Release Date: 4th October 2022
To access the original FCA document, click here.
Summary
Mr Matthew Charles Kent has been fined £83,600 by the Financial Conduct Authority (FCA) for significant regulatory breaches while serving as a Director at Sigma Broking Limited between 1 December 2014 and 12 August 2016. The fine was reduced from £92,900 due to a 10% discount for early settlement. Kent’s failings included inadequate governance, risk management, and compliance oversight, particularly related to Sigma’s expansion into contracts for difference (CFDs) and Spread-Bets, which are high-risk financial products.
Key Takeaways for Other Firms:
- Conduct Thorough Risk Assessments:
- Perform detailed risk assessments when expanding into new high-risk financial products to ensure compliance with regulatory standards.
- Effective Governance and Oversight:
- Hold regular board meetings with proper documentation and ensure the board is provided with adequate management information to oversee business activities effectively.
- Robust Compliance Functions:
- Establish clear reporting lines and adequately resource the compliance department to ensure adherence to regulatory requirements and effective monitoring of business activities.
Summary of Findings:
- Inadequate Risk Management and Governance:
- Despite the high-risk nature of CFDs and Spread-Bets, Sigma, under Mr Kent’s directorship, failed to conduct an adequate risk assessment or implement necessary preparations to meet regulatory standards.
- The board of directors, including Mr Kent, did not hold regular meetings or maintain proper minutes, undermining their ability to provide effective oversight.
- Failure to Meet Regulatory Reporting Obligations:
- Sigma failed to report approximately 56,000 transactions accurately, violating SUP 17.1.4R and SUP 17.4.1 EU/SUP 17 Annex 1 EU. This failure impeded the FCA’s ability to conduct market surveillance and detect market abuse.
- Inadequate Monitoring and Reporting of Suspicious Transactions:
- Sigma did not identify or report any suspicious transactions (STRs/STORs) during the relevant period, despite significant activity that warranted such reports. This contravened SUP 15.10.2R and Article 16(2) EU MAR.
- Lack of Compliance Oversight:
- Mr Kent and the board did not ensure that the compliance department had effective systems, clear policies, or adequate training to monitor and report potential market abuse.
- Sigma’s arrangements were inadequate to equip the board with the information needed to manage and control the risks associated with the CFD desk’s activities.
Conclusion:
Mr Matthew Charles Kent’s significant failings in governance, risk management, and compliance oversight while serving as a Director at Sigma Broking Limited led to substantial regulatory breaches. The FCA’s fine of £83,600 underscores the importance of robust governance, thorough risk assessments, and effective compliance functions to prevent market abuse and ensure regulatory adherence. Other firms should take note of these key takeaways to avoid similar penalties and uphold the integrity of the financial system.
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