On 3 March 2023, the Bank of England (BoE) and the Financial Conduct Authority (FCA) announced further actions being taken by them in connection with the London Metal Exchange’s (LME) temporary suspension of nickel trading in March 2022. These latest updates, as further detailed below, act as a reminder of the current regulatory focus on governance. In light of this, firms may want to take the opportunity to proactively review their governance arrangements so that they can consider any improvements to their own systems and controls. To assist firms in this area, at the start of this year we analysed some of the key recent FCA enforcement cases to draw out some learnings on governance for firms. Our briefing on this can be found here.


In April 2022, the BoE, responsible for supervision of LME Clear as a central counterparty, announced that it would undertake a review into the operation of LME Clear during the period following the nickel events to determine whether lessons should be learned in relation to its governance and risk management. The FCA, which is responsible for supervision of the LME as a recognised investment exchange, announced in the same statement that it intended to review LME’s approach to managing the suspension of the market in nickel to ascertain what lessons might be learned in relation to the LME’s governance and market oversight arrangements. These reviews were assisted by the appointment of skilled persons under section 166 of the Financial Services and Markets Act 2000. LME Clear and LME also jointly commissioned and have published an independent review into the factors that contributed to the nickel market conditions in March 2022 (although governance fell outside scope for this review). 

Latest actions

In its most recent update statement, the BoE explains that the BoE and independent reviews referenced above highlighted shortcomings in LME Clear’s governance, management and risk management capabilities and, in response to these findings, LME Clear has committed to publishing its implementation plan at the end of Q1 2023. The BoE intends to appoint a skilled person to independently monitor and report to it regularly on LME Clear’s implementation progress against remedial actions and will incorporate those reports into its supervisory strategy for LME Clear.

In its update statement, the FCA recognises that the LME has already implemented changes to its control framework and committed to a wider package of market reform, informed by the recommendations of the independent review it has published. The FCA states that it is also encouraged by the LME’s focus on increasing the transparency of OTC trading to support robust risk management in its on-exchange trading. The FCA is closely monitoring the oversight exercised by the LME Board to drive the timely execution of this programme. In addition, the statement sets out that, following a review into the events surrounding the suspension of the nickel market, it has opened an enforcement investigation into some of the LME’s conduct and systems and controls in place in the period between January 2022 and the time of suspension on 8 March 2022.

Lessons for firms

These latest developments demonstrate the clear current regulatory focus on governance and the potential benefits for firms of proactively reviewing their governance arrangements so that they can improve their own systems and controls, and provide assurance to senior management. As noted in our briefing mentioned above, such steps may prove timely given that we expect governance to remain a key regulatory priority for this year, and for the FCA and PRA to continue to investigate and take enforcement action against firms and individuals in connection with governance failings. For further information in relation to governance reviews, please see our governance reviews hub.