FINAL NOTICE

ACTION

1.
For the reasons given in this Notice, the Authority hereby:

(1)
imposes on Neil Danziger a financial penalty of £250,000 pursuant
to section 66 of the Act; and

(2)
makes an order, pursuant to section 56 of the Act, prohibiting
Mr Danziger from performing any function in relation to any
regulated activity carried on by an authorised or exempt person, or
exempt professional firm. This order takes effect from the date of
this Notice.

SUMMARY OF REASONS

2.
The Authority has decided to take this action because during the period
from 14 February 2007 until 22 November 2010, Mr Danziger was
knowingly concerned in a contravention of Principle 5 by RBS in relation to
LIBOR. In addition, between 19 September 2008 and 25 August 2009, Mr
Danziger recklessly entered into Wash Trades for the purpose of making or
facilitating brokerage payments to Brokers for no legitimate commercial
reason, which further demonstrates his lack of integrity.

3.
LIBOR is a benchmark reference rate fundamental to the operation of both
UK and international financial markets. Its integrity is of fundamental
importance to confidence in the financial system.

4.
LIBOR is published daily in a number of currencies and maturities. It is
based on the cost of borrowing in the interbank market and Panel Banks
make daily submissions to an external administrator to enable LIBOR to be
calculated. Until 31 January 2014, LIBOR was administered by the BBA
and was set according to a definition published by the BBA.

5.
On 6 February 2013 the Authority gave RBS a Final Notice, imposing a
financial penalty of £87.5 million for significant failings in relation to
LIBOR. The RBS Final Notice describes how, among other breaches, RBS
breached Principle 5, which provides that a firm must observe proper
standards of market conduct.

Mr Danziger’s misconduct in relation to LIBOR submissions

6.
Mr Danziger acted improperly and was knowingly concerned in RBS’s
breach of Principle 5 in the following ways:

(1)
he made JPY LIBOR requests to Primary Submitters, in an attempt
to influence RBS’s LIBOR submissions;

(2)
he made JPY LIBOR submissions, when acting as a Substitute
Submitter, which took into account requests of other RBS
Derivatives Traders;

(3)
also when acting as a Substitute Submitter, he took into account
Trading Positions for which he and other Derivatives Traders were
responsible when making JPY LIBOR submissions; and

(4)
he obtained a Broker’s assistance to attempt to influence other
Panel Banks to change their JPY LIBOR submissions.

7.
Mr Danziger knew that the definition of LIBOR required submissions from
Panel Banks based on the rate at which borrowing and lending in the
interbank market could take place. He knew that Trading Positions were
not a relevant factor under the definition.

8.
Mr Danziger was motivated by an intention to benefit Trading Positions for
which he and others were responsible when making JPY LIBOR requests to
Primary Submitters, and when making JPY LIBOR submissions which took
into account those Trading Positions. He also knew that in making requests
to him, Derivatives Traders were motivated by profit and seeking to
benefit their own Trading Positions.

9.
Mr Danziger deliberately closed his mind to the risk that taking Trading
Positions into account was contrary to proper standards of market conduct.
In doing so, he acted recklessly, and therefore with a lack of integrity.

Wash trades

10.
Mr Danziger also engaged in Wash Trades, with the purpose of paying
brokerage to Brokers for no legitimate commercial reason; in doing this he
deliberately closed his mind to the risk that it was improper. In doing so,
he acted recklessly, and therefore with a lack of integrity.

11.
The UK and international financial system relies on the integrity of
benchmark reference rates such as LIBOR. Mr Danziger’s misconduct as a
JPY Derivatives Trader and Substitute Submitter threatened confidence in
the integrity of the UK financial system and could have caused significant
harm to other market participants.

12.
Mr Danziger was an approved person. Approved persons must act with
integrity. Mr Danziger’s actions, as set out above, were reckless and
therefore also lacked integrity.

13.
In the light of the seriousness of the matters summarised at paragraphs 6
to 9 of this Notice, Mr Danziger’s misconduct warrants the imposition of a
significant penalty. The Authority therefore considers it appropriate to
impose a financial penalty of £250,000.

14.
In addition, as a result of his lack of integrity, the Authority considers that
Mr Danziger is not a fit and proper person to perform any function in
relation to any regulated activity carried on by any authorised person,
exempt person or exempt professional firm and, as such, should be
prohibited from doing so.

DEFINITIONS

15.
The definitions below are used in this Notice:

“Act” means the Financial Services and Markets Act 2000;

“Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct
Authority;

“BBA” means the British Bankers’ Association, which, until 31 January
2014, was the administrator of LIBOR;

“Broker” means an interdealer broker who acted as intermediary in,
amongst other things, deals for funding in the cash markets and interest
rate derivative contracts. Broker A is specifically referred to in this Notice,
and is the same person as Broker A in the RBS Final Notice;

“Broker Firm” means a firm that employed Brokers. Broker Firm 1 is
specifically referred to in this Notice and is the same firm as Broker Firm 1
in the RBS Final Notice;

“DEPP” means the Authority’s Decision Procedure and Penalties Manual;

“Derivatives Trader” means an employee of RBS trading interest rate
derivatives. Derivatives Trader C is specifically referred to in this Notice,
and is the same person as Derivatives Trader C in the RBS Final Notice;

“EG” means the Authority’s Enforcement Guide;

“ENF” means the Authority’s Enforcement Manual;

“External Trader” means an employee of a Panel Bank other than RBS,
trading interest rate derivatives. External Trader A is specifically referred
to in this Notice, and is the same person as External Trader A in the RBS
Final Notice;

“FIT” means the Authority’s Fit and Proper test for Approved Persons and
specified significant-harm functions;

“JPY” means Japanese Yen;

“JPY LIBOR” means the London Interbank Offered Rate for JPY;

“LIBOR” means the London Interbank Offered Rate;

“Manager” means an employee of RBS with direct line management
responsibility over Derivatives Traders and/or Primary Submitters and/or
Substitute Submitters (e.g. a head of desk). Manager A is specifically
referred to in this Notice and is the same person as Manager A in the RBS
Final Notice;

“Money Market Trader” means an employee of RBS with primary
responsibility for trading cash and managing the funding needs of RBS.

“Panel Bank” means a bank with a place on the administrator of LIBOR’s
panel (the BBA’s panel during the Relevant Period) for contributing LIBOR
submissions in one or more currencies. Panel Banks 3, 4, 5 and 6 are
specifically referred to in this Notice and correspond with Panel Banks 3, 4,
5 and 6 in the RBS Final Notice;

“Primary Submitter” means a Money Market Trader who had responsibility
for making RBS’s LIBOR submissions. Primary Submitter B is specifically
referred to in this Notice and is the same person as Primary Submitter B in
the RBS Final Notice;

“Principle 5” means Principle 5 of the Authority’s Principles for Businesses;

“RBS” means The Royal Bank of Scotland plc;

“RBS Final Notice” means the Final Notice dated 6 February 2013 given to
The Royal Bank of Scotland plc by the Authority;

“Relevant Period” means the period from 14 February 2007 to 22
November 2010;

“Submitter” means an employee responsible for determining and making
LIBOR submissions on behalf of a Panel Bank;

“Substitute Submitter” means a Derivatives Trader who on occasion made
RBS’s LIBOR submissions;

“Trading Position” means a trading book position held either in respect of
derivative positions or money market positions;

“Tribunal” means the Upper Tribunal (Tax and Chancery Chamber); and

“Wash Trades” means risk free trades, with the same party, in pairs that
cancelled each other out and for which there was no legitimate commercial
purpose.

RELEVANT REGULATORY PROVISIONS

16.
Details of the regulatory provisions relevant to this Notice are set out in
Annex A.

FACTS AND MATTERS

LIBOR and interest rate derivatives contracts

17.
LIBOR is the most frequently used benchmark for interest rates globally,
referenced in transactions with a notional outstanding value of at least
USD 500 trillion. During the Relevant Period, LIBOR was published for 10
currencies and 15 maturities.

18.
Interest rate derivatives contracts typically contain payment terms that
refer to benchmark rates. LIBOR is by far the most prevalent benchmark
rate used in over-the-counter interest rate derivatives contracts and
exchange traded interest rate contracts.

19.
During the Relevant Period, LIBOR was published on behalf of the BBA.
LIBOR, in each relevant currency, was, and continues to be, set by
reference to the assessment of the interbank market made by a number of
Panel Banks. Each Panel Bank contributes rate submissions each business
day.

20.
These submissions are not averages of the relevant Panel Banks’
transacted rates on a given day. Panel Banks are required to exercise their
subjective judgement in evaluating the rates at which money may be
available in the interbank market when determining their submissions.

21.
During the Relevant Period, the LIBOR definition published by the BBA and
available to participants in the UK and international financial markets was
as follows:

“The rate at which an individual contributor panel bank could borrow
funds, were it to do so by asking for and then accepting interbank offers in
reasonable market size just prior to 11:00 London time”.

22.
The definition of LIBOR required submissions related to funding from the
Panel Banks. It did not allow for consideration of factors such as Trading
Positions.

23.
Until February 2011 the JPY LIBOR panel consisted of 16 banks, including
RBS, and the rate calculation for each maturity excluded the highest four
and lowest four submissions. An average of the remaining eight
submissions, known as the interquartile range, was taken to produce the
final benchmark rate.

24.
During the Relevant Period, RBS delegated responsibility for determining
and making LIBOR submissions to Submitters on its money markets desk

(which responsibility was sometimes further delegated to Substitute
Submitters).

25.
RBS breached Principle 5 through misconduct relating to its submission of
rates which formed part of the LIBOR setting processes.

26.
Principle 5 states that a firm must observe proper standards of market
conduct.

27.
The RBS Final Notice sets out that RBS breached Principle 5 in, inter alia,
the following ways:

(1)
manipulation of RBS’s own submissions that formed part of the
calculation of the published JPY LIBOR rates; and

(2)
collusion with Panel Banks and Broker Firms.

Mr Danziger’s role at RBS

28.
Mr Danziger was employed by RBS between July 2002 and October 2011,
as an interest rate derivatives trader. He traded derivative products
referenced to JPY LIBOR.

29.
Mr Danziger acted as the Substitute Submitter when the Primary
Submitter was not in the office. The Authority has evidence that Mr
Danziger acted as the Substitute Submitter for JPY LIBOR on the following
occasions: 15 February 2007, between 20 August 2007 and 31 August
2007, 22 October 2007, 2 April 2008 and 16 February 2010.

30.
During the Relevant Period Mr Danziger was approved to perform
controlled functions on behalf of RBS. From 5 August 2005 until 31
October 2007 he was approved to perform the CF26 (Customer Trading)
controlled function, and thereafter he was approved to perform the CF30
(Customer) controlled function until 21 October 2011.

31.
During the Relevant Period, Mr Danziger understood that the BBA
definition of LIBOR was based on a Panel Bank’s assessment of actual
rates in the interbank lending market (although it appears that he
mistakenly understood it to be based on the rate at which a Panel Bank
could lend money, rather than borrow it, in the interbank market). He
knew that Trading Positions were not a relevant factor under the
definition. He deliberately closed his mind to the risk that for a Submitter
to take them into account when making JPY submissions (or for a
Derivatives Trader to request a Submitter to do so) was contrary to proper
standards of market conduct.

Requests made by Mr Danziger to Primary Submitters

32.
During the Relevant Period, Mr Danziger routinely made, and on behalf of
Derivatives Trader C communicated, requests to Primary Submitter B (and
on one occasion Mr Danziger made a request to another Primary
Submitter) to adjust RBS’s JPY LIBOR submissions to benefit both Mr
Danziger’s and Derivatives Trader C’s Trading Positions. The Authority has
evidence that Mr Danziger sent 12 written communications containing such

requests. In addition, Mr Danziger made oral requests whilst he and other
Derivatives Traders sat in close proximity to Primary Submitters.

33.
Mr Danziger’s requests were for high, low or specific JPY LIBOR
submissions with the aim of influencing the final benchmark JPY LIBOR
rate published by the BBA.

34.
Mr Danziger became aware, towards the end of the Relevant Period, that
conduct similar to his own, in relation to another LIBOR currency, was the
subject of a regulatory investigation, but deliberately closed his mind to
the risk that this might suggest that his own conduct in relation to JPY
LIBOR could be of concern to regulators. At 07:35:00 on 24 September
2010, Derivatives Trader C made a request to Mr Danziger to “push 6
month JPY LIBOR up 2 bps to 44”. Mr Danziger responded “will mention it,
no emails anymore, after tom”. At 07:20:57 on 22 November 2010,
Derivatives Trader C told Mr Danziger in a Bloomberg exchange “need to
drop 3m LIBOR and hike 6m LIBOR …” Mr Danziger responded “at the
moment the FED are all over us about libors”. Derivatives Trader C then
asked, “that’s for the USD? … [don’t] think anyone cares [about] the JPY
LIBOR”. Mr Danziger then responded, “not yet, I will walk it over to them”.

Motivation for the requests

35.
Mr Danziger’s requests were motivated by profit. The final benchmark JPY
LIBOR rate published by the BBA would impact the profitability of RBS’s
JPY Trading Positions, including those for which Mr Danziger and
Derivatives Trader C were responsible.

36.
Shortly before the start of the Relevant Period the following Bloomberg
exchange took place between Mr Danziger and Derivatives Trader C at
13:24:24 on 9 January 2007, after LIBOR had been submitted for that
day:

Derivatives Trader C: “wow…libor bump up higher than

expected today”

Danziger: “i know! [Primary Submitter B]

said it would be around 5025 and he
put in 50, it is frustrating”

Derivatives Trader C: “lets see which bank put it up”

Danziger: “im not sure why other people

can manipulate libor and we cant” ….

Danziger: “we need to get a better handle

on JPY cash, i am going to start paying
more attention to it and speaking to
cash brokers”

It is clear from this exchange that Mr Danziger understood that other
banks were making submissions that he considered were manipulating
LIBOR.


37.
At 11:56:25 on 2 May 2007, Derivatives Trader C sent the following
Bloomberg communication to Mr Danziger: “hey could you drop an email

to [Primary Submitter B] to set low 1m libor and low 3m libor for
tomorrow?...our big fixing tomorrow …”.

38.
Paragraph 41 below sets out RBS’s one month and three month JPY LIBOR
submissions on 3 May 2007 (the next trading day) that Primary Submitter
B made following this exchange.

39.
Mr Danziger was an experienced trader and many of his exchanges with
Derivatives Trader C in the Relevant Period made explicit reference to the
impact of JPY LIBOR on their Trading Positions.

Primary Submitters took account of Mr Danziger’s JPY LIBOR requests

40.
Primary Submitter B routinely took Mr Danziger’s JPY LIBOR requests into
account when making submissions, as on one occasion did another
Primary Submitter. This is evidenced by the positive responses given by
Primary Submitter B to Mr Danziger’s requests and the submissions
subsequently made.

41.
In relation to the 2 May 2007 Bloomberg communication referred to at
paragraph 37 above, in which Derivatives Trader C asked Mr Danziger to
request Primary Submitter B to make low one month and three month JPY
LIBOR submissions the following day, on 3 May 2007 RBS made the
following submissions for one month and three month JPY LIBOR:

(1)
For one month JPY LIBOR, RBS’s submission was 0.63, a drop of
one basis point from 0.64 the previous day. This resulted in RBS
moving down to equal tenth in the ranking of Panel Banks, from
equal fourth the previous day.

(2)
For three month JPY LIBOR, RBS’s submission was 0.66, a drop of
one basis point from 0.67 the previous day. This resulted in RBS
moving down to equal fourteenth in the ranking of Panel Banks,
from equal sixth.

42.
At 06:50:59 on 14 September 2009, Mr Danziger sent the following
Bloomberg communication to Primary Submitter B: “high 3s and 6s
please”. Although RBS’s three month JPY LIBOR submission on this day
remained unchanged at 0.38, RBS moved up in the ranking of Panel Banks
from equal third to equal second. RBS’s six month JPY LIBOR submission
remained unchanged at 0.59. This submission was second compared to
equal second the previous day.

43.
At 07:44:16 on 15 September 2009, a further Bloomberg communication
took place between Mr Danziger and Primary Submitter B:

Danziger:

“can we lower our fixings today please
[Primary Submitter B]”

Primary Submitter B:
“make your mind up, haha, yes no probs”

Danziger:


“im like a whores drawers”

44.
Although on 15 September 2009, RBS’s submission for one month JPY
LIBOR was not in line with Mr Danziger’s request, (the submission was
0.18, remaining unchanged from the previous day, resulting in RBS

remaining equal fifth in the ranking of Panel Banks) RBS’s three and six
month JPY LIBOR submissions were in line:

(1)
For three month JPY LIBOR, RBS’s submission was 0.36, a drop of
two basis points from 0.38 the previous day. This resulted in RBS
moving to equal fourth in the ranking of Panel Banks, from equal
second the previous day.

(2)
For six month JPY LIBOR, RBS’s submission was 0.56, a drop of
three basis points from 0.59 the previous day. This resulted in RBS
moving to equal fifth in the ranking of Panel Banks, from second
the previous day.

45.
During the course of the Authority’s investigation, Primary Submitter B
admitted that on occasion he had taken into account requests made by Mr
Danziger “as a factor” when making JPY LIBOR submissions.

When making JPY LIBOR submissions, Mr Danziger took into account
Trading Positions for which he and other Derivatives Traders were
responsible

46.
Mr Danziger acted as the Substitute Submitter for JPY LIBOR on 15
February 2007, between 20 August 2007 and 31 August 2007, on 22
October 2007, on 2 April 2008, and on 16 February 2010. During these
periods Mr Danziger took into account Trading Positions for which he and
other Derivatives Traders were responsible, when making JPY LIBOR
submissions. In doing so Mr Danziger was motivated by an intention to
benefit those Trading Positions, and knew that other Derivatives Traders
were motivated by profit, and seeking to benefit their own Trading
Positions, in making requests to him.

47.
At 14:45:21 on 17 August 2007 (a Friday), the following Bloomberg
communication took place between Derivatives Trader C and Mr Danziger
after LIBOR had been submitted for that day:

Derivatives Trader C:
“i dont think 3m libor drop that much,
3m jpy at most down 1bps”

Danziger:

“oh no, not if i have anything to do
with it, and i do have something to do
with it! lol.”

Although this was not itself a request by Derivatives Trader C, it shows
that Mr Danziger considered that he could and would take the opportunity
to attempt to influence LIBOR when acting as Substitute Submitter.

48.
Mr Danziger referred openly to the fact that he was taking his own
preferences into account when making JPY LIBOR submissions.

49.
For example, on 22 August 2007, the following Bloomberg communication
took place between Manager A and Mr Danziger:

Manager A: “Hi Mate, where are u calling the 6m and 3s Libor
today?”

Danziger:
“i put in 1.05 and 1.15”

Manager A: “ok cool…is that close to consensus?”

Danziger:
“i think my 3s are too high, 6s will prob be 1.13 too, but
i wanted high fixes today”

Manager A: “ok cool, its all a random variable for us at this stage it

is just we have some small fixings”

Danziger:
“well let me know if you have any preferencves, each
day”

Manager A: “thx will do”

50.
On 22 August 2007, RBS’s submission was 1.05 for three month JPY
LIBOR, a rise of one basis point from 1.04 the previous day. This resulted
in RBS being placed first in the ranking of Panel Banks, from equal first the
previous day. RBS’s submission was 1.15 for six month JPY LIBOR, a rise
of six basis points from 1.09 the previous day. This resulted in RBS
moving to equal third in the ranking of Panel Banks, from equal tenth the
previous day. This was despite Mr Danziger’s assertion that he thought
both rates were too high.

51.
At 12:54:25 on 22 October 2007, after LIBOR had been submitted for that
day, the following Bloomberg exchange occurred between Mr Danziger and
Derivatives Trader C:

Danziger:
“i was the highest on the libors!”

Derivatives Trader C:
“haha.. well we need low 3m libor
tomorrow.. you could be the lowest
tom!”

Danziger:
“think we can arrange that”

52.
Consistent with this exchange, on 22 October 2007, RBS’s submission was
0.98 for three month JPY LIBOR, a rise of two basis points from 0.96 the
previous day. This resulted in RBS being placed first in the ranking of
Panel Banks, from equal sixth the previous day.

53.
The following day, on 23 October 2007, RBS’s submission was 0.94 for
three month JPY LIBOR, a drop of four basis points from 0.98 the previous
day. This resulted in RBS moving down to equal sixth in the ranking of
Panel Banks, from first the previous day.

54.
At 13:23:28 on 2 April 2008, the following Bloomberg exchange occurred
between Mr Danziger and Derivatives Trader C:

Derivatives Trader C:
“nice libor, our 6m fixing move the
entire fixing, hahahah”

Danziger:
“the bba called to ask me about that
today ….”

55.
On this day, RBS’s six month JPY LIBOR submission was 0.95, a drop of
eight basis points from 1.03 the previous day. This resulted in RBS moving
down to equal twelfth in the ranking of Panel Banks, from first the
previous day.

Mr Danziger obtained a Broker’s assistance with respect to LIBOR
manipulation

56.
The Authority has evidence that on two occasions, Mr Danziger obtained a
Broker’s assistance to attempt to manipulate other Panel Banks’ JPY LIBOR
submissions in order to benefit the Trading Positions for which he and
other Derivatives Traders were responsible.

57.
On 26 June 2009, Mr Danziger called Broker A (who worked at Broker Firm
1) and asked, “Has [External Trader A] been asking you to put LIBOR’s up
today?” Broker A responded, “He wants … ones and threes a little bit lower
and sixes probably about the same where they are now. He wants them to
stay the same.” Mr Danziger replied, “I want them lower…” Broker A then
stated, “Alright, well, alright, alright, well [unclear] work on it.”

58.
Later on that day, Mr Danziger spoke with Broker A again by telephone:

Broker A:

“Alright okay, alright listen, we’ve had a couple words
with them. You want them lower, right?”

Danziger:

“Yeah.”

Broker A:

“Alright okay, alright, no we’ve okay just confirming
it. We’ve so far we’ve spoke to [Panel Bank 3] We’ve
spoke to a couple of people so we’ll see where they
come in alright. We’ve spoke, basically… basically we
spoke to [Panel Bank 3], [Panel Bank 4], [Panel Bank
5], who else did I speak to? [Panel Bank 6]. There’s a
couple of other people that the boys have spoke to
but as a team we’ve basically said we want a bit
lower so we’ll see where they come in alright?”

Danziger:
“Cheers.”

Broker A:
“No worries mate.”

59.
On 29 June 2009 (the next working day), Mr Danziger made a further
request to Broker A for “low libors again pls”.

60.
Between September 2008 and August 2009, Mr Danziger entered into 28
Wash Trades. The purpose of these Wash Trades was to make or facilitate
brokerage payments to two firms of Brokers in recognition of his receipt of
personal hospitality. This was not a legitimate commercial purpose.

61.
Mr Danziger admitted that he socialised with Brokers, although he denied
a connection between Wash Trades and the hospitality received from
Brokers. The Authority considers the evidence shows that this was the
motivation for the Wash Trades.

62.
For example, on 19 September 2008, Mr Danziger received a telephone
call from Broker A who asked him to enter into a Wash Trade in return for
him sending round lunch for everybody on Mr Danziger’s desk. Mr
Danziger agreed. Later that day, he agreed to increase the value of the
Wash Trade and volunteered to pay brokerage on one side of the trade.

63.
By way of further example, on 26 June 2009, Broker A telephoned a
colleague of Mr Danziger at RBS asking whether Mr Danziger was in the
office, and saying that Mr Danziger “owes me a little switchy today…he
owes me a little rumble today”. He stated that he was out the previous
evening with Mr Danziger, who got very drunk. On the same day, Broker
A spoke to another individual and said that he had run up a £2,000 drinks
bill. He said that he had asked Mr Danziger to help him out as he had a
“£2,000 bill last night” and his monthly expenses were “a grand”, and that
Mr Danziger had told him to “put a switch through”. Mr Danziger executed
a Wash Trade later that day.

FAILINGS

Knowing concern in RBS’s breach of Principle 5

64.
Section 66(2)(b) of the Act provides that a person is guilty of misconduct
if, while an approved person, he has been knowingly concerned in a
contravention by the relevant authorised person of a requirement imposed
on that authorised person by or under the Act.

65.
For the purposes of this Notice, RBS is the “relevant authorised person”
under section 66(2)(b) of the Act and its breach of Principle 5 is the
“contravention of a requirement imposed on that authorised person” by or
under the Act.

66.
Mr Danziger, as an approved person, was knowingly concerned in RBS’s
breach of Principle 5 because during the Relevant Period he:

(1)
knew that the definition of LIBOR required Panel Banks to make
submissions based on the rate at which borrowing and lending in
the interbank market could take place and that Trading Positions
were not a relevant factor under the definition;

(2)
made JPY LIBOR requests to Primary Submitters, in an attempt to
influence RBS’s LIBOR submissions;

(3)
he made JPY LIBOR submissions, when acting as a Substitute
Submitter, which took into account requests of other RBS
Derivatives Traders;

(4)
took into account Trading Positions for which he and other
Derivatives Traders were responsible when making JPY LIBOR
submissions as Substitute Submitter;

(5)
obtained a Broker’s assistance in an attempt to influence other
Panel Banks’ JPY LIBOR submissions;

(6)
was motivated by profit when making JPY LIBOR requests to
Primary Submitters and when taking into account the JPY Trading
Positions for which he and other Derivatives Traders were
responsible, and knew that other Derivatives Traders were
motivated by profit when making requests to him as Substitute
Submitter and sought to benefit their own Trading Positions; and

(7)
deliberately closed his mind to the risk that making JPY LIBOR
requests to Primary Submitters and taking Derivatives Trader
requests into account in determining where RBS’s JPY LIBOR

submissions should be set, to benefit the financial interests of RBS,
was contrary to proper standards of market conduct.

67.
Mr Danziger also engaged in Wash Trades, with the purpose of paying
brokerage to Brokers for no legitimate commercial reason; in doing this he
deliberately closed his mind to the risk that it was improper.

Lack of fitness and propriety

68.
The relevant sections of FIT are set out in Annex A. FIT 1.3.1G states that
the Authority will have regard to, among other things, a person’s integrity
when assessing the fitness and propriety of a person to perform a
particular controlled function.

69.
Mr Danziger is not a fit and proper person to perform any function in
relation to any regulated activity carried on by an authorised person,
exempt person or exempt professional firm because he lacks integrity, as
demonstrated by his conduct set out in this Notice.

70.
Mr Danziger acted recklessly, and therefore with a lack of integrity, in
deliberately closing his mind to the risk that his behaviour in relation to
the submission of JPY LIBOR rates was contrary to proper standards of
market conduct, and to the risk that it was improper to enter into Wash
Trades.

SANCTION

71.
Mr Danziger’s misconduct took place from 14 February 2007 to 22
November 2010.

72.
The Authority’s policy on the imposition of financial penalties and public
censures is set out in DEPP. The Authority has applied the provisions of
DEPP which were in force from 28 August 2007 to 6 March 2010. The
detailed provisions of DEPP are set out in Annex A.

73.
The Authority has also had regard to the provisions of ENF relevant to the
pre-28 August 2007 part of the Relevant Period, and the provisions of
DEPP in force during the post-5 March 2010 part of the Relevant Period.

74.
DEPP 6.5.2 lists factors which may be relevant when the Authority
determines the amount of financial penalty for a person under the Act.
Relevant factors are analysed below. DEPP 6.5.1 provides that the list of
criteria in DEPP 6.5.2 is not exhaustive and all the relevant circumstances
of the case will be taken into consideration.

75.
The Authority considers the following DEPP factors to be particularly
important in assessing the sanction:

Deterrence – DEPP 6.5.2(1)

76.
DEPP 6.5.2(1) states that when determining the appropriate level of
penalty, the Authority will have regard to the principal purpose for which it
imposes sanctions, namely to promote high standards of regulatory and/or

market conduct by deterring persons who have committed breaches from
committing further breaches and helping to deter other persons from
committing similar breaches, as well as demonstrating generally the
benefits of compliant business. The Authority considers that the need for
deterrence means that a significant fine on Mr Danziger is appropriate.

Nature, seriousness and impact of the breach – DEPP 6.5.2(2)

77.
Mr Danziger’s breaches were extremely serious. Mr Danziger improperly
and routinely made JPY LIBOR requests to Primary Submitters. He also
took his own Trading Positions, and those of other Derivatives Traders,
into account when making RBS’s JPY LIBOR submissions as Substitute
Submitter.

78.
LIBOR is of central importance to the operation of UK and worldwide
financial markets. Doubts about the integrity of LIBOR threaten confidence
in these markets. Submitters are the guardians of LIBOR and as such Mr
Danziger’s failings were very serious.

79.
Mr Danziger’s misconduct could have caused serious harm to other market
participants.

80.
Mr Danziger was in a position of significant responsibility in his role at
RBS.

81.
Mr Danziger was a highly experienced market professional.

The extent to which the breach was deliberate or reckless – DEPP 6.5.2(3)

82.
Mr Danziger’s conduct was reckless. He acted as he did despite knowing
that
taking
Trading
Positions
into
account
when
making
LIBOR

submissions was not permitted under the BBA’s definition of LIBOR, and
deliberately closed his mind to the risk that taking them into account was
contrary to proper standards of market conduct.

Disciplinary record and compliance history - DEPP 6.5.2G (9)

83.
The Authority has not taken previous regulatory action against Mr
Danziger.

Conclusion in relation to financial penalty

84.
Having taken into account all the relevant circumstances, the Authority
has decided to impose a financial penalty of £250,000 on Mr Danziger in
respect of his knowing concern in the breach by RBS of Principle 5.

85.
The Authority considers that Mr Danziger’s actions as described in this
Notice demonstrate that he lacks integrity. As such, the Authority believes
that it is appropriate to prohibit Mr Danziger from performing any function
in relation to any regulated activity carried on by an authorised person,
exempt person or exempt professional firm.

REPRESENTATIONS

86.
Annex B contains a brief summary of the key representations made by Mr
Danziger, and how they have been dealt with. In making the decision
which gave rise to the obligation to give this Notice, the Authority has
taken into account all of the representations made by Mr Danziger,
whether or not set out in Annex B.

PROCEDURAL MATTERS

87.
This Notice is given in accordance with section 390 of the Act.

88.
The following paragraphs are important.

Decision maker

89.
The decision which gave rise to the obligation to give this Notice was made
by the Regulatory Decisions Committee.

Manner of and time for Payment

90.
The financial penalty of £250,000 must be paid in full by Mr Danziger to
the Authority by no later than 30 June 2018.

If the financial penalty is not paid

91.
If all or any of the financial penalty is outstanding after its due date for
payment, the Authority may recover the outstanding amount as a debt
owed by Mr Danziger and due to the Authority.

Confidentiality and publicity

92.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of
information about the matter to which this Notice relates. Under those
provisions, the Authority must publish such information about the matter
to which this Notice relates as the Authority considers appropriate. The
information may be published in such a manner as the Authority considers
appropriate. However, the Authority may not publish information if such
publication would, in the opinion of the Authority, be unfair to you or
prejudicial to the interests of consumers or detrimental to the stability of
the UK financial system.

93.
The Authority intends to publish such information about the matter to
which this Final Notice relates as it considers appropriate.

Contacts

94.
For more information concerning this matter generally, contact Rebecca
Cole (direct line: 020 7066 7202) or David Hayton (direct line: 020 7066
1404) at the Authority.

Mark Francis
Head of Department, Wholesale 1,
Enforcement and Market Oversight Division
Financial Conduct Authority

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

1. The Authority’s strategic objective, set out in section 1B(2) of the Act, is

ensuring that the relevant markets function well. The relevant markets
include the financial markets and the markets for regulated financial
services (section 1F of the Act). The Authority’s operational objectives are
set out in section 1B(3) of the Act, and include the integrity objective.

Knowingly concerned

2. The Authority has the power, pursuant to section 66(1) of the Act, to

impose a financial penalty of such amount as it considers appropriate
where it appears to the Authority that a person is guilty of misconduct and
it is satisfied that it is appropriate in all the circumstances to take action
against him.

3. A person is guilty, pursuant to section 66A(3)(A) of the Act, of misconduct

if, while an approved person, he has been knowingly concerned in a
contravention by the relevant authorised person of a requirement imposed
on that authorised person by or under the Act.

4. PRIN was issued pursuant to section 137A of the Act and contains general

statements regarding the fundamental obligations of firms under the
regulatory system.

PRIN

5. Principle 5 states: “A firm must observe proper standards of market

conduct” (PRIN 2.1.1R).

Lack of integrity

6. The Authority has the power, pursuant to section 56 of the Act, to make a

prohibition order if it appears to the Authority that an individual is not a fit
and proper person to perform functions in relation to a regulated activity
carried on by an authorised person, exempt person or exempt professional
firm. Pursuant to section 56(2) of the Act, such an order may relate to a
specified function, any function falling within a specified description or any
function.

7. FIT sets out the criteria for assessing a person’s fitness and propriety.

“The purpose of FIT is to set out and describe the criteria that… the
[Authority] will consider when assessing the fitness and propriety of a
candidate for a controlled function… (see generally SUP 10A and SUP 10B
on approved persons), and may consider when assessing the continuing
fitness and propriety of approved persons.”

9. FIT 1.3G states that the Authority will have regard to a number of factors,

including a person’s integrity, when assessing the fitness and propriety of
a person to perform a particular controlled function.

“The criteria listed in FIT 2.1 to FIT 2.3 are guidance and will be applied in
general terms when the Authority is determining a person’s fitness and
propriety. It would be impossible to produce a definitive list of all the
matters which would be relevant to a particular determination...”

“In determining a person's … integrity …, the Authority will have regard to
all relevant matters including, but not limited to, those set out in FIT 2.1.3
G which may have arisen either in the United Kingdom or elsewhere…”

12. FIT 2.1.3G provides a non-exhaustive list of matters to which the

Authority will have regard in determining a person’s integrity.

Financial penalty

13. The Authority’s policy on the imposition of financial penalties and public

censures is set out in DEPP. The provisions of DEPP set out below are
those which were in force from 28 August 2007 to 5 March 2010. The
Authority has also had regard to the provisions of DEPP in force during the
part of the Relevant Period after 5 March 2010.

14. DEPP 6.2.1(1) states that the Authority will consider the full circumstances

of each case when determining whether or not to take action for a
financial penalty or public censure. The list is not exhaustive: not all of
these factors may be applicable in a particular case, and there may be
other factors, not listed, that are relevant.

(1) The nature, seriousness and impact of the suspected breach, including:

(a) whether the breach was deliberate or reckless;

(b) the duration and frequency of the breach;

(c) the amount of any benefit gained or loss avoided as a result of the

breach; and

(e) the impact or potential impact of the breach on the orderliness of

markets including whether confidence in those markets has been
damaged or put at risk;

(2) The conduct of the person after the breach, including the following:

(a) how quickly, effectively and completely the person brought the

breach to the attention of the Authority or another relevant
regulatory authority;

(b) the degree of co-operation the person showed during the

investigation of the breach;

(c) any remedial steps the person has taken in respect of the breach;

and

(d) the likelihood that the same type of breach (whether on the part

of the person under investigation or others) will recur if no action
is taken;

(3) The previous disciplinary record and compliance history of the person

(a) whether the Authority (or any previous regulator) has taken any

previous disciplinary action resulting in adverse findings against
the person;

(b) whether the person has previously undertaken not to do a

particular act or engage in particular behaviour; and

(d) the general compliance history of the person, including whether

the Authority (or any previous regulator) has previously issued
the person with a private warning.

15. DEPP 6.5.1(1) states that Authority will consider all the relevant

circumstances of a case when it determines the level of financial penalty
(if any) that is appropriate and in proportion to the breach concerned. The
list of factors in DEPP 6.5.2 is not exhaustive: not all of these factors may
be relevant in a particular case, and there may be other factors that are
relevant.

16. DEPP 6.5.2(1) states that when determining the appropriate level of

penalty, the Authority will have regard to the principal purpose for which it
imposes sanctions, namely to promote high standards of regulatory and/or
market conduct by deterring persons who have committed breaches from
committing further breaches and helping to deter other persons from
committing similar breaches, as well as demonstrating generally the
benefits of compliant business.

17. DEPP 6.5.2(2) states that the Authority will consider the seriousness of the

breach in relation to the nature of the rule, requirement or provision
breached. The considerations that may be relevant include:

(a) the duration and frequency of the breach; and

(d) the loss or risk of loss caused to consumers, investors or other market
users;

18. DEPP 6.5.2(3) states that the Authority may take account of the extent to

which the breach was deliberate or reckless.

19. For the period between 14 August 2006 and 27 August 2007, the

Authority’s approach to deciding whether to impose a financial penalty,
and the factors to determine the level of that penalty, are listed in chapter
13 of ENF.

20. ENF 13.3.3 G stated: “The factors which may be relevant when the

[Authority] determines the amount of a financial penalty for a firm or
approved person include the following.” Some of the relevant factors are
set out below.

21. ENF 13.3.3 G (1) related to “the seriousness of the misconduct or

contravention” and stated: “In relation to the statutory requirement to
have regard to the seriousness of the misconduct or contravention, the
[Authority] recognises the need for a financial penalty to be proportionate
to the nature and seriousness of the misconduct or contravention in
question. The following may be relevant:

(a) in the case of an approved person, the [Authority] must have regard

to the seriousness of the misconduct in relation to the nature of the
Statement of Principle or requirement concerned;

(b) the duration and frequency of the misconduct or contravention…;

(d) the impact of the misconduct or contravention on the orderliness of

financial markets, including whether public confidence in those
markets has been damaged;

(e) the loss or risk of loss caused to consumers or other market users.”

22. ENF 13.3.3 G (2) related to “the extent to which the contravention or

misconduct was deliberate or reckless” and stated:

“In determining whether a contravention or misconduct was
deliberate, the [Authority] may have regard to whether the…
approved person’s behaviour was intentional, in that they intended or
foresaw the consequences of their actions.

If the [Authority] decides that behaviour was deliberate or reckless, it
may be more likely to impose a higher penalty on… [an] approved
person than would otherwise be the case.”

23. ENF 13.3.3 G (3) related to “Whether the person on whom the penalty is

to be imposed is an individual, and the size, financial resources and other
circumstances of the firm or individual” and stated: “This will include
having regard to whether the person is an individual, and to the size,
financial resources and other circumstances of the… approved person. The
[Authority] may take into account whether there is verifiable evidence of
serious financial hardship or financial difficulties if the… approved person
were to pay the level of penalty associated with the particular
contravention or misconduct. The [Authority] regards these factors as
matters to be taken into account in determining the level of a penalty, but
not to the extent that there is a direct correlation between those factors
and the level of penalty. The size and financial resources of [an] approved
person may be a relevant consideration, because the purpose of a penalty
is not to render [an] approved person insolvent or to threaten [his]
solvency. Where this would be a material consideration, the [Authority]
will consider, having regard to all other factors, whether a lower penalty
would be appropriate; this is most likely to be relevant to… approved
persons with lower financial resources; but if [an] individual reduces [his]
solvency with the purpose of reducing [his] ability to pay a financial
penalty, for example by transferring assets to third parties, the [Authority]
will take account of those assets when determining the amount of a
penalty.”

24. ENF 13.3.3 G (5) related to “conduct following the contravention” and

“The [Authority] may take into account the conduct of the…
approved person in bringing (or failing to bring) quickly, effectively
and completely the contravention or misconduct to the [Authority]’s
attention and:

(a)
the degree of cooperation the… approved person showed
during the investigation of the contravention or misconduct
(where [an] approved person has fully cooperated with the
[Authority]’s investigation, this will be a factor tending to
reduce the level of financial penalty)”

Prohibition order

25. The Authority’s approach to deciding whether to impose a prohibition

order, and the scope of any such prohibition order, is set out in chapter 9
of EG.

26. EG 9.1.1 sets out how the Authority’s power to make a prohibition order

under section 56 of the Act helps it work towards achieving its statutory
objectives. The Authority may exercise this power where it considers that,
to achieve any of those objectives, it is appropriate either to prevent an
individual from performing any functions in relation to regulated activities
or to restrict the functions which he may perform.

27. EG 9.2.1 states:

“In deciding whether to make a prohibition order and/or, in the case of an
approved person, to withdraw its approval, the [Authority] will consider all
the relevant circumstances including whether other enforcement action
should be taken or has been taken already against that individual by the
[Authority]. As is noted below, in some cases the [Authority] may take
other enforcement action against the individual in addition to seeking a
prohibition order and/or withdrawing its approval. The [Authority] will also
consider whether enforcement action has been taken against the individual
by other enforcement agencies or designated professional bodies.”

28. EG 9.2.3 states:

“The scope of a prohibition order will depend on the range of functions
which the individual concerned performs in relation to regulated activities,
the reasons why he is not fit and proper and the severity of risk which he
poses to consumers or the market generally.”

29. EG 9.3.1 to 9.3.8 set out guidance on the Authority’s approach to making

prohibition orders against approved persons.

30. EG 9.3.1 states that, in deciding whether to make a prohibition order, the

Authority will consider whether its regulatory objectives can be achieved
adequately by imposing disciplinary sanctions.

31. Specifically in relation to approved persons, EG 9.3.2 states that in

deciding whether to make a prohibition order, the Authority will consider
all the relevant circumstances of the case. These may include, but are not
limited to, the following:

(2) Whether the individual is fit and proper to perform functions in
relation to regulated activities. The criteria for assessing the fitness
and propriety of approved persons are set out in FIT 2.1 (Honesty,
integrity and reputation); FIT 2.2 (Competence and capability) and FIT
2.3 (Financial soundness).

(3) Whether, and to what extent, the approved person has:

a.
[…..]

b.
been knowingly concerned in a contravention by the
relevant firm of a requirement imposed on the firm by
or under the Act (including the Principles and other
rules)…

(5) The relevance and materiality of any matters indicating unfitness.

(6) The length of time since the occurrence of any matters indicating
unfitness.

(7) The particular controlled function the approved person is (or was)
performing, the nature and activities of the firm concerned and the
markets in which he operates.

(8) The severity of the risk which the individual poses to consumers
and to confidence in the financial system

32. EG 9.3.3 states:

“The [Authority] may have regard to the cumulative effect of a number of
factors which, when considered in isolation, may not be sufficient to show
that the individual is not fit and proper to continue to perform a controlled
function or other function in relation to regulated activities. It may also
take account of the particular controlled function which an approved
person is performing for a firm, the nature and activities of the firm
concerned and the markets within which it operates.”

33. EG 9.3.4 states:

“Due to the diverse nature of the activities and functions which the
[Authority] regulates, it is not possible to produce a definitive list of
matters which the [Authority] might take into account when considering
whether an individual is not a fit and proper person to perform a
particular, or any, function in relation to a particular, or any, firm.”

34. EG 9.3.6 states:

“Certain matters that do not fit squarely, or at all, within the matters
referred to above may also fall to be considered. In these circumstances

the [Authority] will consider whether the conduct or matter in question is
relevant to the individual's fitness and propriety.”

ANNEX B

REPRESENTATIONS

1.
Mr Danziger’s representations (in italics), and the Authority’s conclusions
in respect of them, are set out below.

Delay

2.
These proceedings have been much more protracted than is usually the
case. Mr Danziger was interviewed by the Authority in 2012/13, when
some of the conduct alleged against him was already five years old. The
Warning Notice was issued in these proceedings in June 2014 and in July
2014 this matter was stayed, at the request of the Serious Fraud Office.
Some of the chats relied on are now 10 years old. In responding, Mr
Danziger is hindered unfairly by the fact that his trading book cannot be
reconstructed and the data which influenced his requests and LIBOR
submissions is not available. The absence of this material is a significant
impediment in explaining Mr Danziger’s actions and his recollection of the
events will have diminished over time. Further, the Authority did not ask
Mr Danziger about most of the chats in interview; had it done so at his
original interview five years ago, his recollection of the context would
almost certainly have been better than it is today.

3.
The Authority accepts that these proceedings have taken longer to
conclude than is usually the case. However, the evidence in this case is
largely documentary, so it is less reliant on the recollection of events than
might otherwise have been the case. As Mr Danziger has admitted taking
Trading Positions into account in requesting and making LIBOR
submissions, any other matters that may have influenced his actions are
not relevant. Mr Danziger has not contended that he had any difficulty in
recalling whether or not he thought it permissible to take Trading Positions
into account; he has stated that he did, and explained why.

4.
The Authority notes that Mr Danziger consistently supported the stay of
these proceedings until it was lifted in June 2016.

Disclosure

5.
The Authority has sought to restrict the disclosure to which Mr Danziger
should ordinarily be entitled to under section 394 of the Act. This includes
material relating to other cases (criminal, regulatory or civil) involving
similar allegations against other individuals, which is relevant to this case
and may undermine the basis for the action in this case. The underlying
issues overlap significantly so it is no answer to say the facts in each case
are different.

6.
The Authority is satisfied that disclosure has been made in accordance with
section 394 of the Act. Conclusions in other cases in relation to different
(even if, in some respects, similar) facts, and in particular in relation to
the mental states of other people with whom, for the most part, Mr
Danziger did not work, are not relevant to the issues in this case.

7.
The Authority reviewed the disclosure position in the light of Mr Danziger’s
written representations in this matter and made limited extra disclosure at
that stage (some of it going beyond the requirements of section 394).

8.
The effect of section 66(4) of the Act is that the Authority may not take
action under section 66 (including for a financial penalty) in respect of
misconduct more than three years after the day on which it knew of the
misconduct. Under section 66(5), the Authority is to be treated as
knowing of the misconduct if it has information from which the misconduct
can reasonably be inferred. These proceedings against Mr Danziger were
commenced only a few days before 21 June 2014, which the Authority said
was three years from the earliest date on which it could be said to have
had information from which the relevant alleged misconduct could
reasonably be inferred.

9.
Mr Danziger is not able to advance a positive case on limitation because
the Authority has refused to disclose any of the material that underpins its
calculation. However, the anomalies between the Authority’s explanations
and open source information do not allow him to accept that the
proceedings against him were in time. There is reason to believe they are
not.

10.
Mr Danziger is aware that: the Authority and the United States Commodity
Futures Trading Commission (CFTC) began a joint investigation into
alleged LIBOR manipulation in 2008; the Authority received material in
response to information requirements issued under the Act at the request
of overseas agencies; RBS conducted its own investigation into alleged
LIBOR manipulation and was under an obligation to notify the Authority of
significant regulatory breaches; and the Authority holds a large amount of
documentation in respect of Mr Danziger, as to which it is not clear
whether (or, if so, how) it has been reviewed for the purposes of
limitation. In a reported case in the Upper Tribunal the Authority
acknowledged errors in identifying relevant material obtained by it on
behalf of the CFTC from which it had later become apparent that the
financial penalty element of the case was time-barred.

11.
As a result of the above matters, it seems probable that the Authority did
have information from which the alleged misconduct could reasonably be
inferred, more than three years before the issue of the Warning Notice
against Mr Danziger. But the Authority has refused access to the material
from which Mr Danziger would be able to test its assertion that it did not.

12.
The Authority first became aware of possible LIBOR manipulation by RBS
traders as a result of an internal investigation by a different bank, and the
investigation by the United States Department of Justice (DOJ) into that
bank. Mr Danziger was one of the traders that were identified by that bank
as attempting to manipulate LIBOR, but that bank had concealed his
identity. Only when, on 21 June 2011 (three and a half months later), the
Authority obtained documents underlying that bank’s submissions to the
DOJ was it able to identify Mr Danziger. The Authority is satisfied that that
was the first date on which it had information from which Mr Danziger’s

misconduct in relation to LIBOR could reasonably be inferred. It does not
consider there would be any purpose in Mr Danziger’s checking the
documents obtained earlier to satisfy himself as to whether the Authority
ought reasonably to have identified him from them, given that the bank
concerned had been careful to conceal his identity.

There was no breach of Principle 5 by RBS

13.
The practices of making requests to Submitters, and of Submitters taking
commercial interests into account, were not contrary to Principle 5,
provided the requester or Submitter believed the rate requested or posted
was justifiable. There were, in fact, no “proper standards of market
conduct” in relation to benchmark submission. If a practice is so
widespread that it is replicated across the market it is hard to say that it is
a breach of Principle 5, even if it is suggested subsequently that the
practice is inappropriate. This is because “standard” is defined as
“normal”, “typical”, “usual” or “accustomed”. There was no appropriate
regulatory framework setting out what was required.

14.
This representation is inconsistent with decisions of the Court of Appeal: R
v H (2015); R v Hayes (2015); and R v Merchant (2017), which have
clearly established that a submitter is (and at the relevant time, was) not
entitled to take the commercial advantage of the bank into consideration.
As the Court of Appeal stated in R v H, “The definition provided by the BBA
does, it is true, call for a statement of opinion which involved subjective
considerations; but otherwise it is by reference to what is an objective
matter: the rate at which an individual contributor panel bank could
borrow funds et cetera”. In drawing attention to what he says is the
meaning of “standard”, Mr Danziger overlooks the word “proper”; a
practice is not proper just because it is widespread in a market.

If there was a breach of Principle 5 by RBS, Mr Danziger was not knowingly
concerned in it

15.
Mr Danziger did not understand during the Relevant Period that making
requests to Submitters, and taking into account requests from Derivatives
Traders when acting as Substitute Submitter, was improper. He accepts
that he took into account the Trading Positions communicated to him by
other Derivatives Traders when acting as Substitute Submitter, but he
always posted what he understood to be a fair rate, justifiable by
independent factors, and believed he was permitted to do so. He did not
know, believe or suspect that the making of requests, or the taking of
requests into account, was improper, as long as the rate submitted was
genuine and could be objectively justified.

16.
The communications by Mr Danziger which are relied on by the Authority
were all conducted openly, and the making of requests was permitted and
encouraged by RBS. Mr Danziger was not given any training about LIBOR
submissions, which he learned about on the job, and was unaware of any

BBA guidance. He was placed in a position of inherent conflict by the fact
that RBS, while he was a Substitute Submitter, encouraged him to share
market information with Submitters. Any information relayed by Mr
Danziger to the Submitter was designed to assist the Submitter in
identifying the rate at which to make a submission, and not improperly to
influence him. It was a matter for the Submitter using his own professional
judgement as to the submission he should make. The Authority has
accepted that Mr Danziger misunderstood the LIBOR definition, and there
was no basis for him to know all the factors which should or should not be
taken into account.

17.
This Notice sets out the extent to which the Authority accepts that others
within RBS (including management) were aware of or involved in the
requests made by Mr Danziger to Primary Submitters or by others to him
when acting as Substitute Submitter. The Authority accepts that Mr
Danziger made and received requests openly, that he did not receive any
formal training in relation to the LIBOR submissions process, and that he
wrongly understood that the LIBOR rate was based on the rate at which a
Panel Bank could lend money, rather than borrow it, in the interbank
market. However, Mr Danziger knew that LIBOR was based on a Panel
Bank’s assessment of actual rates in the interbank lending market; he was
aware that Trading Positions were not a relevant factor under the
definition. It follows that (whatever the views of others within the Panel
Bank) Trading Positions could not be relevant even if they led to a rate
being requested or ultimately submitted which, as it happened, was
capable of being objectively justified by reference to other, legitimate
factors.

18.
The Authority accepts that there was an inherent conflict of interests in the
position of a Submitter who was also a Derivatives Trader, but it was the
job of the Submitter to disregard Trading Positions when making
Submissions, and Mr Danziger failed to do so. Mr Danziger went further
than sharing “market information” with Submitters when he made
requests for JPY LIBOR submissions for the benefit of Trading Positions.
His representation that he was merely providing information with which
the Submitter might identify the appropriate rate is inconsistent with his
admission that he made “requests” to Primary Submitters, as well as with
the language of the requests themselves (such as “please”; ”can we
get…?”). The Authority considers that Mr Danziger deliberately closed his
mind to the risk that for a Submitter to take Trading Positions into account
when making LIBOR submissions (or for a Derivatives Trader to request a
Submitter to do so) was contrary to proper standards of market conduct.

19.
Mr Danziger had no personal profit motive for manipulating LIBOR as he
did not generally trade in products that were referenced to LIBOR. His
own Trading Positions were not affected by the rate submitted, and his
bonus was not directly linked to his profit and loss.

20.
The Authority notes that Mr Danziger’s personal trading was largely (if not
exclusively) in FX forwards, which were not linked to LIBOR. The

Authority considers that Mr Danziger was motivated by profit for the
Trading Positions held by the overall derivatives trading book for which he
and others were together responsible, and for RBS more generally. The
Authority notes that the profitability of those Trading Positions, and of RBS
generally, was likely to have an impact on his bonus awards.

21.
The Authority’s approach of examining Mr Danziger’s submission by
reference to where other Panel Banks posted their submissions is wholly
misconceived and irrelevant. It cannot be assumed that Mr Danziger’s
submission was wrong merely because he happened to be an outlier or
that his submission was correct because he was in the middle of the pack.
The appropriateness of the submission is solely determined by his state of
mind, and at all times Mr Danziger believed that he was posting a genuine
rate.

22.
Mr
Danziger’s
representation
mischaracterises
the
significance
of

comparing Mr Danziger’s LIBOR submissions (and, indeed, those of
Primary Submitters who took his requests into account) with those of
other Panel Banks. It is not part of the Authority’s case that any particular
submissions were “wrong” in the sense that they were not submissions
that could properly have been made if regard were had only to legitimate
factors; rather, the comparison demonstrates whether or not RBS’s
submission did in fact move up or down in line with the internal request.
There is a limit to the reliance that can be placed on an analysis of the
figures submitted. The primary evidence against Mr Danziger is the
communications between him and other Derivatives Traders and Primary
Submitters, which suggest he was taking into account Trading Positions, or
asking Primary Submitters to do so, together with his admission that he
did so. However, while the analysis of the comparison against other Panel
Banks’ LIBOR submissions does not provide a definitive answer, it shows
that there were a significant number of occasions on which RBS’s
submission or its position in relation to other Panel Banks (or both) did in
fact move up or down in line with the internal request.

Mr Danziger did not ask a Broker to attempt to influence other Panel Banks’
submissions

23.
In the whole of his employment period, there is only one occasion on
which it could conceivably be alleged that Mr Danziger discussed other
Panel Banks’ submissions with a Broker. A critical examination of the two
dates in question (26 and 29 June 2009) undermines the suggestion that
there was any attempt to influence other Panel Banks’ submissions, or
even that there was a discussion about other Panel Banks’ submissions at
all. It happened only once (with one follow-up), the discussion was
instigated by a Broker asking Mr Danziger whether he cared where LIBOR
fixed that day, and the discussion was more generalised about where cash
would be and market colour.

24.
The communications in question (set out at paragraphs 56 to 59 of this
Notice)
are
self-evidently
concerned
with
influencing
the
LIBOR

submissions of other Panel Banks and in them (regardless of who had
initiated the discussion about LIBOR) Mr Danziger was enlisting the

assistance of the Broker to do so. This happened on two separate
occasions, being two consecutive working days.

25.
There are numerous reasons why traders might properly enter into the
type of transactions which the Authority characterises as Wash Trades: to
facilitate liquidity in the market; to reduce credit risk; to allow two traders
within the same bank to trade with each other in the market; and to
provide opportunities in funding arbitrage when different counterparties
had different collateral agreements.

26.
The alleged Wash Trades in this case had a commercial rationale. This was
that helping out the Brokers concerned would have benefits for RBS.
These included – by redressing the imbalance between RBS’s trading
profits and commissions paid – ensuring that RBS remained an attractive
counterparty with whom brokers would wish to deal, and thereby ensuring
that Mr Danziger would continue to have access to market colour. The
level of brokerage paid was not at any time inconsistent with the market
generally and no concerns were raised by management as to the rates
paid, even though they had full visibility as to Mr Danziger’s trading
activity.

27.
Mr Danziger did socialise with the Brokers with whom he entered into the
alleged Wash Trades; for example, he would have drinks or dinner with
them or socialise while on foreign trips. But this was unconnected with the
trades in question, and Mr Danziger would “pay his way” eg paying for his
own flights and accommodation on overseas trips. This was not dissimilar
to what he heard of other people in his position doing.

28.
Trades of this type were common practice within RBS and the financial
services sector generally. Such trades were conducted openly, and were
fully known about, condoned and positively encouraged by management at
RBS as being in the best interests of RBS. They were not prohibited by the
RBS compliance manual at the time unless they constituted market abuse.

29.
Mr Danziger did not argue that any of the matching pairs of trades in
question were in fact for any of the reasons (as set out in paragraph 25
above) that he stated would have been legitimate. Accordingly, it is not
necessary to reach any conclusion in this case as to the circumstances in
which such purposes might be legitimate or otherwise. As for the purpose
which he stated was his actual commercial rationale (as set out in
paragraph 26 above), the Authority does not consider that the objectives
concerned would have been an acceptable reason for entering into trades
which mirrored each other completely but which resulted in the payment
of brokerage. It notes that there would have been other, transparent,
ways of achieving the same objectives (such as increasing brokerage rates
for business which had a commercial purpose other than merely the
payment of brokerage). However, the Authority concludes that Mr
Danziger’s objective in entering into the trades in question was in fact to
recognise the hospitality which he admitted receiving from the Brokers. In
the Authority’s view, it should have been apparent to Mr Danziger that this

was an improper reason for the trades but he deliberately closed his mind
to the risk that this was the case.

30.
The Authority has not made any finding that the practice of entering into
Wash Trades was either widespread at RBS, or known to or condoned by
management. The Authority notes that a practice need not be specifically
listed in a firm’s compliance manual as unacceptable for it to be said that
it was not permitted by that firm. In its investigation into the conduct of
RBS, the Authority reflected in the Final Notice given to RBS dated 6
February 2013 its conclusion that the Wash Trades mentioned in that
Notice were not detected by RBS until drawn to its attention by the
Authority; Mr Danziger has not provided the Authority with any evidence
(beyond bare assertion) that RBS was aware of any of the Wash Trades
into which he entered and the Authority has not concluded that RBS was
so aware.

Financial penalty

Lack of seriousness

31.
The misconduct alleged against Mr Danziger was not of a serious nature,
given:

(a)
the small number of written requests which, on the Authority’s
case, Mr Danziger made, and the limited number of occasions on
which, on its case, he acted as Substitute Submitter;

(b)
the lack of any personal profit to Mr Danziger arising from the
misconduct alleged;

(c)
that Mr Danziger acted with the participation and awareness of his
direct management;

(d)
the lack of training received by Mr Danziger in relation to the LIBOR
submissions
process
(and
the
Authority
admits
that
he

misunderstood the LIBOR definition); and

(e)
the lack of any evidence to show that Mr Danziger’s actions had
any impact on the market.

32.
In addition to the 12 written requests by Mr Danziger which are relied on
by the Authority, as set out in paragraph 32 of this Notice, the Authority
has also found that Mr Danziger made oral requests to Primary
Submitters. Notwithstanding that the Authority has only identified a
relatively small number of occasions when Mr Danziger acted as Substitute
Submitter, it considers the evidence demonstrates that he took Trading
Positions into account when he did so act (see paragraphs 46 to 55 of this
Notice).

33.
As set out in paragraph 20 above, the Authority considers that Mr
Danziger’s misconduct was motivated by profit, notwithstanding that no
direct profit accrued to him as a result of it. The Authority has not included
in the penalty it has decided to impose on Mr Danziger any element of
disgorgement of profits.

34.
The Authority considers that neither Mr Danziger’s lack of training in the
LIBOR submission process nor his misunderstanding of the LIBOR
definition provides any mitigation of his actions, as he knew that LIBOR
was based on a Panel Bank’s assessment of actual rates in the interbank
lending market and was aware that Trading Positions were not a relevant
factor under the definition. The Authority notes that it was open to Mr
Danziger to make appropriate enquiries, if he was unclear as to what
factors it was permissible to take into account.

35.
In the Authority’s view, the awareness or involvement of others within
RBS, including (to the extent found by the Authority, as set out in this
Notice)
his
direct
management,
does
not
excuse
Mr
Danziger’s

misconduct, and nor does it mean that it was not serious. Mr Danziger
acted recklessly in deliberately closing his mind to the risk that his actions
were contrary to proper standards of market conduct, which is an
extremely serious matter.

36.
Whatever the actual effect of his misconduct on the JPY LIBOR rate, the
Authority is satisfied that Mr Danziger acted as he did in the belief that it
might lead to a rate being set that would be more advantageous to
Trading Positions than might otherwise have been the case. LIBOR was of
central importance to the operation of financial markets worldwide and his
misconduct could have caused significant harm to other market
participants.

The position of other individuals

37.
In determining whether to impose a financial penalty, the Authority must
avoid “scapegoating” Mr Danziger for the ills of a now much-discredited
system.

38.
It would be unfair to impose a financial penalty on him when other
relevant individuals had received only private warnings, and others
(including some senior to him at RBS) continued to work in the financial
services industry.

39.
The case was less serious than that of another individual from RBS, who
(as set out in the Final Notice in relation to that case) would have received
a financial penalty of £250,000, but for having demonstrated that that
would cause him serious financial hardship. In other cases in which final
notices had been issued by the Authority (against individuals convicted of
criminal offences in relation to LIBOR), no financial penalty had been
imposed.

40.
This Notice is concerned only with the case against Mr Danziger, and the
Authority makes no comment on the facts or relative merits of any other
cases, which are not relevant to his particular position. Having considered
the facts of Mr Danziger’s case, the Authority is satisfied that his conduct
merits the financial penalty which it has decided to impose.

Remuneration

41.
The Authority should not place undue weight on Mr Danziger’s
remuneration over the Relevant Period in fixing the level of any financial
penalty; this is not indicative of a potential link between misconduct and
personal benefit. The Authority has, in any event, calculated his
remuneration at far too high a level.

42.
The Authority is satisfied that its calculation of Mr Danziger’s relevant
remuneration is appropriate; this was based directly on figures provided to
it by RBS and, in any event, even on his own figures Mr Danziger was
highly remunerated. The Authority does not consider there to be a direct
link between remuneration and the appropriate level of financial penalty,
having regard to its penalty policy in force prior to 6 March 2010 (which
the Authority has applied in determining the appropriate penalty in this
case, as set out at paragraphs 13 to 24 of Annex A to this Notice). It has,
however, taken account in general terms of Mr Danziger’s remuneration
when determining the financial penalty in this case, as an indicator
(among other factors) of his relative seniority and of the appropriate level
to achieve deterrence of both Mr Danziger and individuals in a similar
position to him.

43.
A significant financial penalty is not warranted on grounds of deterrence,
given:

(a)
that the Authority has already taken robust regulatory action
against the banks involved in alleged LIBOR manipulation in
circumstances where the misconduct now alleged was known about
and encouraged;

(b)
the passage of time since the conduct complained of;

(c)
the strengthened regulatory framework within which banks now
operate; and

(d)
the intended future phasing out of LIBOR.

44.
The Authority is satisfied that the need for deterrence is a factor in this
case notwithstanding the factors listed in paragraph 43 above. In
particular, it is necessary to deter misconduct generally, not merely
misconduct of an identical or similar nature to that in this case.

Personal mitigation

45.
Mr Danziger is of otherwise good character, the loss of which through this
action would be penalty enough. His financial services career is effectively
finished as he has not worked in financial services since leaving RBS. The
delay in disposing of this matter (which is not Mr Danziger’s fault) has
caused him and his family considerable stress as the matter has been
hanging over them for at least five years. From an early stage of the
Authority’s investigation, and throughout it, Mr Danziger has co-operated
fully and this should be reflected in the penalty.

46.
In deciding on the appropriate penalty, the Authority has taken these
matters into account, to the extent relevant. As noted above, Mr Danziger
has supported the stay of these proceedings throughout; in addition, the
Authority does not consider Mr Danziger’s co-operation has been such as
to merit any discount to the level of penalty. Even where relevant, these
matters do not negate the seriousness of this matter or mean that a
substantial financial penalty is not warranted.

Mr Danziger’s financial circumstances

47.
In considering the issue of financial penalty, the Authority should have
regard to Mr Danziger’s financial circumstances, which are such that any
significant financial penalty is likely to result in his bankruptcy.

48.
Mr Danziger has opted not to provide the Authority with verifiable
evidence that the imposition of a significant financial penalty would result
in serious financial hardship. Accordingly, in accordance with the
provisions of DEPP 6.5.2 (5)(a), the Authority has not taken Mr Danziger’s
financial circumstances into account in deciding on the level of financial
penalty that is appropriate in this case.

49.
A prohibition would be appropriate if Mr Danziger were found to have
acted with a lack of integrity, but he did not do so.

50.
For the reasons set out in this Notice, the Authority considers that Mr
Danziger lacked integrity in committing the misconduct set out above in
relation to LIBOR, and in entering into the Wash Trades. Accordingly it
considers it appropriate to impose a prohibition in the terms set out in this
Notice.