Firm fined over market abuse monitoring

Firm fined over market abuse monitoring

The Financial Conduct Authority (FCA) has fined a wealth and discretionary fund manager for failing to make sure market abuse could be detected and reported.

The regulator has fined Linear Investments, which is also a prime broker and hedge fund incubator, £409,300 but the company has disputed the FCA's fine and plans to challenge the decision in the courts.

During an investigation, the FCA found that before August 2015 Linear Investments had had limited manual oversight of trading conducted through its Direct Market Access service.

The FCA said up until November 2014, Linear mistakenly believed it could rely upon post-trade surveillance undertaken by the brokers through which it executed transactions.

The regulator said: "As with any other broker, inherent within Linear’s business was the risk that clients may commit market abuse. Linear did not appreciate the need to undertake its own separate surveillance based on information available to it and its perspective. This reliance on the brokers' surveillance was wrong."

It added: "Tackling market abuse is a priority for the FCA and firms are expected to play their part by ensuring that they are able at all times to identify and manage the market abuse risks to which they are exposed."

In November 2014, Linear became aware of the need to have its own post-trade surveillance system and took steps to source and implement an automated system but it was not until 10 August 2015 that the company had effective systems in place to remedy the breach.

The FCA said firms are required to identify where there are reasonable grounds to suspect market abuse has occurred and submit reports to it.

Linear agreed to the facts and liability, but has contested the level of the fine.