Release Date: 22nd January 2015
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined and banned two former senior executives of Martin Brokers (UK) Limited (‘Martins’) for compliance and cultural failings related to the manipulation of the London Interbank Offered Rate (LIBOR). This enforcement action follows a 2014 fine of £630,000 against Martins for similar misconduct.
- Fined Executives: David Caplin (former CEO) fined £210,000 and Jeremy Kraft (former Compliance Officer) fined £105,000.
- Reason for Fine: Their failures contributed to a culture at Martins that allowed LIBOR manipulation and enabled the misconduct to continue undetected over a prolonged period.
- Sanctions: Both executives are banned from performing significant influence functions at financial services firms.
Details of Misconduct:
- David Caplin:
- Role: Former CEO
- Failings: Presided over a weak compliance culture, failed to implement recommendations from an external consultancy, and neglected proper oversight of broker conduct. Allowed a profit-over-compliance culture, leading to brokers accepting inducements for LIBOR manipulation.
- Consequences: Facilitated LIBOR misconduct and compromised market integrity.
- Jeremy Kraft:
- Role: Former Compliance Officer
- Failings: Did not oversee brokers properly, failed to challenge Caplin on compliance matters, and delegated responsibilities to unqualified staff. Ignored advice highlighting serious deficiencies.
- Consequences: Enabled LIBOR misconduct and compromised market integrity.
Key Takeaways for Other Firms:
- Establish Robust Compliance Systems: Ensure adequate systems and controls to monitor all activities, particularly those involving significant influence functions.
- Promote a Strong Compliance Culture: Develop a culture where compliance is integral to operations, not secondary to profit.
- Effective Oversight and Supervision: Senior executives must ensure effective oversight and timely implementation of compliance recommendations.
- Recognise and Mitigate Risks: Proactively address risks related to unethical behaviour and inducements.
- Act on External Advice: Implement recommendations from external compliance consultancies promptly and thoroughly.
The FCA’s action against Caplin and Kraft serves as a warning to senior management about the importance of maintaining robust compliance frameworks and an ethical culture within financial firms.
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