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From Banking and Finance Law Daily, January 23, 2018

Fed terminates action against Heartland Bank, affirms FX trader’s $1.2M fine

By Lisa M. Goolik, J.D.

The Federal Reserve Board announced on Jan. 23, 2018, that it has terminated an enforcement action against Heartland Bank, Little Rock, Ark., that stemmed from its May 2017 determination that the bank was undercapitalized (see Banking and Finance Law Daily, Aug. 18, 2017). The Fed also announced that it had denied a motion to void the $1.2 million fine and permanent ban on employment in the banking industry against Christopher Ashton, the former Global Head of Foreign Exchange (FX) Spot Trading at Barclays Bank PLC.

Heartland Bank. The Fed had ordered Heartland Bank to take steps to ensure that the bank was adequately capitalized, including increasing the bank’s equity through the sale of shares or agreeing to merge with another depository institution or be acquired by a depository institution holding company. The order also prohibited the bank from soliciting and accepting new deposit accounts, or renewing any deposits bearing an interest rate that exceeds the prevailing effective rates, until it was adequately capitalized.

FX trader. In May 2017, the Fed imposed the $1.2 million fine and permanent ban against Ashton due to his alleged role in FX price fixing while at Barclays (see Banking and Finance Law Daily, May 22, 2017). The Fed claimed Ashton used electronic chat rooms to coordinate his trading with competitors and agree on the FX prices quoted to customers. At the time of the order, Ashton had failed to respond to the allegations or file an appearance since the Fed charged him in June 2016.

Ashton motion to vacate the order argued that he was not subject to personal jurisdiction in the United States, and that he was not an "institution-affiliated party" of a foreign bank that conducts operations in the United States, and thus could not be subjected to an enforcement action under Section 8 of the Federal Deposit Insurance (FDI) Act. He also argues that he was not properly served because the Fed’s rules limit permissible service to the United States and its territories.

The Fed’s decision denying Ashton’s request makes clear that the Fed had no interest in reopening the matter. The Fed noted that Ashton was served with notice of the charges and proceedings in multiple ways and, despite that notice, Ashton "never requested a hearing, filed an answer, or otherwise responded" until his motion for reconsideration, which, the Fed pointed out, was filed three months after service of the final order, and after the period for judicial review had expired.

Further, the Fed noted that Congress made the FDI Act’s enforcement provisions applicable to "acts[s] or practice[s] outside the United States on the part of... any officer, director, employee or agent" of a foreign bank. To limit service to within the United States would defeat Congress’s intent to capture the offshore wrongdoing by agents of foreign banks, explained the Fed.

Companies: Barclays Bank PLC

MainStory: TopStory ArkansasNews BankingOperations CapitalBaselAccords CrimesOffenses EnforcementActions SecuritiesDerivatives

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