An inter-dealer broker has been fined £630,000 for misconduct relating to the London Interbank Offered Rate (LIBOR).
Martin Brokers (UK) Ltd (Martins) is apparently the second inter-dealer broker, and the sixth firm overall, to be fined by the Financial Conduct Authority (FCA) for LIBOR-related failures.
The fine imposed is significant, but the FCA has highlighted that it would have been much higher, at £3,600,000, had Martins not been able to show that it could not pay a penalty of this amount on top of the other regulatory fines that the firm faces in relation to LIBOR.
In addition, Martins agreed to settle at an early stage of the investigation and therefore qualified for a 30% discount under the FCA’s settlement discount scheme. Without the discount, the fine would have been £900,000.
The fines relate to activity between January 2007 and December 2010, when Martins is reported to have colluded with a trader at UBS to manipulate the (Japanese Yen) JPY LIBOR rates for his benefit. The misconduct involved Martins deliberately disseminating incorrect or misleading LIBOR submission levels by:
- communicating skewed suggestions to some Panel Banks as to where they believed the published JPY LIBOR rate would set for a particular day (known as "run-throughs");
- creating false (or “spoof”) orders, with the aim of influencing Panel Banks’ views of the cash market so that they would make JPY LIBOR submissions at levels that benefitted the UBS trader; and
- requesting certain Panel Banks to make specific JPY LIBOR submissions.
Several brokers at Martins were involved in the misconduct, and the FCA found that the firm’s risk management systems and controls were inadequate to monitor and oversee its broking activity. There was no effective oversight of the brokers involved, which meant that they were able to freely engage in misconduct.
This latest fine means that the FCA has now imposed penalties of £426.63 million on entities for manipulative conduct with respect to LIBOR submissions. This total includes a fine of £59.5 million given to Barclays Bank plc in June 2012 for misconduct relating to LIBOR and EURIBOR, and a £87.5 million fine imposed on The Royal Bank of Scotland plc in February last year for LIBOR related misconduct.
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