When is a Felony Not a Felony? When You’re a Bank!
Good news, America: We can now get guilty pleas from banks!
Bad news, America: That’s only because guilty pleas from banks are now absolutely meaningless.
Last week, JP Morgan, Citigroup, Barclays, and Royal Bank of Scotland pled guilty to felony charges of conspiring to manipulate currency prices, and UBS pled guilty to manipulating benchmark interest rates. Regulators and prosecutors found the misconduct because the traders left extensive, written tracks — in chatrooms called “The Cartel” and “The Mafia.” James Kwak wrote that Stringer Bell from the popular television series The Wire would never have tolerated the brazen, “amateurish behavior” these traders exhibited. But why should traders bother to cover their tracks, when they know they have the absolute best clean-up crew in the business — the financial regulators and law enforcement meant to police them?
When an individual is convicted of a felony, they face years of disenfranchisement — from being denied the right to vote in many states, to facing barriers to finding work, felony convictions have real-world consequences for people. But when it comes to banks, regulators and law enforcement work together to ensure collateral consequences don’t occur.
It’s not supposed to be that way. When a bank is charged with a crime, there are certain penalties that automatically kick in. Here is what the banks were facing as a result of their felonies:
Disqualification from managing mutual funds and exchange-traded funds for RBS, JP Morgan, Citigroup and UBS.
New barriers for issuing securities. All the convicted banks are “well-known seasoned issuers,” which is a special status that lets them quickly raise capital without having to get SEC approval first. A criminal conviction automatically disqualifies a bank from this status.
No more immunity for earnings projections. Since you can’t verify the accuracy of the future, the law gives companies a “safe harbor” that allows them to make forward-looking statements anyway — without fear of lawsuits. The felony pleas would disqualify UBS, Barclays and JP Morgan from this immunity, thus subjecting all of their statements to the normal liability standards for fraud.
UBS and Barclays could no longer raise unlimited amounts of money though the sale of private securities.
How many of these consequences do you think the banks actually faced? If you guessed ZERO out of four, you are correct!
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https://medium.com/bull-market/when-is-a-felony-not-a-felony-when-you-re-a-bank-232a5371d7c1
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