FCA hands Tullett Prebon £15.4m fine

Tullett Prebon has been fined £15.4m by the FCA for failing to conduct its business with due skill, care and diligence, failing to have adequate risk management systems, and for failing to be open and cooperative.

Now part of global firm TP ICAP, Tullett Prebon is an electronic and voice inter-dealer broker acting for institutional clients transacting in the wholesale financial markets.

The rates division of Tullett Prebon carried out ‘name passing’ broking which comprised a significant part of Tullett Prebon’s overall business – employing many brokers and generating significant revenues for the firm.

Following an FCA investigation, the regulator found that between 2008 and 2010, Tullett Prebon’s rates division had ineffective controls around broker conduct.

One activity included ‘wash’ trades, which involves no change in beneficial ownership and has no legitimate underlying commercial purpose, and this generated Tullett Prebon unwarranted and unusually high amounts of brokerage for the firm.

The FCA’s executive director of enforcement and market oversight, Mark Steward, 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.”

Tullett Prebon also breached Principle 11 of the FCA’s Principles for Businesses, by failing to be open and cooperative with the FCA. This breach occurred between August 2011 and October 2014 and related to the FCA’s request to Tullett Prebon in August 2011 for broker audio tapes.

Although Tullett Prebon had most of the audio that the FCA required, they failed to produce it to the FCA until 2014. The firm had also initially provided an incorrect account as to how the audio had been discovered.

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