Large Custody Bank Agrees to $30 Million Fine to Settle FX Charges

A large custody bank agreed to pay a $30 Million fine for misleading customers about its foreign exchange (FX) execution program, in addition to agreeing to pay $133 Million in disgorgement.  Although the firm claimed to offer best execution in its Standing Instruction FX program, the SEC alleges that the respondent priced client transactions near the end of the day “at or near the worst” interbank rates, resulting in significant profits from the spread obtained when the respondent traded on its own behalf.  The SEC faults the firm for failing to disclose how it assigned specific rates during the trading day.

OUR TAKE: Any transaction with a client has the potential for conflicts of interest.  Regulated entities must ensure full transparency to avoid an appearance of impropriety when viewed in hindsight.

https://www.sec.gov/litigation/admin/2016/34-78046.pdf