FCA fines Merrill Lynch £34.5m over derivatives reporting failures
The Financial Conduct Authority (FCA) has fined Merrill Lynch International (MLI) £34.5m for failing to report tens of millions of exchange traded derivative transactions over a two-year period under the European Markets Infrastructure Regulation (EMIR)
23 Oct 2017
The FCA fine marks the first enforcement action against a firm for failing to report details of trading in exchange traded derivatives.
MLI was found to have neglected to log 68.5m transactions between 12 February 2014 and 6 February 2016.
The FCA says that reporting exchange traded derivative transactions helps authorities assess and address the risk inherent in financial systems caused by a lack of transparency. The reporting requirement was one of the key reforms introduced following the financial crisis in 2008 to improve transparency within financial markets.
The regulator also pointed out that while MLI were open and co-operative in assisting in the FCA’s investigation and quickly took steps to remediate the breach, MLI were the subject of two earlier and related transaction reporting cases.
In 2015, the FCA fined it £13.3m for incorrectly reporting more than 35m transactions and failing to report others over a seven-year period up to 2014. That followed a £150,000 fine in 2006 for inaccurate data on European equity transactions.
Mark Steward, FCA executive director of enforcement and market oversight, said: ‘Effective market oversight depends on accurate and timely reporting of transactions. The obligations under EMIR, as with MiFID, are key aspects of such oversight.
‘It is vital that reporting firms ensure their transaction reporting systems are tested as fit for purpose, adequately resourced and perform properly. There needs to be a line in the sand. We will continue to take appropriate action against any firm that fails to meet requirements.’
MLI agreed to settle at an early stage of the investigation and received a 30% reduction in their overall fine. Without this discount the fine would have been £49.3m.
The FCA final notice for MLI is here.
Previous MLI final notice are here.
Report by Pat Sweet