FCA slaps Tullett Prebon with £15.4m fine

Pedro Gonçalves
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FCA slaps Tullett Prebon with £15.4m fine

The FCA has fined Tullett Prebon £15.4m in relation to a number of conduct failures in its broking division.

The Financial Conduct Authority (FCA) said Tullett Prebon failed to conduct its business with due skill, care and diligence, failed to have adequate risk management in place and failed to be open an co-operative with the FCA.

The regulator alleged that the firm's rates unit reported improper trading activity, including wash trades that "involves no change in beneficial ownership and has no legitimate underlying commercial purpose".

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"

At one point, a Tullett Prebon broker claimed more than £15,000 from the company to pay for a luxury holiday to the US with his friend, a trader at a client bank.

Tullett Prebon ended up paying for the ten-day trip to Las Vegas and California, during which time the broker racked up bills from dinners in expensive bars and restaurants, and hired two top-end sports cars as amusement.

Tullett Prebon is an electronic and voice inter-dealer broker which acts for institutional clients, typically investment banks, doing business in the wholesale financial markets. It is now part of TP Icap.

The FCA found that between 2008 and 2010 its rates division had ineffective controls over broker conduct.

Mark Steward, executive director of Enforcement and Market Oversight at the FCA said: "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 case against Tullett Prebon was a long and complex one. The firm's failure to be open with the authority about the existence of key evidence reflected a high degree of culpable incompetence and prejudiced the FCA enquiries."

Some of the transactions were so-called wash trades that generated more than £314,000 but were shams that had "no legitimate underlying commercial purpose" and that resulted in "unwarranted and unusually high amounts of brokerage for the firm".

Additionally, the regulator found that Tullett Prebon failed to be open and cooperative by failing to produce broker audio tapes for three years.

Tullett Prebon agreed to resolve the matter and therefore qualified for a 30% discount under the FCA's settlement discount scheme. Without this discount, the fine would have been £22m.

 

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