t close state hospitals when patients die due to the negligence of Cosatu nurses and doctors. Nor do they close Luthuli House down because of the unemployment levels, crime levels, and state corruption.

The state acts against the private sector because they see the private sector as their competition and their enemy to be exterminated. The state taxes its competition in the free market, to subsidize state monopolies and to hide their inefficiencies.

The Competition Commission, by acting against local private enterprises, plays in the hands of our international competitors. The ANC is the largest exporter of jobs and importer of unemployment in the world. They have an international monopoly on job destruction.

Sensei I spent 38 years in the mining industry and had to suffer their abuse of power !!
Idiots all !!

@Sensei Exactly, you have summed it up perfectly.
SA has reached the point where conducting any profitable enterprise is actually not in the country’s long term best interest. On purely moral grounds, private enterprise needs to go into bare subsistence / survival mode or into voluntary liquidation, to starve the malignant cANCerous growth that is killing the country. All ethical SA’cans should only consider conducting any profitable commerce again once the malignancy has been extirpated.

End of comments.

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