UK FSA issues £250,000 in fines for reporting failures

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The Financial Services Authority (FSA) fined two firms last month for failing to provide accurate and timely transaction reports. Plus500UK Limited (Plus500) was fined £205,128 and James Sharp and Company (James Sharp) £49,000.

Firms are required to submit details of reportable transactions as defined under the Markets in Financial Instruments Directive (Mifid) by the close of the business day after which the transactions take place. The data is used by the FSA to detect and investigate suspected market abuse such as insider trading and market manipulation.

Between June 29, 2010 and November 5, 2011, Plus500, an online contracts-for-difference (CFD) trading broker, conducted 1,332,000 reportable transactions. However, the firm failed to report any of these accurately and failed to report 189,000 of them at all, the FSA said in a statement. The firm's systems and controls were inadequate in that it failed to set up appropriate reporting systems, did not have any documented procedures in place in relation to transaction reporting and failed to provide any relevant training to staff. It therefore breached rules in SUP 17 of the FSA Handbook and Principle 3 of the FSA's Principles for Business, the FSA said.

Between November 5, 2007 and February 8, 2011, James Sharp, an independent stockbroking firm, failed to report any of the approximately 71,000 reportable transactions it undertook. The firm's systems and controls were inadequate, in that it did not have any documented procedures in place and failed to provide any relevant training to staff. It therefore breached rules in SUP 17 and Principle 3.

David Lawton, FSA director of markets in London, said: "Accurate transaction reports are a key tool in our efforts to tackle market abuse. We will take action where necessary to ensure firms – regardless of size – comply with their reporting obligations. As well as a financial penalty, firms can also expect to incur the cost of resubmitting historically inaccurate reports."

The FSA said the firms have taken steps to improve their processes and resolve the errors, resubmitting reports where necessary. Having co-operated with the FSA in the course of the investigations, the firms agreed to settle at an early stage. In doing so, each firm qualified for a 30% discount. Without the discount, the fine for Plus500 would have been £293,040 and James Sharp would have been fined £70,000. Plus500 is the first regulated firm to be fined in respect of transaction reporting failures under the new FSA penalties policy. This policy was established to provide a consistent and more transparent framework for the calculation of financial penalties. The regime came into force on March 6, 2010 and applies to any breaches that occur on or after that date. As a result, the penalty imposed on Plus500, which was based on the number of affected transactions, was larger than it would have been under the previous regime, which was subjective.

The fines are the eighth and ninth issued by the FSA since August 2009, in relation to a failure to provide accurate transaction reports. On September 8, 2009, the FSA fined Barclays, on April 8 2010, it fined Credit Suisse, Getco Europe Limited and Instinet Europe Limited, on April 27, 2010, it fined Commerzbank, on August 25, 2010, it fined Société Générale and on January 20, 2011, it fined City Index Limited.

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