Two former executives of broker Martin Brokers have been fined and banned from holding influential roles at regulated firms for their part in the Libor manipulation scandal.
The FCA found former chief executive David Caplin and ex-compliance officer Jeremy Kraft “contributed to a culture at Martins that permitted Libor manipulation to take place and enabled the misconduct to continue undetected over a prolonged period”.
Caplin has been fined £210,000 and from holding a “significant influence function” at a regulated firm “because of a lack of competence in his CEO and director role”.
Kraft is also banned from influential positions and has been fined £105,000 for his part, including failing to give “due attention” to systems and controls, not properly overseeing brokers and not challenging Caplin over compliance.
The regulator said the culture at Martins prioritised profits over compliance which resulted in a failure to detect “wash trades” which were executed to reward the broker for manipulating the Libor submissions of panel banks. This led to Martins’ misconduct being hidden “for years”, the FCA says.
Both Caplin and Kraft agreed to settle early in the process and received a 30 per cent discount on their fines as a result.
FCA acting director of enforcement and market oversight Georgina Philippou says: “Mr Kraft and Mr Caplin were responsible for setting the right culture at Martins and ensuring that the firm’s risk management systems and controls were adequate to oversee its broking activities. They failed to do this. Proper systems and controls were non-existent and there was a culture at Martins where revenue came first and compliance was seen as unimportant rather than as an integral part of the running of the firm.
“Both individuals also ignored obvious risks such as the risk that brokers would give or accept inducements. This risk did in fact crystalise when brokers at Martins were induced to assist in Libor manipulation in exchange for corrupt brokerage payments. Consequently, the integrity of the financial markets was compromised.
“This case and other recent Significant Influence Function (SIF) outcomes should serve as a warning to everyone that holds a significant influence function that if a firm’s misconduct can be attributed to cultural failings, then we expect senior management to answer for this.”
The FCA has plans to extend its remit to include the regulation of seven additional financial benchmarks in the light of the Libor rigging scandal. The proposals are currently under consultation.