British Regulator Warns Two of Potential Libor Charges

The Wells notice appears to be going global.

The Financial Conduct Authority, one of Britain’s financial regulators, made public on Monday warnings to two individuals that it plans to charge them for misconduct related to the rigging of the London Interbank Offered Rate, or Libor.

It is the first time the agency has used its newly minted authority to issue such warnings and the first time the regulator has taken action against individuals in the wide-ranging Libor investigation. The warning is similar to the Securities and Exchange Commission’s Wells notice, which notifies individuals or institutions in the United States that the S.E.C. plans to file civil charges against them.

Unlike the S.E.C., however, the F.C.A. cannot identify the individuals or the banks involved.

Regulators and prosecutors from around the globe, including those in Japan, the Netherlands, the United States and Britain, are investigating more than a dozen banks on the suspicion that they rigged benchmark interest rates including Libor in a number of different currencies in an attempt to inflate trades in more than $400 trillion worth of financial products, including derivatives and mortgages.

Banks have paid more than $6 billion, according to Bloomberg, in fines related to the investigations into the manipulation of benchmark interest rates. At least 10 people have been charged criminally by the Justice Department in the United States and the Serious Fraud Office in Britain, with more charges expected.

The F.C.A., which is in charge of regulating the markets, has fined five institutions £426 million, with UBS topping the list with a penalty of £160 million. In December, European Union antitrust regulators fined six banks, including Deutsche Bank and Citigroup, a record $2.3 billion for manipulating interest rates linked to Libor and Euribor.

At the time, Joaquín Almunia, the European commissioner responsible for competition, said, “What is shocking about the Libor and Euribor scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other.” He said the European Commission would fight cartels in the financial sector.

In 2012, as part of regulatory reforms in Britain, the F.C.A., which is led by Martin Wheatley, was given the authority to “warn” individuals that they would be charged in an effort to expedite the regulatory inquiry process and to increase transparency around the proceedings. That power went into effect last year. The warning system was designed to illuminate what the F.C.A. is examining, perhaps prodding it to examine more.

The F.C.A.’s cases were detailed in two brief summaries. The first says a “submitter” â€" the person who submits the benchmark every day â€" failed to adhere to proper market conduct when he rigged rates and colluded with an interdealer broker on other rigged trades over two years, the notice said.

In a second notice, the F.C.A. said a bank manager went beyond turning a blind eye to market manipulation. The manager was aware of and condoned the fact that traders were asking submitters to manipulate the interest rate benchmark, the warning said. Rather than put controls in place, “He instead facilitated others’ attempts to manipulate interest rate benchmark submissions.”

The minimum fine for market abuse is £100,000. The most the F.C.A. has ever penalized an individual is £6.5 million. It can also ban individuals from the profession.

The agency has 50 people working on the rate-rigging investigation out of a total of 400 enforcement staff members. The individuals who were notified are not likely the same people who are being charged criminally. While the F.C.A. can investigate the same people, it would most likely not bring a case against someone who is already facing criminal action.

In Britain, the identity of the individuals is meant to stay private. Some laud the difference in the British approach from the United States system, which some call “pre-prosecution.”

“It balances the public interest in knowing their watchdog is on the case with the privacy interest of the individual bankers who may or may not end up being charged,” said Robert Henoch, a London-based partner at Kobre & Kim.

Both notices were issued on Nov. 28 and published on Monday. The F.C.A.’s investigation into other institutions and individuals is continuing.