Release Date: 15th May 2014

To access the original FCA document, click here.

Summary

Martin Brokers (UK) Limited (Martins) was fined £630,000 by the Financial Conduct Authority (FCA) for its involvement in the manipulation of the London Interbank Offered Rate (LIBOR), particularly the Japanese Yen (JPY) LIBOR rates. The fine was substantially reduced from a potential £3.6 million due to Martins’ inability to pay this sum on top of other regulatory penalties it faced for similar misconduct.

During the period from January 2007 to December 2010, Martins engaged in practices that deliberately misled panel banks about LIBOR rates to benefit a trader at UBS. These manipulative practices included providing skewed LIBOR rate suggestions, creating false orders to influence bank perceptions of the cash market, and directly requesting specific LIBOR submissions. These actions were part of a strategy to manipulate submissions and make corrupt brokerage payments through “wash trades”—fictitious trades meant to compensate Martins for their manipulation efforts.

The FCA highlighted several critical failings at Martins:

1. Repeated Rule Breaches: Martins broke FCA rules designed to limit risks to investors on numerous occasions, involving multiple brokers and managers across different desks.
2. Poor Compliance Culture: The culture within Martins prioritized profits over compliance, which the FCA noted made broker misconduct almost inevitable.
3. Inadequate Systems and Controls: Martins lacked the necessary systems to monitor and oversee broking activities effectively, allowing the misconduct to continue unchecked for years.
4. Failure in Oversight: There was no effective supervision of brokers involved in the manipulative practices, and the firm’s systems failed to identify suspiciously large “wash trades.”

This case underscores the importance of maintaining a robust compliance culture within financial institutions. Firms are reminded of their responsibility to uphold market integrity by ensuring that their systems and controls are capable of detecting and preventing such misconduct. If firms neglect these duties, the FCA has made it clear that it will take decisive action to enforce regulatory standards. This enforcement action is part of broader regulatory efforts to ensure the integrity of financial benchmarks following widespread scrutiny of LIBOR settings practices across the banking industry.