‘Sham’ trades cost broker TP ICAP £15.4 million after regulator probe
Management at TP ICAP ignored “obvious red flags” that its staff were carrying out improper trades, the market regulator has said as it fined the broker £15.4 million.
The Financial Conduct Authority (FCA) said the firm’s “ineffective controls” had allowed brokers make sham trades just to boost their books.
Brokers at Tullett Prebon, which has since been incorporated into TP ICAP, carried out so-called wash trades between 2008 and 2010, the regulator found.
These are fictitious trades, made to look like the broker is active in the market.
By selling, and then buying back shares for the same price within a short period of time, TP ICAP was able to to charge high brokerage fees, the FCA said.
This happened 17 times between September 2008 and October 2010, the regulator said, generating £314,000 in fees for the company.
“The market performs important public functions and is not a private game of self-enrichment,” said Mark Steward, the head of enforcement at the FCA.
“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.”
While the trades were happening senior management ignored obvious red flags, the FCA said.
At one point management asked a trader why one deal had generated high fees.
“You don’t want to know,” came the reply.
The bosses did not investigate further.
“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,” Mr Steward said.
The FCA said that when it started investigating in 2011 the inter-dealer broker had failed to hand over tapes of its brokers’ phone calls.
These did not appear until 2014.
“The firm’s failure to be open with the FCA about the existence of key evidence reflected a high degree of culpable incompetence and prejudiced the FCA inquiries,” Mr Steward said.
TP ICAP chief executive Nicolas Breteau said: “We are pleased to put this historical matter behind us.
“None of the individuals involved in the relevant broking activities remain with our firm, which has long since taken the opportunity to significantly enhance its systems and controls to comply with regulatory expectations.”