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Merrill Lynch fined 34.5 million GBP for failing to report transactions

First Published 25th October 2017

FCA highlights that non-reporting is more than a misdemeanour

Merrill Lynch International gets the first of its type fine from the UK's financial regulator, the Financial Conduct Authority (FCA), for failing to report 68.5 million exchange-traded derivative transactions since February 2014. The FCA penalised the American Bank 34.5 million GBP, the equivalent to 45.3 million USD.

As a result of the financial crisis in 2008, the European regulators introduced the European Markets Infrastructure Regulation (EMIR) to maintain the transparency and integrity of the financial markets. One of the key changes of this reform is that organisations now have to report derivative transactions in general, which includes exchange-traded derivatives.

Merrill Lynch failed to comply with this regulation for almost three years, and the investigation of the FCA brought up two similar cases from the past. As mitigating factors, the bank was co-operative while under the microscope of the FCA during the investigation

Mark Steward, FCA Executive Director of Enforcement and Market Oversight, said: "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."

Merrill Lynch International agreed to settle at an early stage of the investigation and thus received a 30% reduction in their overall fine. Without this discount, the overall fine would have been a whopping 49.3 million GBP, however the bank gets away with paying exactly 34,524,000 GBP. Given that there were 68.5 million exchange-traded derivative transactions not reported, that is basically 50 pence per trade.