2015 financial scandal

2015 financial scandal
Name	2015 financial scandal
Date	2015
Location	International
Type	Financial scandal
Participants	Bernie Madoff; JPMorgan Chase; Deutsche Bank; Goldman Sachs; UBS; Wells Fargo; Royal Bank of Scotland; HSBC; Citigroup; Barclays
Outcome	Legal settlements; regulatory reforms

2015 financial scandal

The 2015 financial scandal refers to a series of interrelated corporate fraud and market manipulation episodes that surfaced in 2015 involving major financial institutions, hedge funds, investment banks and auditing firms. Coverage linked high-profile figures, corporate entities and international regulators, producing litigation that engaged courts such as the United States District Court for the Southern District of New York, tribunals like the International Criminal Court (in commentary), and oversight bodies including the Financial Conduct Authority and the Securities and Exchange Commission.

Background

In the lead-up to 2015 the collapse of Lehman Brothers and the fallout from the 2008 financial crisis had prompted reforms like the Dodd–Frank Wall Street Reform and Consumer Protection Act and evaluations from the Financial Stability Board and the International Monetary Fund. Major institutions such as Goldman Sachs, Morgan Stanley and Bank of America operated alongside asset managers like BlackRock, Vanguard Group and Bridgewater Associates. Auditors including PricewaterhouseCoopers, Deloitte, Ernst & Young and KPMG faced scrutiny following scandals involving Enron and WorldCom. Politicians and regulators such as Mario Draghi, Janet Yellen, Christine Lagarde and Mark Carney debated reforms as journalists from the New York Times, Financial Times and The Wall Street Journal investigated alleged misconduct tied to practices traced to firms like JPMorgan Chase and Deutsche Bank.

Timeline of Events

In early 2015 whistleblowers contacted outlets including Bloomberg L.P., Reuters and The Guardian, alleging improprieties linked to trading desks at UBS, Barclays and HSBC. By mid-2015 regulators including the Securities and Exchange Commission and the Financial Conduct Authority opened probes; courts in London and New York City received suits from pension funds such as CalPERS and sovereign funds like the Abu Dhabi Investment Authority. High-profile arrests and indictments referenced executives formerly at Goldman Sachs International and Credit Suisse. Late-2015 saw settlements negotiated with firms represented by law firms such as Sullivan & Cromwell, Skadden, Arps, Slate, Meagher & Flom and Linklaters; concurrently, parliamentary inquiries in Canberra and hearings before the United States Senate Committee on Banking, Housing, and Urban Affairs highlighted systemic issues. The timeline culminated with multi-billion-dollar fines levied by the European Commission and negotiated plea deals in United States federal court.

Investigations and Legal Actions

Civil litigation involved plaintiffs including Pension Protection Fund, Teachers Insurance and Annuity Association, and hedge funds like Paulson & Co.; defendants included Wells Fargo, Citigroup, and Royal Bank of Scotland. Criminal investigations were pursued by agencies such as the Federal Bureau of Investigation and the Serious Fraud Office (United Kingdom). International cooperation between the International Organization of Securities Commissions and the Basel Committee on Banking Supervision coordinated cross-border inquiries. Investigations called upon expert testimony from academics at Harvard University, University of Oxford, and London School of Economics and engaged forensic accounting teams from FTI Consulting and AlixPartners.

Impact on Markets and Stakeholders

Market reaction saw volatility in indices including the Dow Jones Industrial Average, FTSE 100 Index, and the DAX. Investor confidence among institutional holders such as Norwegian Government Pension Fund Global, Qatar Investment Authority, and California Public Employees' Retirement System shifted, affecting assets under management at BlackRock and State Street Corporation. Credit default swap spreads for affected firms widened, influencing ratings by Moody's Investors Service, Standard & Poor's, and Fitch Ratings. Client litigation from corporations like General Electric and Procter & Gamble sought damages; retail customers at Wells Fargo and HSBC faced account scrutiny. Exchange operators including New York Stock Exchange and London Stock Exchange Group adjusted listing oversight.

Regulatory and Policy Responses

Regulators like the Securities and Exchange Commission, Financial Conduct Authority, European Central Bank, and Office of the Comptroller of the Currency implemented reforms including enhanced compliance rules, stress-testing adjustments, and conduct standards inspired by recommendations from the Financial Stability Board. Legislatures in United States Congress, European Parliament, and national parliaments debated amendments to Dodd–Frank Act and rules under the Markets in Financial Instruments Directive II. Central banks including the Federal Reserve System and Bank of England issued guidance; international bodies such as the Organization for Economic Co-operation and Development published best-practice frameworks.

Corporate Governance Failures

Corporate governance critiques focused on boards at Deutsche Bank, Barclays PLC, UBS Group AG, and Goldman Sachs Group, Inc. for failures involving risk committees, audit committees, and compensation committees. Shareholder activists including Elliott Management Corporation and Pershing Square Capital Management pushed for director changes; proxy fights referenced governance models from Tesla, Inc. and Apple Inc. as contrasts. Internal controls shortcomings implicated chief executives, chief financial officers, and general counsels, prompting revisions in codes of conduct aligned with standards from International Organization for Standardization and audit requirements following precedents set after Arthur Andersen.

Aftermath and Reforms

In the aftermath, numerous settlements altered capital allocation at firms such as JPMorgan Chase & Co. and Citigroup Inc., with corporate restructurings reflecting shifts similar to post-2008 financial crisis reforms. Reforms included strengthened compliance functions, improved whistleblower protections modeled on Dodd–Frank Act provisions, and expanded roles for independent directors akin to practices at Unilever and BP plc. Ongoing litigation and academic study at institutions like Columbia University and Stanford University continued to assess long-term effects on market structure, prompting policy papers from think tanks such as the Brookings Institution and Council on Foreign Relations.

Category:Financial scandals Category:2015 in finance