Investec throws jab in banks’ forex case
• Accuses Competition Commission of delays, flip-flopping and flouting of procedures
Investec wants the Competition Commission’s conduct declared “vexatious and unreasonable” by the Competition Tribunal in the forex case against currency traders, accusing it of repeated delays, flip-flopping on issues and flouting procedures.
Hearings in the case, first referred to the tribunal in February 2017, started on Monday with banks arguing technical issues, such as whether the commission had jurisdiction over foreign entities. Investec’s application is adding another twist to what is shaping up to be a protracted legal battle between the commission and banks.
The commission referred a collusion case to the tribunal for prosecution against 23 banks, among them Bank of America Merrill Lynch International, BNP Paribas, JPMorgan Chase, Investec, Standard New York Securities, HSBC, Standard Chartered, Credit Suisse, Standard Bank of SA, Australia and New Zealand Banking Group, Nomura International, Macquarie, Absa and Barclays.
It reached a settlement agreement with Citibank for being part of the forex trading cartel and the bank paid a R69.5m administrative penalty. Damning findings against bank traders in similar cases overseas have resulted in fines exceeding $10bn, according to Bloomberg.
These cases will help the commission’s case, which accuses 36 individuals with ties to 23 mostly foreign financial institutions of conspiring to coordinate rand-dollar currency trades, in order to boost profit and limit losses for the traders.
But the commission must first overcome “exceptions” filed by banks. The declaratory order sought by Investec is an additional nuisance.
Acting for the bank, advocate Kate Hofmeyr said that as an organ of state, the commission
should be held to higher standards of litigation. “When the commission behaves in an unreasonable, frivolous and vexatious manner, it must be sanctioned,” Hofmeyr said.
She told the tribunal on Monday that since bringing the case against the banks, the commission had flip-flopped on several issues. This had repeatedly delayed the matter and displayed a “callous disregard for the impact on banks”. At every step, the commission had “flouted” due process and “caused undue prejudice to those affected by its conduct”.
In one instance, the week before banks were expected to file their heads of argument, the commission filed a supplementary affidavit and then withdrew it the next day without explanation. Other banks are challenging the commission’s case on the grounds that it lacks sufficient facts.
The commission’s original referral was so lacking in detail that the banks did not know whether or not to plead guilty, said advocate Wim Trengove, also representing Investec.
Banks had to be able to “admit or deny each of the facts on which the commission relied, meaning [the facts] should be set out with sufficient particularity”, Trengove said.
A more detailed affidavit filed by the commission in December 2017 was essentially an “admission” that it needed to “do better”, said advocate Alfred Cockrell, acting for HSBC.
The commission had also failed to prove that the respondents were in all instances competitors, ignoring that exchange control rules in some cases required foreign entities to interact with authorised local dealers to execute client trades, said advocate Arnold Subel, representing Standard Bank.
If the commission’s case survives the exceptions, it could become the first competition authority worldwide to have to prosecute forex accusations in court, according to competition law journal Global Competition Review. The commission is expected to respond to exceptions on Wednesday.