RP Martin Holdings Ltd., a London-based interdealer broker, was fined $2.3 million by U.S. and U.K. regulators for accepting more than $400,000 in bribes in exchange for helping to manipulate benchmark interest rates.
RP Martin brokers colluded with a trader at UBS AG (UBSN) to manipulate the London interbank offered rate tied to the Japanese yen, the U.K. Financial Conduct Authority said in a statement today. The FCA levied a fine of 630,000 pounds ($1.1 million), while the U.S. Commodity Futures Trading Commission fined the broker $1.2 million. The penalty, the second RP Martin has faced over Libor-rigging, is the smallest levied in the U.S. and U.K. probes.
Authorities around the world are investigating how more than a dozen firms, including Deutsche Bank AG and JPMorgan Chase & Co., colluded to rig benchmark interest rates to profit on their own derivatives trades. Global fines for rate-rigging reached about $6 billion in December, when European Union antitrust regulators levied a record 1.7 billion euros ($2.3 billion) in penalties.
The firm accepted more than $400,000 in bribes through wash trades in exchange for their help manipulating the rate, the CFTC said.
“The culture at Martins was that profit came first,” Tracey McDermott, the FCA’s head of enforcement, said in the statement. “Compliance was seen as a hindrance and the firm lacked the means to detect the ‘wash trades.’ In this environment, broker misconduct was almost inevitable.”
The firm would have faced a 3.6 million-pound penalty from the U.K., but the regulator accepted its argument that it couldn’t pay the amount in addition to the other regulators’ fines that it owes over Libor manipulation. It also received the FCA’s standard 30 percent discount for cooperating early.
“RP Martin’s new senior management team cooperated fully with the FCA and CFTC in their investigation and entirely respect the fine and sanctions imposed,” the firm said in an e-mailed statement. “Over the last 12 months the board comprehensively restructured the firm’s governance, systems and controls and compliance procedures.”
RP Martin was fined 247,000 euros in the EU case. Two of its former brokers have been charged by U.K. prosecutors over rate rigging.
The UBS trader and RP Martin brokers attempted to conceal the wash trades by avoiding instant messages and choosing to talk primarily over the phone. They also tried to hide the fictitious trades by staggering them in the market so as not to raise questions, the CFTC said.
Richard Morton, a spokesman for UBS, declined to comment.
The firm is the second interdealer broker to be penalized in the case after ICAP Plc (IAP) was fined $88 million by the FCA and CFTC in September.
Interdealer brokers such as RP Martin and ICAP act as go-betweens for banks that trade bonds, stocks, currencies, energy and derivatives.
Brokers assumed greater influence as credit markets froze during the early stages of the financial crisis in 2007. Bankers who made submissions to Libor increasingly relied on information from the brokers to determine what figures to contribute because there were no trades on which to base them. That left the benchmark vulnerable to manipulation by traders trying to profit from bets on derivatives.
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