The Financial Service Authority (FSA), which has the objectives in the UK of maintaining market confidence, promoting public understanding of finance, protecting consumers and fighting financial crime, has fined three firms a total of Â£4.2 million over transaction report irregularities.
Financial firms are required to have proper controls and systems in place to ensure that they meet regulatory transaction reporting requirements. The firms should (must) report every transaction to the regulators no later than close of business the day after the transaction took place. The FSA then uses this data to monitor for suspected market abuse such as insider trading or market manipulation.
Three companies have, after repeated warnings over the matter, were found to have failed to comply and have therefore been fined. They had committed ‘multiple breaches that resulted in failures to provide transaction reports promptly and correctly to the FSA’.
The bank Credit Suisse was fined Â£1.75 million, the electronic trade market maker Getco was fined Â£1.4 million and Instinet Europe Ltd, an agency broker, was fined Â£1.05 million.
Over the course of 2007 and 2008 the firms could have addressed their shortcomings but failed to do so. According to the FSA regular reviews of data would have identified and prevented the breaches.
As the firms co-operated fully with the FSA in the ensuing investigations and agreed to pay the fines promptly they qualified for a 30% discount on the amount due. Otherwise the fines would have totalled Â£6 million.
Alexander Justham, director of markets, said:
"Firms must meet their obligation to provide accurate and timely data.Â Without quality data we cannot properly detect and investigate market abuse, identify market wide risks or have a comprehensive understanding of the activities of each firm.
Now, unless I’m missing something here, by not amending their procedures when first told by the FSA how can they be seen to have co-operated fully? And secondly, does that mean that for over a year the FSA could not ‘properly detect and investigate market abuse, identify market wide risks or have a comprehensive understanding of the activities of’ each of the firms involved?
This seems an awfully small fine for the length of time involved and the potential gains that are at stake.