Merrill Lynch
ML was fined £150,000 by FSA for failing to accurately report the capacity in which it executed transactions in non-UK European equities from Sep 1996 to Dec 2001.
When dealing with US clients of the US affiliate, ML acted as principal on a back-to-back basis, but its transaction reports indicated its status as agent. This is because the transaction reporting system was set to report trades from the client's perspective instead of the firm's perspective.
Morgan Stanley
MS was fined US$2.9m by NASD for widespread violations of NASD Rules from 1999 to 2006.
In those significant violations, MS:
- failed to adequately price, sell & report corporate & municipal bond transactions
- failed to timely or correcty report thousands of transactions in listed and OTC securities
- executed thousands of short sales trades without ensuring delivery or borrowing of securities by settlement date
- failed to execute thousands of customer trades at the best available price
Transaction reporting reflects the disclosure-based regulatory approach, which is extensively implemented in the UK and the US. My curiosity is:
- How could the reporting violations last for such a long period?
- How were the violations finally detected by the regulators?
- How would the compliance officers be made responsible for the violations?
It is not difficult for something unnoticed for a lengthy period. Simply ignore it and don’t think about it. Pretend you do not aware of its existence or the existence of any deficiency.
ReplyDeleteEven the most industrial auditor will not perform 100% check. Examiners also adopt the “don’t aware” approach. Who wishes to make his life difficult? or get off work late?
Compliance personnel, while doing risky job, there is virtually no protection. The firm will not take out insurance to cover their back because you are not equivalent to executive directors (they are protected by very expensive insurance).
The regulators simply expect compliance personnel to be saint without acknowledging that they are simply employees of the firm earning their daily bread. Should a compliance officer be really serious on its responsibility, there will be huge amount of reporting and notification to the SFC of deficiencies. Why don’t they challenge the auditors (internal and external) as well? (they are very high pay and are powerful)