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 significant compliance and cultural failings related to the manipulation of the London Interbank Offered Rate (LIBOR). This follows a previous fine of £630,000 against Martins in 2014 for similar misconduct.
- Individuals Fined: David Caplin (former CEO) fined £210,000 and Jeremy Kraft (former Compliance Officer) fined £105,000.
- Reason for Fines: Their failures contributed to a culture at Martins that enabled LIBOR manipulation to go undetected for years.
- Sanctions: Both are banned from performing significant influence functions at financial services firms.
Specific Failings:
- David Caplin:
- Role: Former CEO
- Issues: Failed to oversee compliance, ignored external consultancy recommendations, and allowed a profit-over-compliance culture. Did not monitor brokers properly, enabling unethical behaviour and LIBOR manipulation.
- Consequences: Facilitated misconduct and compromised market integrity.
- Jeremy Kraft:
- Role: Former Compliance Officer
- Issues: Failed to oversee brokers, did not challenge Caplin on compliance issues, and delegated responsibilities to unqualified staff. Ignored advice highlighting serious deficiencies.
- Consequences: Enabled misconduct and compromised market integrity.
Key Takeaways for Other Firms:
- Robust Compliance Systems: Implement and maintain effective systems and controls to monitor all activities, particularly those involving significant influence functions.
- Strong Compliance Culture: Foster a culture where compliance is integral to operations, not secondary to profits.
- Effective Oversight and Supervision: Senior executives must ensure comprehensive oversight and timely implementation of compliance recommendations.
- Proactive Risk Management: Recognise and address risks related to unethical behaviour and inducements.
- Act on External Advice: Implement and act on recommendations from external compliance consultancies promptly.
The FCA’s action against Caplin and Kraft serves as a strong reminder to senior management of the importance of maintaining robust compliance frameworks and fostering an ethical culture within financial firms.
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