FSA imposes penalty for inadequate systems and controls
The Financial Services Authority (FSA) has fined Nomura International Plc (Nomura) £1.75m for widespread systems and controls failings around book marking within its International Equity Derivatives (IED) business.
The systems and controls around marking the IED books fell far short of those expected by the FSA for a business trading complex and high risk financial products.
Nomura breached two FSA Principles as the firm failed to conduct its business with due skill, care and diligence and failed to take reasonable care to organise and control its affairs responsibly.
The failings were particularly serious because they were fundamental and systemic and persisted over a prolonged period of time, until they were identified by Nomura in June 2008.
Margaret Cole, FSA director of enforcement and financial crime, said: “Firms must ensure their systems and controls develop at the same rate their business operations grow; if this doesn’t happen – as in Nomura’s case – they run the risk of having systems that are inadequate for their business.”
“Financial instruments must be valued correctly by traders and a firm’s systems and controls must be able to minimise the risk of traders mis-marking their positions. When a firm’s systems and controls fall short of required standards, we will not hesitate to take action.”
Nomura cooperated fully with the FSA and because it agreed to settle at an early stage of the FSA's investigation it qualified for a discount. Without the discount, the fine would have been £2.5m.
Nomura commissioned both internal and external reports on its systems and controls in this area and has taken extensive remedial action.