UK regulatory body the Financial Conduct Authority (FCA) has issued a £15.4m fine to Tullett Prebon, now part of TP ICAP.
The FCA stated that the fine was warranted due to the firm “failing to conduct its business with due skill, care and diligence, failing to have adequate risk management systems and for failing to be open and cooperative with the FCA.”
Tullett Prebon is an electronic and voice inter-dealer broker, acting for institutional clients transacting in the wholesale financial markets.
Mark Steward, executive director of enforcement and market oversight at the FCA commented: “The market performs important public functions and is not a private game of self-enrichment.
“While these trades did not mislead the market, nor amount to market abuse, the wash trades were entirely improper, undermining the proper function of the market.
“Senior management and compliance were cocooned from seeing the misconduct, and systems and controls failed to probe broker conduct, even when warning signs were visible.”
The rates division of Tullett Prebon carried out ‘name passing’ broking which comprised a significant part of Tullett Prebon’s overall business, employing many brokers and generating revenues for the firm.
Following an investigation by the regulatory body – between 2008 and 2010 – Tullett Prebon’s rates division had “ineffective controls” around broker conduct.
“Lavish entertainment” and insufficient controls by senior management figures allowed improper trading to take place that ultimately “undermine the proper function” of wholesale markets.
Tullett Prebon also breached Principle 11 of the FCA’s Principles for Businesses by failing to be open and cooperative with the FCA.
The breach related to audio tapes requested by the FCA in August 2011, of which the company failed to produce until October 2014 – despite Tullett Prebon possessing the majority of the audio that the FCA required.
Tullett Prebon initially provided an incorrect account as to how the audio had been discovered and this breach is considered to be “serious” due to the fundamental nature of Principle 11.
“The case against Tullett Prebon was a long and complex one,” continued Steward.
“The firm’s failure to be open with the FCA about the existence of key evidence reflected a high degree of culpable incompetence and prejudiced the FCA enquiries.”
