The UK’s Financial Conduct Authority (FCA) announced last week that Tullet Prebon Europe Limit (TPEL) has been fined £15.4 million 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 with the FCA”. The notice can be found here. In summary:
- TPEL broke Principles 2, 3 and 11 of the FCA’s Principle for Business:
- Principle 2 – Requires a firm to conduct its business with due skill, care and diligence.
- Principle 3 – Requires firms to take reasonable care to organise and control its affairs responsibly and effusively, with adequate risk management systems.
- Principle 11 – Requires firms to deal with their regulators in an open and cooperative way, and to disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.
- The misconduct took place from 2008 to 2011.
- The key part of the misconduct was the placing of wash trades and “three-way switches” in return for lavish entertainment and also the promise of improved pricing and possible LIBOR manipulation(which did not occur) The wash trades in question were to generate unwarranted commission, rather than misleading price signals.
- TPEL were found to have inadequate controls in place. Compliance were found to have an inadequately close relationship with the business, who were expected to perform certain checks themselves. These checks were not carried out
- Senior managers did not enquire as to why unusual profits had been made. Instead they were shown to have turned a blind eye to any misdemeanour
- TPEL also failed to cooperate with the FCA, and also did not provide recordings and other records to the FCA when requested.
Updated REMIT Guidance
ACER has issued an updated version of the 4th Edition of the REMIT Guidance, which can be found here. Section 6.4.1 i on page 38 has been expanded to include a longer definition of “capacity hoarding”. ACER’s Guidance Note on the application of Article 5 of REMIT to transmission capacity hoarding can be found here.