In April 2020, as the Covid-19 pandemic was surging across Europe, dealer boards on DBS’s London trading desks failed in unison during one of the busiest trading periods on record.

The entire site was down for over 24 hours before IPC, the vendor that supplied the turrets, could create a fix for the outage, according to a DBS insider, with staff resorting to calling clients and each other on their mobile phones.

For tech staff at DBS, the snafu was the latest in a series of problems involving the technology supplied by IPC, which dominates the market for trading turrets. IPC disputes the severity of those problems.

The bank ran a tender to procure new dealer boards for its London trading desks in July 2020. IPC was invited to pitch, but lost out on both cost and usability grounds. The contract was awarded to a rival vendor, Speakerbus, which met all the requirements of the tender and was significantly cheaper than IPC.

That should have been the end of the story: tech failures happen, and all vendor relationships have to come to an end sometime. But when it became known the deal to replace IPC’s turrets with Speakerbus equipment in London was about to be signed off, some traders in the bank’s Singapore head office are said to have been outraged by the decision. One is said to have threatened IT staff associated with awarding the contract to Speakerbus.

According to the DBS insider, an IPC sales rep sought to intervene after losing the contract by going around IT procurement staff and contacting the front office in Singapore directly. A planned request for proposal (RFP) to tender for IPC’s turrets on the bank’s Australian trading desks was shelved.

This is one of the key challenges in dealing with traders. At times, they even came [to us] with their own technology stack

Stephan Murer, fintech consultant and former group chief technology officer at UBS

When Speakerbus won the RFP, “it did get a bit ugly”, says a technology executive at DBS, who was not directly involved in the tender process.

He says he heard about a lot of senior people at DBS getting involved and asking questions as to “why the change?”, adding: “It made us all uncomfortable … I sensed that switching was not going to be easy.”

The DBS insider, who was involved in procurement decisions, suspects the reaction could have been provoked by the direct relationships IPC’s sales reps appear to have cultivated with the bank’s front-office teams.

“I was aware of the level of entertainment that this company was providing to people. I knew that was going on,” he says.

DBS and IPC strongly deny that anything inappropriate took place.

IPC said it “strongly refutes that it used hospitality (excessive or otherwise) in order to influence procurement decisions of its client, DBS” and that “it is also false to suggest that IPC sought to improperly intervene in DBS’s procurement process in July 2020”.

“DBS refutes any suggestion that the procurement of turrets for the 2020 London fit-out was influenced or compromised by any alleged gifts or entertainment by IPC,” the bank said in a statement, adding that the tender was competitive, involved multiple bidders and required sign-offs from various independent parties.

“The integrity and independence of DBS’s procurement process is underscored by the outcome: the bank chose not to reappoint IPC as vendor for the London turrets.”

The bank acknowledges there were “debates on infrastructure vendor strategy” in connection with the tender in London: “Proponents favoring incumbency argued that there were merits in having common telephony infrastructure across DBS’s markets. The outcome of the debate would necessarily have impacted stakeholders from trading and technology based in Singapore with geographic management responsibilities.”

The bank says staff who challenged the tender decision did not attend IPC’s annual client event in Singapore, adding: “Robust and transparent discussions allow genuine differences to be escalated and resolved, and we expect no less of any interactions between our employees.”

“Any suggestion that the current decision with regard to Australia is influenced by relationships with or entertainment from IPC is false,” it adds.

‘Star’ traders and their tech

Veteran technologists have seen this pattern before at other banks.

End-users should have a strong say in technology procurement, they acknowledge—but, for good reason, they’re not the ones who sign off on deals.

Stephan Murer, a fintech consultant and former group chief technology officer at UBS, says traders at other banks that he has worked for have tried to use their influence as revenue-generators to insert themselves into procurement decisions that ought to be the preserve of the technology function—particularly for specialized front-office technology.

“This is one of the key challenges in dealing with traders. At times, they even came [to us] with their own technology stack: essentially, they’d get hired for a lot of money, and then they come in and say: ‘The only way we can work is with technology x, y and z.’ And that was that. I’ve come across that many times,” says Murer.

Vendors can also try to use this to their advantage. Policing the boundaries between vendors, end-users and technologists is tough, he acknowledges, and ultimately a job for risk management: “Essentially, [it’s] a cultural thing in your company, where you say: ‘Look: these guys trade, these guys buy technology—and there is no way around that. Accept it.’ But in trading, this is often difficult—basically due to the ‘star’ [trader] system. Interestingly enough, in other fields like retail [banking], nobody ever doubts that’s the way we work.”

The current wave of technological disruption in the financial industry has pushed this issue to the fore. An army of digital upstarts is seeking to displace incumbent suppliers and usher in new ways of doing business.

Murer, who spent two decades at Credit Suisse in a variety of senior technology roles before joining UBS in 2013, says some incumbents might try to fend off the competition by leaning into relationships with key figures at client firms, often cultivated through years of corporate hospitality.

“If you were sitting on the side of the technology vendor, essentially what you do is you try to understand the decision dynamics of your client,” he says. “The other thing you try to understand [is] who can be influenced. You build a little Venn diagram … then you go after these people. A key thing is how disciplined an organization is with that.”

Murer took a hard line on gifts and hospitality when he was at Credit Suisse: “I remember the London Olympics—big, big festivals, free tickets for everybody. Eventually, I sent out an email: ‘You take an offer by one of the vendors, consider yourself fired. Greetings from Zurich.’”

But the problem runs deeper, he adds, and is in some respects unique to the front office—particularly legacy voice-traded markets, like some corners of foreign exchange, where traders and vendors that sell products and data to them form small, close-knit communities, with friendships enduring over decades in some cases.

“It’s always the same people who sell it, then it’s always the same people who buy it, going from vendor to vendor and bank to bank.” says Murer.

“It’s a narrow circle of specialists, narrow circle of clients, narrow circle of vendors—typically always rotating, but with close personal ties. It’s also loyalties and friendships and the like, because you’ve been on that path over the last 20 years, and you’ve been doing that successfully together.”

A round of golf?

Staff in front-office functions have been subjected to far greater scrutiny of their conduct since the 2008 financial crisis, and many banks have clamped down on corporate hospitality. But industry sources say the practice of vendors entertaining traders and end-users hasn’t disappeared entirely.

IPC is known to entertain clients in Singapore, including end-users in the front office. “They do arrange social gatherings such that they are able to talk to the [front-office] business directly,” says an IT infrastructure specialist at a second Singaporean bank.

Those events included an annual golf tournament in Singapore—operated by a third party, but paid for by IPC—where phones, tablets and clubs were given as prizes, and clients were treated to clubhouse meals and free-flowing alcohol, the DBS insider contends.

DBS said in a statement that the Singapore-based front-office executives who favored incumbency in the procurement dispute “did not attend any IPC golf day”.

The 2019 event took place at the plush Sentosa Golf Club—recently selected as the world’s best in an industry poll—on an island off the mainland. According to its website, corporate green fees at one of its courses typically start at S$270 (US$200) per player, without the cost of scorers, buggies or dining. The event was canceled in 2020 because of restrictions stemming from the Covid-19 pandemic, but went ahead again in 2021.

The DBS insider, who attended the golf events, contrasts IPC’s style of client entertaining with that of other companies. “With most vendors, going out for a coffee or having a lunch is normal. And it could be a really good lunch, perhaps at a casino or something like that—but it’s still a lunch,” he says.

“Then you have the nature of the [golf] competitions, where you’re not just going out for a meal. And I think this is a very big difference. The cost of a golf game with meals and drinks and everything is far in excess of the most lavish sort of dinner.”

IPC says hosting an annual golf event as part of a client hospitality program is common in the industry, and entirely consistent with its anti-bribery, corruption and ethics compliance procedures.

“IPC has a zero-tolerance policy towards bribery and corruption,” the vendor said in a statement.

“IPC’s robust compliance policies and procedures must be strictly adhered to by all of its employees globally, and it provides annual training to and conducts monitoring of its workforce to ensure appropriate compliance with these policies. Any hospitality and entertainment given to third parties must be reasonable, business-appropriate and consistent with these policies.”

Other industry sources also point out that golf days were fairly common in the financial industry, and some still consider them “routine”.

However, when the golf event was described to senior sources at a dozen industry firms—five technology vendors and seven financial companies—most said entertaining clients in this way is “very unusual” and “not the norm any more”.

Murer says a golf event of this type, “in my eyes, would not be acceptable under most policies I know—neither on the vendor nor the client side”.

Typically, company policies “usually allow for simple entertainment” in the context of work-related events, such as trade fairs and conferences, he adds: “A lunch or a good bottle of wine is OK, but not much more.”

The DBS insider cites the golf event as just one example of the hospitality that IPC provided to employees at client firms.

After being approached in connection with this story, IPC set up a dedicated ethics hotline for people to file anonymous reports with respect to “the security of information … compliance with laws or IPC policy, or any concerns with respect to ethics and standards”.

The company takes these matters “very seriously”, reads the webpage.

Blurred lines

Corporate hospitality is commonly used by companies of all types to build client relations, and is often perfectly acceptable. However, the line separating legitimate corporate entertainment from bribery and corruption is a blurry one, and it can be hard to tell when it has been crossed.

Singapore’s primary anti-bribery statute, the Prevention of Corruption Act (PCA), prohibits “corruptly” giving or receiving “any gratification as an inducement to or reward for … doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed”.

To rise to the level of corruption, the act of giving or receiving a gratification—which can include money, gifts, loans or even favors—must be objectively dishonest and involve an explicit quid pro quo.

Responsibility for investigating and preventing corruption rests with the Corrupt Practices Investigation Bureau, a standalone agency under the prime minister’s office.

Nick Williams, a partner in the Singapore office of law firm Hogan Lovells, describes the CPIB as “an energetic enforcer” of anti-bribery laws against private companies. It charged several company executives last year with securing or advancing business interests through corrupt means. One example from 2005 presented as a case study on the CPIB’s website involved staff at an official distributor of BMW cars in Singapore who received expensive watches, phones and TVs in exchange for continuing to authorize dealerships.

The value of the gift or entertainment given or offered is not in itself proof of corruption.

“It’s not the dollar value of the gifts or entertainment that’s offered to you. It’s the corrupt intent, and whether the gratification that was offered caused you to change your mind or to favor the person offering you the gift. So, it is somewhat subjective,” says a senior compliance lawyer at a Singapore law firm.

Corporate hospitality in particular can be a gray area.

Vendors spending money on individuals in the hope they might continue to buy their products is a declining trend

Philip Freeborn, Delta Capita

“Gifts and entertainment are often offered in the legitimate course of business to promote good relations. However, if it is too frequent or lavish, or done with the deliberate intention to gain an unfair business advantage, such gifts and entertainment can be tantamount to corruption, regardless of whether the recipient is able to fulfill the request of the giver,” the CPIB states on its website.

The same general principles hold true under the UK’s Bribery Act, which applies not just to UK nationals and companies, but also to anyone doing business in the country. It outlaws gifts intended to lead the recipient to perform their functions improperly.

The CPIB advises that the risk associated with corporate hospitality “can be reduced by setting a policy on when gifts and entertainment may be given and accepted and what records need to be kept”.

The internal policies of banks normally dictate that staff should not accept gifts or hospitality from vendors if they are in a decision-making position with respect to procurement, says the second Singaporean bank’s IT infrastructure specialist. “If we are invited to attend a vendor’s event, we need to declare this to our company. Singapore is a very regulated and transparent country. We do not expect there will be any wrongdoing between bankers and vendors,” he adds.

End of the party?

While gifts and hospitality have historically played a role in the sales and client retention strategies of some big vendors, the practice is seen as increasingly outmoded by some.

Brad Levy, chief executive of Symphony—a competitor to IPC—says entertaining clients has always been part of the business development process. But he says tech vendors must be careful not to cross the line: “You do need to find ways to maintain the relationships over time, and I do believe IPC has spent time over the years managing their relationships.”

But Levy adds that vendors can no longer rely on entertainment to keep clients happy: “If you have great tech in a relationship, that opens the door to clients telling you their problems and treating you more like a partner than a vendor. I think there’s probably some history of being more vendor than partner and having to entertain in between refresh cycles. You’ve got to lead with great tech, but you also have to have those relationships, and there’s obviously appropriate ways to maintain those.”

Philip Freeborn, group chief operating officer at consultant Delta Capita, and previously head of technology and operations for Barclays’ investment bank, agrees that the role of entertainment in procurement is changing, partly as a result of the pandemic.

“The advantage of vendors spending money on individuals in the hope they might continue to buy their products is a declining trend. In the past, maybe that influenced buying behavior, but I don’t think that’s the case now. I also think the increasing prevalence of remote working means corporate entertainment is going to be harder. A lot of the decision-makers will be operating on a more fluid working basis. When there’s only a finite number of days you’re in the office, going out for dinner becomes harder,” he says.

The chief information officer of a trading firm in the US, which uses IPC’s technology, agrees that entertaining in person has certainly “shrunk” during the pandemic—both the opportunities to provide it and the willingness to accept it. He no longer wants to spend his free time “hanging out with some stupid vendors” if they want to take him to a game, he says, preferring to spend more time with his family.

Another more fundamental driver is the steady decline in the number of traders at many banks over the last decade, he notes—voice traders or otherwise.

“There’s always partners that have an expense account and use that toward helping to win business. But as we become more and more electronic, the patronage model is fading significantly. And I think part of that is it’s just overdue, and people have to earn business, as opposed to [going] to a fancy restaurant or a great sports game.”

Stuart McClymont, managing director at financial services consultant JDX Consulting, says: “These days, [hospitality] is almost zero. In the last 10 years, it’s literally ‘you can’t accept anything from anybody without having to get compliance approval beforehand’—which is a good thing. We don’t even bother offering tickets to Wimbledon.”

The consultant to a rival vendor agrees. He describes responding to a recent RFP with a European bank, during which time executives involved in the tender wouldn’t accept any hospitality—“even go out for a coffee”—for fear of having to subsequently declare this hospitality, and then stand accused of lacking impartiality.

“A lot of the tier-one banks have really stepped back from this type of activity … They’re not going to risk going out for even a pint or two. I’ve got friends at banks in London, and they pay their own way when they go out,” he says, adding that “it’s just not worth the aggravation for them” to declare the hospitality.

Additional reporting by Max Bowie, Anthony Malakian, Rebecca Natale and Wei-Shen Wong