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FCA’s £409k fine for broker firm ‘appropriate’ rules Upper Tribunal

A London-based broker and investment firm has lost its appeal against the FCA over a £409,300 fine for its failure to update its risk surveillance systems following a business model change.

Linear Investments’ trading is primarily conducted via electronic Direct Market Access.

The firm saw increased trading volume following a business model change prior to November 2014.

In June 2018 it was fined £409,300 by the FCA for incorrectly assuming it could rely upon post-trade surveillance by the brokers through which it executed transactions during this period.

After Linear became aware of the need to have its own post-trade surveillance system in November 2014, it took until the following August for effective systems remedying the breach to be put in place.

In its decision notice, the FCA says Linear’s breach of Principle 3 by failing to control its affairs responsibly with suitable risk management systems rendered it unable to detect or report potential instances of market abuse.

Linear received a 30 per cent discount on what would have been a £584,700 fine had it not agreed to settle with the FCA during the early stages of its investigation.

FCA fines broker firm £409k over trade surveillance system

Linear agreed with the facts of the regulator’s decision but disputed the penalty and appealed the amount to the Upper Tribunal. Grounds for appeal included the decision overstating the seriousness of the case and the penalty being disproportionate.

In a written decision dated 9 April 2019 the Upper Tribunal states the fine of £409,300 is the ‘appropriate action’ for the FCA to take.

FCA Executive director of enforcement and market oversight Mark Steward says:

‘Firms are expected to play their part in tackling market abuse by ensuring that they are able to identify and manage the market abuse risks to which they are exposed.

‘The Upper Tribunal recognised that, despite the pain caused by the size of the penalty, given Linear’s financial resources and level of profits, Linear’s lack of effective monitoring measures was a serious matter and the FCA’s penalty was therefore appropriate.’

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