Firms are required to submit details of reportable transactions by the close of the business day after which the transaction takes place. The FSA uses this data to detect and investigate suspected market abuse (insider trading and market manipulation) and in support of its statutory objectives of maintaining market confidence in financial markets and reducing financial crime.
Between 29 June 2010 and 5 November 2011 Plus500, an online Contracts for Difference (CFD) trading facility provider, 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 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.
Between the 5 November 2007 and 8 February 2011 James Sharp, an independent stockbroking firm, failed to report any of the approximately 71,000 reportable transactions that 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 and relevant training to staff. It therefore breached rules in SUP 17 and Principle 3.
David Lawton, FSA director of markets 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 firms have taken steps to improve their processes and resolve the errors, resubmitting reports to the FSA where necessary.
The firms cooperated with the FSA in the course of the investigations and 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 are 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 6 March 2010 and applies to any breaches which 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.