Published: 29th April 2015

Merill Lynch International (MLI) became the twelfth firm to be fined by the Regulator for a transaction reporting failure – the previous one being Deutsche Bank last August.

The Final Notice concerns failings between November 2007 and November 2014, although it does also reference that the firm had been subject to a previous Enforcement action and a Private Warning for similar failings.

In the Notice eleven breaches are listed which in total relate to 35,156,197 inaccurate or absent transaction reports.  The breaches include: reporting inaccurate trade times; incorrect identification of counterparties; incorrect use of the buy/sell indicator; incorrect BIC codes; and the failure to report 121,387 listed derivative trades.

After the usual 30% discount for early stage settlement, MLI were subjected to a financial penalty of £13,285,900 – the highest (to date) imposed for transaction reporting failures.  It is noted that the FCA has increased the metric for transaction reporting breaches to £1.50 per breach (the Deutsche Bank penalty in August last year included a ‘fine’ of £1 for each reporting breach) because it believes that past fines have not been high enough to achieve ‘credible deterrence’.

Although perhaps most firms that are subject to transaction reporting obligations are far removed from the size of MLI, the failings that gave rise to the Enforcement action e.g. inaccurate trade times, incorrect use of buy/sell indicator etc. were fairly basic.  As such, relevant firms may wish to review the Final Notice in detail and consider whether their own systems and processes are sufficient to provide comfort that they will not be added to the current list of the one dozen transgressors.

Print this Page