The Financial Conduct Authority has slapped a fine of 34.5 million pounds on Bank of America Corp's (NYSE:BAC) investment banking arm, Merrill Lynch, over a transaction reporting failure. According to the financial watchdog in the United Kingdom, Merrill Lynch failed to undertake testing, put in place adequate oversight arrangements or allocate enough personnel who would be responsible for ensuring that reporting obligations were met between the years 2014 and 2016.
Due to the fact that Merrill Lynch agreed to a settlement when the investigation was still at an early phase, the investment bank paid 30% less in fines as the overall fine would have been 49.32 million pounds.
Global financial crisis
In the derivatives trading market, regulators in the European Union toughened the reporting requirements after the global financial crisis that occurred between the years 2007 and 2009. During the financial crisis, the regulators were unable to tell which financial institutions had huge exposures to risky positions and this resulted in uncertainty in the markets. Consequently banks are now required to commit to reporting their derivatives trades to ensure regulators are in a position to spot when uncontrolled risks are building up.
This was the first time that an enforcement action was being taken against a firm which had failed to report derivatives trades under the European Union’s EMIR – European Markets Infrastructure Regulation.
No client losses
"It is vital that reporting firms ensure their transaction reporting systems are tested as fit for purpose, adequately resourced and perform properly. There needs to be a line in the sand," said the enforcement executive director at the Financial Conduct Authority, Mark Steward.
A spokesperson for Merrill Lynch stated that no client of the investment suffered losses and that it was putting in place measures to ensure full compliance. This is not the first time that Merrill Lynch had been penalized over violations. Two years ago Merrill Lynch was slapped with a fine of 13.28 million pounds over its failure to report transactions that had taken place between the years 2007 and 2014 accurately.
On Monday shares of Bank of America Corp fell by 0.04% to close the day at $27.16.
