UK fines Merrill Lynch £13 million for 35 million compliance lapses

The UK Financial Conduct Authority on Wednesday fined Merrill Lynch International £13,285,900 ($19.8 million) for incorrectly reporting 35,034,810 transactions and failing to report another 121,387 transactions between November 2007 and November 2014.

It was the biggest fine ever imposed by the FCA for transaction reporting failures.

Transaction reports in the UK securities market have to include details of the product traded, the firm that undertook the trade, the trade counterparty, the price, quantity, and trading venue.

The FCA said Merrill Lynch failed over several years to correct problems with its transaction reports. The poor performance continued despite substantial FCA guidance and a history of transaction reporting non-compliance, including a “Private Warning” issued in 2002 and a fine of £150,000 ($225,000) in 2006.

The FCA said Wednesday’s £13.2 million fine consisted of a penalty of £1.50 ($2.25) per line of incorrect or non-reported data. The regulator said it raised the penalty from £1.00 ($1.50) per line used in the three most recent transaction reporting cases to increase deterrence.

Georgina Philippou, FCA acting director of enforcement and market oversight, said:

“Proper transaction reporting really matters. Merrill Lynch International has failed to get this right again — despite a Private Warning, a previous fine, and extensive FCA guidance and enforcement action in this area.”

Merrill Lynch agreed to settle at an early stage of the investigation and received a 30% reduction in the overall fine, the FCA said. Without the discount the fine would have been about £19 million ($28.5 million).

The FCA has fined 11 other firms for transaction reporting breaches: Deutsche Bank, Barclays, Credit Suisse, Instinet, Getco, Commerzbank, Société Générale, City Index, James Sharp & Co, Plus500UK, and RBS.

A copy of the FCA’s April 22, 2015 final notice against Merrill Lynch International is here.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.