U.K. traders who’ve come under investigation for rigging benchmark rates may find themselves in another difficult situation -- unable to find a good lawyer.
The top attorneys at specialist white-collar crime firms say that, in the past few months, they’ve seen the largest number of finance workers ever seeking advice as probes into the London interbank offered rate, or Libor, expand to the manipulation of currency, derivatives and precious metals benchmarks.
About half a dozen law firms in the British capital specialize in advising individuals facing regulatory and criminal probes, while the largest London and U.S. based firms generally represent institutions. The increase in probes means that in a growing number of cases, the most experienced lawyers for individuals are turning traders away.
“There is an unprecedented increase in the number of individuals who need specialist legal advice,” said David Corker, a defense lawyer at Corker Binning. “The supply of such lawyers is limited because hitherto white-collar crime has been seen as largely a boutique or highly specialist area.”
Corker Binning is one of four of the top U.K. firms that specialize in advising people in criminal fraud cases, along with Kingsley Napley LLP, BCL Burton Copeland and Peters & Peters Solicitors LLP, according to the legal directory Chambers and Partners. Some larger firms, such as Stephenson Harwood LLP, also specialize in advising individuals over banks.
Regulatory scrutiny of benchmarks has grown since it emerged that Libor, the benchmark interest rate for more than $360 trillion of securities worldwide, was being manipulated. Barclays Plc was the first bank to be penalized in the investigation in June 2012. Regulators have levied fines of about $3.7 billion in total, with more to come.
The Libor case has led to probes of alleged abuses of other financial benchmarks by companies that play a central role in setting them. This year, regulators have opened probes into the setting of the daily ISDAfix swap rates, the WM/Reuters rates and gold benchmarks. At least 12 traders have been suspended over alleged foreign-exchange rigging, and about 11 banks, including Goldman Sachs Group Inc. and Barclays, have said they’ve been contacted by regulators.
Individuals who are implicated in the cases could face fines or bans from working in the finance industry from regulators, or possible criminal charges if prosecutors become involved. In the Libor case, seven people have been charged in the U.S. and U.K.
Lawyers, and sometimes entire law firms, can often only take on one person or one firm in a regulatory probe to prevent conflicts of interest with other clients in an investigation. At times, firms build so-called Chinese walls internally to allow them to work for multiple institutions or people, with the lawyers keeping information private from their colleagues advising other parties in the case. While London-based Clifford Chance LLP advised both Barclays and the Royal Bank of Scotland Plc in the Libor investigation, this is rare and generally requires client consent.
Most of the largest law firms will be tied to the banks that they have long-standing client relationships with, said Jo Keddie, a London-based employment lawyer.
“This means that individuals are left with a small handful of top, niche, white-collar U.K. firms to choose from,” she said. “We have never seen this number of regulatory probes affecting so many individuals at one time.”