Macquarie's London branch fined $25.3m over fictitious trades
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The news: The UK's Financial Conduct Authority (FCA) has fined Macquarie Bank's London branch (MBL) £13 million ($25.3 million) for control failures that allowed one of its traders to record over 400 fictitious trades.
The numbers: From June 2020 to February 2022, MBL trader Travis Klein was able to record and take steps to conceal over 400 fictitious trades in the company's internal systems in a bid to hide his trading losses, the FCA said.
As a result, Klein, a relatively junior trader on MBL's London metals and bulks trading desk, was able to bypass three key internal controls without detection for over 20 months.
The FCA has banned Klein from the financial services industry for acting dishonestly and without integrity and would have fined him £72,000 if his application for serious financial hardship had not been successful.
The fictitious trades cost MBL an estimated USD57.8 million ($89.4 million) to unwind but did not affect customers or the market overall.
The context: The regulator noted that the fictitious trades were not detected earlier because of "significant weaknesses" in MBL’s systems and controls, some of which the firm had been previously made aware of. Despite knowing of the weaknesses, MBL failed to put effective and timely plans in place to fix them, it said.
What they said: Steve Smart, FCA's 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," Smart said.
The source: FCA media release
