UK watchdog slaps Merrill Lynch with £34.5m fine for breaking reporting rule

FCA’s first penalty of its kind under Emir rules put in place after 2008 financial crisis

In its third transaction reporting failure in just over a decade, Bank of America’s Merrill Lynch has been slapped with a £34.5m fine by Britain’s financial watchdog for breaking a reporting rule.

The Financial Conduct Authority (FCA) said today that Merrill Lynch International failed to report £68.5m derivative trades in a period of two years, breaking a rule put in place by the European Union regulators following the 2007-09 financial crisis.

This is FCA’s first penalty of its kind under European Markets Infrastructure Regulation (Emir) rules.

According to the financial watchdog, derivatives can create a “complex web of interdependence” that then make it difficult to identify risks. Therefore, banks are now expected to report their derivatives in a timely way so that regulators can spot uncontrolled risks building up.

Mark Steward, the FCA’s head of enforcement, said that firms needed to ensure their reporting systems worked properly: “There needs to be a line in the sand. We will continue to take appropriate action against any firm that fails to meet requirements.”

A spokesman for Merrill Lynch has stated that the bank had alerted authorities about their failure to report the financial trades between February 2014 and February 2016, adding that no clients were affected financially and they have improved its systems since then.

In April 2015 as well, the bank had faced a £13.3m fine for incorrectly reporting 35m transactions and failing to report thousands of others. In August 2006, the watchdog had again fined the bank £150,000 for share trading reporting failures.