Fines for inaccurate MiFID reporting
According to art. 51 of MiFID member states must ensure the appropriate administrative measures can be taken or administrative sanctions be imposed against the persons responsible where the provisions adopted in the implementation of MiFID have not been complied with. Furthermore the member states should provide ESMA annually with aggregated information about all administrative measures and sanctions imposed.
MiFID came into force in Nov 2007. By now FCA is the only national competent authority (NCA) in the EU that has officially imposed fines to 12 companies. The first audits started in Oct 2008 when FCA (then FSA) noted discrepancies in Barclays’ transaction reports. Those actions were taken after a review of trading that was conducted by FSA due to an incident of suspected market abuse by a third party. The first fine for inaccurate MiFID reporting was imposed to Barclays Capital Securities Limited and Barclays Capital Division of Barclays Bank plc on 19 Aug 2009. The financial penalty amounts to GBP 2,45 million and covered the period between 1 October 2006 and 31 October 2008. The fine was imposed because:
- Barclays failed to submit accurate transaction reports as required in respect of an estimated 57.5 million transactions;
- failing to take reasonable care to organize and control its affairs responsibly and effectively, with adequate risk management systems, to meet the requirements to submit accurate transaction reports;
- failing to conduct its business with due skill, care and diligence in failing to respond sufficiently to opportunities to review the adequacy of its transaction reporting systems.
The financial penalty is in million GBP because Barclays failed to implement MiFID accurately during previous reviews and recommendations by FCA.
Since then FCA has imposed fines to:
- 6 more banks totaling almost GBP 30 million;
- 2 brokers: Plus500UK with GBP 205,128 and City Index Limited with GBP 490,000 and
- 3 other companies totaling GBP 2,5 million.
A detailed breakdown of the fines, dates and number of inaccurately reported / not reported transactions is below.
|Name of the FC||Fine to be paid||By the date||Failed to accurately report / not reported transactions|
|Barclays Bank PLC (Barclays)||2,450,000 GBP||02/09/2009||57.5 million / 0 transactions|
|Credit Suisse||1,750,000 GBP||08/04/2010||not prompt and correct reports|
|Getco Europe Limited||1,400,000 GBP||08/04/2010||not prompt and correct reports|
|Instinet Europe Limited||1,050,000 GBP||08/04/2010||not prompt and correct reports|
|Commerzbank AG London branch||595,000 GBP||27/04/2010||all transactions|
|Société Générale London branch||1,575,000 GBP||25/08/2010||18.8 million / 0 transactions|
|City Index Limited||490,000 GBP||20/01/2011||2 million / 55,000 transactions|
|Plus500UK Limited||205,128 GBP||24/10/2012||1.3 million (all) / 189,000 transactions|
|James Sharp and Company||49,000 GBP||24/10/2012||0 / 71,000 transactions (all)|
|Royal Bank of Scotland (RBS)||5,620,300 GBP||27/07/2013||44.8 million / 804,000 transactions|
|Deutsche Bank AG London branch||4,718,800 GBP||28/08/2014||29.4 million / 0 transactions|
|Merrill Lynch International||13,285,900 GBP||22/04/2015||35 million / 121,387 transactions|
Please note that the figures listed above are after the 30% reduction of the fine because of an early settlement option by the regulator. In the last cases FCA imposed fines of GBP 1 per inaccurately reported or not reported transaction. For example James Sharp and Company failed to report all of its 71,000 transactions and the fine was GBP 71,000. As 30% reduction applies for early payment, the fine was reduced to GBP 49,000. According to FCA the sanctions are with the same amounts for wrong lines and missing lines in the reports. The UK legislation gives very broad definitions about the fines that FCA can impose. For that reason FCA has the freedom to decide on the case-by-case basis the amount of the financial penalties.
The last fine is imposed to Merril Lynch International and it is the biggest one for now: GBP 13,285,900. Merril Lynch International failed to correctly report 35 million transactions and did not report 121,387 transactions. For this case FCA has explicitly stated that the fine is GBP 1.5 per line due to the seriousness of the errors and because Merril Lynch International has failed to comply with MiFID during previous reviews.
Unfortunately, the FCA’s tendency regarding the financial penalties is that they are getting bigger and more frequent. Currently most of the biggest banks are affected. We expect FCA to continue conducting its supervisory activities and to ensure that the companies are fully compliant under MiFID. We would advise the financial companies to do a review of the previously submitted reports in order to ensure that full accuracy has been achieved. We would like to draw your attention to the fact that the revisions are always covering the periods that start with November 2007. The last fine to Merril Lynch International was covering transaction reports for the period between November 2007 and November 2014. For more information please feel free to contact us at firstname.lastname@example.org.
Written by Mrs. Rady Petkova, CEO of EMIR Reporting Ready, Ltd.