Merrill Lynch fined $45.5M for failure to report transactions

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Bank of America’s Merrill Lynch unit has been fined $45.5 million by Britain’s Financial Conduct Authority for failing to report details of trading in exchange-traded derivatives, the market regulator said Monday.

The enforcement action, the first of its kind under the European Markets Infrastructure Regulation, focused on 68.5 million derivatives transactions between February 2014 and February 2016. The transactions represent contracts with agreed-upon values based on underlying assets, indexes or securities.

Reporting of such transactions is important because the process helps authorities assess and address the risk inherent in financial systems caused by a lack of transparency, the market regulator said. The reporting requirement was a key reform introduced after the 2008 financial crisis.

Merrill Lynch cooperated with the Financial Conduct Authority investigation of the issue and agreed to a settlement during an early stage of the review. As a result, the wealth management division of Bank of America received a 30% discount on what otherwise would have been a $64.9 million fine.

“When we discovered that certain trades had not been fully reported to a trade repository … we immediately reported the matter to the FCA,”  Bank of America-Merrill Lynch said in a formal statement Monday. “We have re-evaluated and improved our related processes and can confirm that no clients were financially impacted as a result.”

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Despite the company’s cooperation and correction of the reporting lapse, Merrill Lynch previously was the subject of two related and similar issues, the Financial Conduct Authority said.

“It is vital that reporting firms ensure their transaction reporting systems are tested as fit for purpose, adequately resourced and perform properly,” said Mark Steward, the regulator’s executive director of enforcement and market oversight. “There needs to be a line in the sand.”

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Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc

 

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