Merrill Lynch International (MLI) has been fined £13,285,900 by the Financial Conduct Authority (FCA) for incorrectly reporting 35,034,810 transactions and failing to report another 121,387 transactions between November 2007 and November 2014.
The size of the fine – the highest imposed for transaction reporting failures to date - reflects the severity of MLI’s misconduct, failure to adequately address the root causes over several years despite substantial FCA guidance to the industry and a poor history of transaction reporting compliance, consisting of a Private Warning issued in 2002 and a fine of £150,000 in 2006. The FCA has used a penalty of £1.50 per line of incorrect or non-reported data for the first time rather than the £1.00 per line used in the three most recent transaction reporting cases because past fines have not been high enough to achieve credible deterrence.
Georgina Philippou, FCA acting director of enforcement and market oversight, said:
"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. The size of the fine sends a clear message that we expect to be heard and understood across the industry.
"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."
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 £18,979,876.
Notes to editors
- The Final Notice for Merrill Lynch International[1].
- A transaction report is a data set submitted to the Authority that relates to an individual financial market transaction which includes, but is not limited to, details of the product traded, the firm that undertook the trade, the trade counterparty and the trade characteristics such as buy/sell indicator, price, quantity and trading venue. Read more information about transaction reporting.
- The FCA’s rules on transaction reporting are based on the EU Markets in Financial Instrument Directive (MiFID), November 2007. MiFID II will take effect from 3 January 2017 and will mean additional instruments will be transaction reported to the FCA and other competent authorities. MiFID II has been comprehensively revised to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection.
- To date, the FCA has fined 11[2] other firms for transaction reporting breaches: Deutsche Bank, Barclays, Credit Suisse, Instinet, Getco, Commerzbank, Société Générale, City Index, James Sharp & Co, Plus500UK and RBS.
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.