Challenging inappropriate practices

Published by the Stockbrockers and Financial Advisers Association of Australia in the Stockbrokers and Financial Advisers Monthly, July 2017.

Over the last few years, conduct in the wholesale spot FX businesses of some of Australia’s largest financial institutions has fallen short of our expectations. Where we have come across this poor behaviour, we have taken action.

To make sure this doesn’t happen again, we have released good practice guidance in Report 525 Promoting better behaviour: Spot FX. We encourage you to consider the guidance to make sure your conduct in the workplace supports the integrity of the spot FX market.

To help you identify inappropriate conduct, we’ve set out two examples of poor practices that we observed over the course of our investigations.

Example 1

A junior employee joins an institution’s spot FX trading desk and learns how to interact with external participants by observing more senior traders on the desk, including by being added to instant message chat rooms with those more senior traders.

Within these chat rooms, the junior employee observes his more experienced colleagues disclosing varying levels of information from the institution’s order book. The junior employee assumes that this conduct is ‘market practice’ and therefore permissible.

The junior trader engages in similar exchanges of information with external parties. While the trader is not entirely sure whether the level of detail he is disclosing is appropriate, he takes comfort in the fact that his senior colleagues are present in some of the chats and have not told him otherwise.

Engaging in behaviour because it is a common practice among your colleagues, or because someone in your team has assured you that it is ‘market practice’, might mean that you fall short of acceptable standards of conduct.

To make sure your conduct doesn’t become the subject of an ASIC investigation, we encourage you to speak up when you notice practices that make you uncomfortable.

Example 2

A trader joins an institution’s spot FX trading desk after recently moving from another institution. He notices a trader in his team trading in spot FX on a personal trading account, which he thought was inappropriate because it was prohibited in his previous role.

He asks another trader on the desk who says ‘it’s fine, everyone does it here’. He also observes other traders occasionally engaging in personal account trading openly on the desk using their mobile devices. Believing this to be acceptable behaviour at the institution, he opens his own personal trading account.

Contrary to the trader’s belief, speculative personal trading is not allowed under the institution’s policies.

You can play a key role in identifying areas of weakness or poor practices within your organisation by challenging these inappropriate practices.

To make sure your conduct meets acceptable standards of conduct, you should:

  • ask yourself whether the behaviour is appropriate and takes into account the interests of your clients. Just because you’ve seen someone else do it, doesn’t mean it’s right
  • exercise your own independent and critical judgement, and
  • seek clarity about any practices or behaviours that you consider questionable.

Report 525 was released to coincide with the publication of the FX Global Code of Conduct. Developed in conjunction with industry, the FX Global Code provides a global set of practice guidelines designed to promote the integrity and effective functioning of the wholesale FX market.

To help you manage inappropriate conduct in the spot FX market, you should consider the good practice principles set out in Report 525 alongside the FX Global Code.

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Last updated: 20/09/2017 10:57