Release Date: 15th December 2015
To access the original FCA document, click here.
Summary
The FCA fined Threadneedle Asset Management Limited (TAML) £6,038,504 for breaches of Principles 3 and 11 between June 2010 and February 2012. The breaches involved failing to organise and control its affairs responsibly and effectively, leading to inadequate controls in its fixed income front office. This exposed TAML to significant risks of erroneous trading and unauthorised transactions. Additionally, it provided inaccurate information to the FCA about its trading processes, further breaching Principle 11. TAML was aware of weaknesses in its fixed income area through internal reports and FCA concerns but failed to segregate trading duties adequately, allowing fund managers to initiate, execute, and book their own trades without sufficient oversight. An unauthorised trade of $150 million in Argentine warrants was initiated, executed, and booked by a fund manager, nearly resulting in a significant financial loss. The firm’s response to FCA concerns was inaccurate, misrepresenting the actual state of its trading controls.
Key Takeaways for Other Firms:
- Risk Management: Ensure adequate preventive and detective controls to mitigate risks of erroneous and unauthorised trading.
- Segregation of Duties: Properly segregate trading duties to provide checks and balances within the trading process.
- Accurate Reporting: Provide accurate and transparent information to regulators, especially in response to specific regulatory concerns.
- Compliance with Alerts: Implement and enforce appropriate alerts (both soft and hard stops) to prevent unauthorised trades.
- Post-Trade Monitoring: Establish robust post-trade monitoring processes to identify and rectify discrepancies before settlement.
By adhering to these practices, firms can avoid significant regulatory penalties and protect both their financial stability and reputation.
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