In R v Hayes, the Court of Appeal reiterated that a particular market practice and ethos is not the relevant standard when determining objective dishonesty and provided guidance on sentencing on conviction for dishonest behaviour in relation to markets.

Relevant to

“Approved persons” and traders in all banking and financial services firms.


14 years imprisonment reduced to 11 on appeal.

What happened

On 3 August 2015 Tom Hayes, a former UBS and Citigroup yen derivatives trader, was found guilty of conspiring to manipulate the Japanese Yen London Interbank Offered Rate (YenLIBOR). Mr Hayes had argued that he had not acted dishonestly and that his actions were common practice in the banking industry. He was later sentenced to 14 years imprisonment.


Mr Hayes appealed against both his conviction and sentence, arguing inter alia that:

  1. He was wrongly precluded from putting forward evidence relating to common market practice for consideration by the jury in relation to the first, objective limb of the Ghosh test for dishonesty (whether, by the ordinary standards of reasonable and honest people, the conduct was dishonest). Such evidence was said to include the ethos of the banking system at the time; the prevalence of commercial LIBOR requests from traders to submitters and more generally; the use of interdealer brokers to discuss potential LIBOR submissions; the attitude of the BBA, which knew of the association between LIBOR submissions and the banks’ commercial positions, and the attitude of the Bank of England and the Financial Services Authority (as then was) in refusing to step in at first despite knowing that the LIBOR rate was not accurate; and
  2. The sentence was manifestly excessive and that consecutive sentences for each count he was convicted on should not have been used to overcome the statutory maximum of ten years.

In relation to 1, the court held that although such evidence was relevant to the second, subjective limb of the Ghosh test (whether the defendant himself must have realised that what he was doing was by those (objective) standards dishonest), it had no relevance to the first limb. The court said:

“The history of the markets have shown that, from time to time, markets adopt patterns of behaviour which are dishonest by the standards of honest and reasonable people; in such cases, the market has simply abandoned ordinary standards of honesty. Each of the members of this court has seen such cases and the damage caused when a market determines its own standards of dishonesty in this way. Therefore to depart from the view that standards of honesty are determined by the standards of ordinary reasonable and honest people is not only unsupported by authority, but would undermine the maintenance of ordinary standards of honesty and integrity that are essential to the conduct of business and markets.”

As to 2, the Court of Appeal reduced Mr Hayes’ sentence to 11 years. The initial sentence was longer than necessary to punish Mr Hayes and to deter others, taking into account his youth, his non-managerial position and his mild Asperger’s condition. Mr Hayes’ decision to abandon the SOCPA process deprived him of any further mitigation (see Serious Organised Crime and Police Act 2005).

What do we learn from this?

The court went out of its way to make clear that there is no separate standard of honesty (which would take into account general market behaviour and ethos) by which conduct in a particular market as a whole is to be judged. Despite reducing Hayes’ sentence, the court also made it “clear to all in the financial and other markets in the City of London that conduct of this type, involving fraudulent manipulation of the markets, will result in severe sentences of considerable length which, depending on the circumstances, may be significantly greater than the present total sentence”.