City firms have been told they could face larger fines for failing to report transactions correctly. The warning by the Financial Conduct Authority came as Merrill Lynch was hit with a record £13.3m penalty for the offence.
The City regulator said the fine was equivalent to £1.50 per incorrect line of data – up from the £1 used to calculate previous penalties – to provide more of a deterrent. The UK arm of the US bank was fined £150,000 in 2006 for failing to report transactions and had been handed a private warning in 2002 for similar failures.
“The size of the fine sends a clear message that we expect to be heard and understood across the industry,” said Georgina Philippou, the FCA’s acting director of enforcement and market oversight.
The current penalty relates to the period between November 2007 and November 2014 when Merrill Lynch inaccurately reported 35m transactions and failed to report 121,000 transactions entirely.
The higher penalty level could be imposed on firms conducting similar breaches of the rules in the future. “Proper transaction reporting really matters. Merrill Lynch International has failed to get this right again – despite a private warning, a previous fine, and extensive FCA guidance and enforcement action in this area,” Philippou said.
“Accurate and timely reporting of transactions is crucial for us to perform effective surveillance for insider trading and market manipulation in support of our objective to ensure that markets work well and with integrity.”
Eleven other firms have been fined for similar breaches. Merrill Lynch cooperated and was handed a 30% discount on a fine that would otherwise have been £19m.
Merrill Lynch said: “We are wholly committed to complying with all FCA requirements and continuously seek to improve all necessary aspects of our reporting. While regrettable, today’s decision principally refers to self-identified issues which we have sought to remediate as quickly as possible. We can confirm that no clients were financially impacted as a result.”
