On 21 December 2015, the Court of Appeal upheld Tom Hayes’ conviction, but reduced his sentence from 14 to 11 years


In August 2015 Tom Hayes was convicted of conspiracy to defraud. He had been involved in manipulating the Japanese Yen London Interbank Offered Rate (Yen LIBOR), while employed at UBS Securities Japan Ltd, and later at Citigroup Global Markets Japan Inc.

An unusual feature of the case was that Hayes had initially agreed to assist the authorities under sections 73 to 74 of SOCPA 2005, and made what purported to be full and frank admissions in interview as part of the process. However, a few months after he was charged, he withdrew from the agreement. At trial, he claimed that the many admissions to dishonesty, made during the SOCPA process, had been made so that he would be charged in the UK and thereby avoid extradition to the USA.

Dishonesty was the central issue at trial. Hayes’ defence was, in part, that he had not been acting dishonestly by the standards of reasonable and honest people. Alternatively, he had never realised that his actions would be considered dishonest by reasonable and honest people. In other words, both limbs of the test identified in R v. Ghosh were engaged.

At trial, and on appeal (as part of the only ground on which leave was granted), it was submitted on Hayes’ behalf that evidence relating to the conduct and views of participants in the market was relevant to both limbs of the Ghosh test. The trial judge ruled that such evidence could only be relevant to the second, subjective, limb, and not to the first, objective limb. The Court of Appeal agreed. Lord Thomas CJ observed that there was no authority for the proposition that objective standards of honesty were to be set by a market. Moreover, history has 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 dishonesty”. The standards of reasonable and honest people must prevail.

The Court of Appeal reduced Hayes’ sentence to 11 years’ imprisonment because the original sentence of 14 years was longer than necessary, taking into account personal circumstances. However, the judgment ended with the following deterrent message: “… 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”.