FX broker fined £3.44m over misleading information
25 Nov 2020
Foreign exchange options broker TFS-ICAP Ltd has been fined £3.44m by the Financial Conduct Authority (FCA) for communicating misleading information to clients
25 Nov 2020
The regulator said that between 2008 and 2015, brokers at TFS-ICAP carried out the practice of ‘printing’ trades, a process which meant they told their clients that a trade had occurred at a particular price and/or quantity when no such trade had actually taken place.
The FCA said its investigation found that TFS-ICAP brokers, across multiple broking desks, did this openly and over a prolonged period.
According to the regulator, printing trades was viewed by certain TFS-ICAP brokers as market practice, while one desk head saw it as being part of the role of broking.
The business that a broker at TFS-ICAP generated was one factor that was considered when calculating their overall remuneration. As such, the FCA highlighted a potential risk that brokers had a motivation to print in order to generate additional revenue for TFS-ICAP given the personal remuneration they stood potentially to gain.
Its investigation found that on the emerging markets desk, decisions over printing a trade would, on occasion, be discussed and agreed collectively and in such instances the whole desk might be instructed to print a particular trade by the senior brokers. Moreover, junior brokers learnt about printing by being involved in such discussions with more senior brokers.
On occasion, certain clients requested that trades were printed for their own purpose as it could be beneficial to them for other clients to be provided with such misleading information.
However, the regulator said printing trades sought to encourage clients to trade when they might not have done, to generate business for TFS-ICAP. As such, TFS-ICAP did not observe proper standards of market conduct.
Furthermore, TFS-ICAP did not react to warning signs that printing might be taking place or act to address the risk of it, and so failed to act with due skill, care and diligence.
Neither were there any records to evidence the practice which, in turn, meant the investigation had to establish the existence of a practice that was opaque and unrecorded in any of TFS-ICAP’s records.
TFS-ICAP also had shortcomings in its oversight and compliance arrangements to detect and counter the risk of brokers providing price or quantity information on the basis that it was based on actual trades when these had not taken place.
Mark Steward, FCA executive director of enforcement and market oversight, said: ‘This market should take notice that printing, or providing information to clients where the basis for the information is not true, is not in keeping with appropriate standards of market conduct.
‘The market should also take notice that the opacity of such practices, while forensically challenging, is no bar to action either.’
TFS-ICAP agreed to resolve this case with the FCA, thereby qualifying for a 30% discount to the overall financial penalty imposed. Without this discount, the FCA would have imposed a financial penalty of £4.92m.