UK Brokerage Big-Hitter Fined £14 Million For "Misconduct" On LIBOR

Tom Burroughes

25 September 2013

The UK financial regulator has fined inter-dealer brokerage £14 million ($22.5 million) for “misconduct” relating to the London Interbank Offered Rate, or LIBOR, the first such broker to be fined about the matter.

The fine comes after a number of firms, such as Barclays, Royal Bank of Scotland and UBS were punished by international watchdogs for manipulating the inter-bank interest rate market, behaviour which has shaken confidence in markets and raised questions about compliance and governance at large institutions. LIBOR rates are references for structured products, mortgages, savings and other products.

The Financial Conduct Authority said today that ICAP Europe’s behaviour broke the FCA’s Principles for Businesses, involved a “significant number” of brokers (including two managers) and occurred over a number of years.

Between October 2006 and November 2010, the misconduct included brokers colluding with traders at UBS to manipulate the (Japanese Yen) JPY LIBOR rates for the benefit of the traders, the FCA said in a statement.

This misconduct involved “brokers deliberately disseminating incorrect or misleading LIBOR submission levels”, the FCA said. For example, they emailed skewed suggestions to some panel banks as to where they believed the published JPY LIBOR rate would set for a particular day (known as “run-throughs”); and asked certain panel banks to make specific JPY LIBOR submissions. One broker received corrupt bonus payments (at the instigation of one manager) as a reward for his assistance in manipulating the JPY LIBOR rates, the FCA said.

“The misconduct in relation to LIBOR has cast a shadow over the financial services industry. The findings we publish today illustrate, once again, individuals within the industry acting with a cavalier disregard both for regulatory obligations and the interests of the markets. IEL’s significant failings in culture and controls allowed that misconduct to flourish and fell far short of our expectations,” Tracey McDermott, director of enforcement and financial crime at the regulatory, said.

“This is our fourth penalty in relation to LIBOR and our investigations continue. The lessons however go far wider than LIBOR and we will take a very dim view of those who do not learn them,” she said.