The Financial Conduct Authority has fined WH Ireland Limited £1.2m and restricted the firm from taking on new clients in its corporate broking division for 72 days.
The regulator found that between 1 January and 19 June 2013, WH Ireland failed to ensure it had the proper systems and controls in place to prevent market abuse being detected or occurring.
According to the FCA, WH Ireland had deficient controls to ensure inside information did not leak from the private to the public side of its business or in ensuring disclosure to external parties was conducted in a controlled manner with proper safeguards in place.
The City watchdog also found WH Ireland had inadequate personal account dealing rules for employees and failed to maintain an effective written conflicts of interest policy.
WH Ireland was also found to have inadequate records of the kinds of service or activity in which a conflict of interest had arisen or may arise.
The regulator also reported it found deficient compliance oversight including the absence of formal risk management framework for market abuse and inadequate post trade surveillance systems.
The FCA stated it considers these failings to be particularly serious because the range of services that WH Ireland performed during this time meant that the broker was exposed to a broad range of market abuse risks and the business received inside information on a regular basis.
As such, the regulator stated there was significant scope for an adverse impact on the market and on a large number of other market participants if that inside information was mishandled.
The failings were identified by a “skilled person” appointed by the FCA in a report of August 2013.
In July 2014, WH Ireland commissioned a follow up report to look at the extent to which it had complied with the skilled person’s recommendations.
This second report showed that there were some recommendations which had not been implemented adequately within the time set by the FCA’s skilled person.
In addition, throughout this period, the FCA had also been communicating widely with all firms about their responsibilities for countering the risks of market abuse by having effective controls.
At the time the failings took place, WH Ireland had around 9,000 private wealth clients with about £2.5bn of assets under management.
These clients may have bought and sold financial instruments or may have been advised to do so by the firm without the necessary protections in place, the regulator ruled.
WH Ireland also had 87 corporate broking clients.
Mark Steward, director of enforcement and market oversight at the FCA, said: “WHI’s failings were aggravated by the failure to implement adequately the skilled person’s recommendations. It is one thing to be given a chance; for the chance not to be taken up is especially culpable.”
The broker received a 20 per cent settlement discount, without which, the fine would have been £1.5m and the restriction would have been 90 days.
