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FCA bans former broker over 'dishonest' trades

FCA bans former broker over 'dishonest' trades

The Financial Conduct Authority (FCA) has banned an ex-broker for "dishonestly" carrying out "wash trades".

Terry Farr, a former broker at Martins Brokers, told traders at UBS that he could influence the Libor rates submitted by banks, and in exchange for this, the firm rewarded him with wash trade business.

A wash trade is a practice between two brokers where they trade the same instruments with each other, but on behalf of clients.  

The trades are designed to cancel each other out, so the investors are in the same position as when they started, except that the brokers charge the clients a fee for carrying out the trades, which are typically not needed by the client.

This allows brokers, who earn commission, to do more business and increase their income to the detriment of the end client.

Mr Farr was acquitted of actually influencing the rate following a trial in 2016.

Traders attempt to profit from the difference between the actual Libor rate and interest rates.

Libor is compiled from the average of the daily interest rates banks charge to lend to each other.

Mr Farr’s firm received income from the wash trades of more than £250,000, according to the FCA.

The FCA stated: "Mr Farr knew that this increased the bonus pool available to him and his colleagues on the Japan desk."

Mark Steward, executive director for enforcement and market oversight at the FCA, said: "There was no legitimate reason for Mr Farr to make these trades and his actions were motivated by greed. His actions mean he has no place in financial services.

"Today’s ban reflects our commitment to making sure that people working in financial services act with integrity."

david.thorpe@ft.com

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