FCA has fined broker and wealth manager WH Ireland Limited (WHI) £1.2 million and restricted the firm for 72 days from taking on new clients in its corporate broking division. FCA discovered WHI had failed during the first half of 2013 to ensure there were proper systems and controls in place to prevent market abuse being detected or occurring. These failings, which amounted to a breach of Principle 3, included:
- deficient controls to prevent inside information leaking from the private to the public side of its business or over disclosure to external parties;
- inadequate personal account dealing rules for employees;
- failures to maintain an effective written conflicts of interest policy, and inadequate recording of the kinds of service or activity that might give rise to a conflict; and
- deficient compliance oversight, including the absence of formal risk management framework for market abuse and inadequate post-trade surveillance systems.
FCA considered these failings to be particularly serious because the range of services performed by WHI meant the firm was exposed to a broad range of market abuse risks. In addition, WHI received inside information on a regular basis. As such there was significant scope for an adverse impact on the market and on a large number of other market participants if that inside information was mishandled. A Skilled Persons Report requested by FCA in August 2013 had also identified breaches of the Senior Management Arrangements, Systems and Controls (SYSC) rules. A follow-up report commissioned by WHI in 2014 showed that some recommendations had not been adequately implemented within the time set by the Skilled Person. At the time the failings took place, WHI’s private wealth clients had approximately £2.5 billion of assets under management and may have bought and sold financial instruments or been advised to do so by the firm without the necessary protections in place. WHI also had 87 corporate broking clients. Because the firm did not have proper systems and controls in place, it could not protect against the risk of market abuse in respect of the information provided by these clients. FCA deemed the restriction necessary and appropriate in addition to the fine given WHI’s failure to adequately address issues identified by the Skilled Persons Report within agreed deadlines. (Source: FCA fines and restricts WHI for market abuse risks)