FCA fines Threadneedle £6m
The Financial Conduct Authority (FCA) has fined Threadneedle Asset Management Limited (TAML) £6m (€8.3m) for failing to put in place adequate controls in the fixed income area of its front office, and for providing inaccurate information to the regulator and for failing to correct the inaccurate representation for four months.
In April 2011, the Financial Services Authority (FSA) wrote to TAML asking to address specific concerns about the fixed income area of its front office, including the Emerging Markets Debt desk.
The FSA said it was concerned about the number of errors occurring in that area as well as the risks of fund managers initiating, booking and executing their own trades.
On 29 June 2011, TAML responded to the FSA stating that it had appointed individuals to be responsible for all aspects of dealing on the relevant desks (including the Emerging Markets Debt desk) and that the individuals had taken on those responsibilities.
This overstated the position. In fact, the individuals had not taken on all the responsibilities outlined in TAML’s response and consequently, the FSA’s concerns had not been fully addressed.
Shortly after TAML submitted its response, a fund manager on the Emerging Markets Debt desk initiated, executed and booked a $150m trade on behalf of TAML funds at four times its market value.
The fund manager did not have the authority to make the trade. TAML’s outsourced back office identified the problem and did not settle the trade.
The FCA said it considered these failings to be particularly serious because the deficiencies allowed a fund manager to initiate, execute and book a $150m (€206m) trade which, had it settled, could have caused a $110m (€151m) loss to the relevant client funds.
TAML received a 20% Stage 2 settlement discount, without which the fine would have been £7,548,130.
A Threadneedle’s spokesperson said: “While we are pleased to have thwarted a complex attempted fraud, we regret that a subsequent review of our fixed income trading identified areas of weakness. In July 2013 an independent auditor appointed under FCA instruction confirmed the weakness had been fully addressed.
“In addition, a communication to the regulator was not sufficiently clear and we have apologised for this. We have co-operated with the regulator throughout the investigation. We are pleased to move on from these historic events and continue to focus on delivering for our clients”.