The U.S. financial services institution was fully cooperative with a U.K. regulator, but two previous fines prevented the firm from getting an even bigger discount.
The U.K.’s Financial Conduct Authority (FCA) has fined Bank of America — Merrill Lynch (BAML) £34.5 million ($45.7 million) for failing to report derivatives transactions between 2014 and 2016.
The enforcement action — which relates to 68.5 million exchange traded derivative transactions — is the first of its kind against a firm for failing to report details of trading in exchange traded derivatives, under the European Markets Infrastructure Regulation (EMIR).
The EMIR regulation, which was implemented in 2014, applies to all financial counterparties in derivatives trades. It is a key part of the post-financial crisis reforms to improve transparency and minimize possible risks in the sector.
The regulator said that Merrill Lynch failed “to allocate adequate and sufficient human resources to undertake its obligations to report trading in exchange traded derivatives.”
BAML officials agreed to settle at an early stage in the FCA’s investigation, for which it received a 30 percent reduction in the overall fine. Without this discount, the fine would have been £49.3 million ($65.3 million).
However, although the bank was fully cooperative with the FCA, the level of the fine still reflected that the firm had previously been subject to two earlier reporting cases.
In 2015, BAML was fined £13.3 million ($17.6 million) by the FCA for incorrectly reporting more than 35 million transactions and failing to report another 121,000 transactions between 2007 and 2014.
In a statement, Mark Steward, FCA executive director of enforcement and market oversight, says: “Effective market oversight depends on accurate and timely reporting of transactions. The obligations under EMIR, as with MiFID, are key aspects of such oversight.”
Steward adds, “It is vital that reporting firms ensure their transaction reporting systems are tested as fit for purpose, adequately resourced and perform properly. There needs to be a line in the sand. We will continue to take appropriate action against any firm that fails to meet requirements.”
In its statement, BAML officials say: “We are wholly committed to complying with all applicable regulatory requirements. When we discovered that certain trades had not been fully reported to a trade repository, as required following the introduction of EMIR, we immediately reported the matter to the FCA.”
BAML ` also commented that “we have re-evaluated and improved our related processes and can confirm that no clients were financially impacted as a result.
BAML is not alone. The FCA has penalized several firms for reporting and systems and controls failures in recent years.
The most recent is Rio Tinto, which was levied £27.4 million ($36.3 million) for breaching listing disclosure rules when it acquired a Mozambique asset in 2011. Earlier in the year Deutsche Bank had to pay a £163 million ($216 million) charge for serious failings around its anti-money laundering (AML) controls that allowed it to transfer about $10 billion from unknown clients out of Russia to offshore accounts.
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