FCA fines Macquarie Bank for fictitious trades after ‘serious failings’
Macquarie Bank’s London branch has been slapped with a £13m fine for “serious failings” which allowed one of its employees to record 400 fictitious trades.
The Financial Conduct Authority (FCA) penalised the firm based on activity between June 2020 and February 2022.
Trader Travis Klein, based on Macquarie Bank Limited’s (MBL) London metals and bulks trading desk, recorded and made efforts to conceal over 400 fictitious trades in its internal system during the time period, in a bid to hide his losses.
The trades were not detected earlier due to “significant weaknesses” in MBL’s systems and controls.
The FCA said some of these weaknesses “the firm had been previously made aware of” but despite this, “failed to put effective and timely plans in place to fix them”.
Junior trader Klein was able to bypass three internal controls without detection for 20 months, according to the FCA, which has now banned him from the financial services industry.
He was banned for acting dishonestly and without integrity, and would have been fined £72,000, were it not for a successful bid for serious financial hardship.
The FCA said the fictitious trades cost MBL around £57.8m to unwind. The fictitious trades cost MBL an estimated $57.8m (£45.96m) to unwind but did not affect customers or the market overall.
The FCA found that if warnings about failings in its system had been heeded, much of the damage could have been avoided.
‘This should be an example’ – FCA
Steve Smart, joint executive director of enforcement and market oversight, said: “MBL’s ineffective systems and controls meant that one of its employees could, at least for a time, hide trading losses which cost the firm millions to unwind.”
“This should serve as an example to those we regulate; risk can come from within. You need the right systems to identify it so it can be tackled early.”
In a statement responding to the fine Macquarie Bank Limited, London Branch, said it “acknowledges the FCA’s Final Notice and the associated financial penalty.
“This follows Macquarie’s detection, in February 2022, of a period of unauthorised trading by an individual previously employed by Macquarie, which was self-reported by Macquarie to relevant regulators.
“The unauthorised trading was isolated to one individual. The unauthorised trading did not affect clients, or the market, and no financial benefit or gain was derived by Macquarie or any other party directly from the activity.
“The incident was not financially material to Macquarie Group and was accounted for and noted in the Macquarie Group financial results for FY2022.
“Macquarie takes these matters very seriously and understands the importance to all stakeholders.”
“As noted by the FCA, we have displayed a high level of cooperation throughout their investigation. We have focussed significant resources on addressing learnings from the incident and implemented a series of improvements to our control environment in response to the incident.”