FSA fines and enforcement actions in 2005

Between May 1999 and 6 October 2005 UBS AG failed to make required transaction reports to the Securities and Futures Authority (and later the FSA) and failed to take reasonable steps to ensure the accuracy of the reports it did submit. On 17 November 2005 the FSA fined UBS £100,000 for breaches of Rule 5.49 of the SFA Rules and SUP 17.4R and SUP 15.6.1R of the FSA Rules — these provisions require firms to make transaction reports and to take reasonable steps to ensure those reports are accurate. The register entry records two periods of breach: May 1999–30 November 2001 (breach of R5.49) and 1 December 2001–6 October 2005 (breach of SUP 17.4R and SUP 15.6.1R).

The FSA found that on 2 August 2004 Citigroup Global Markets Limited (CGML) ran a large, technology‑enabled trading strategy in European government bonds—building very substantial long positions and then exiting them quickly via many simultaneous trades on the MTS platform—which caused short‑term disruption to MTS volumes and sharp price falls. The FSA concluded CGML breached Principle 2 (to conduct business with due skill, care and diligence) and Principle 3 (to organise and control its affairs and have adequate risk management) because the trade was not escalated to senior management, control functions were not consulted, clear size parameters were not set or reviewed, and trader supervision was inadequate. The FSA imposed a penalty made up of a relinquishment of profits of £9,960,860 and an additional penalty of £4,000,000; the decision was recorded on 28 June 2005.

The Financial Services Authority (FSA) fined City Index Ltd £35,000 (recorded 23 March 2005) for producing misleading financial promotions for spread betting and CFDs that were communicated between September and November 2003. The promotions, run in national newspapers, magazines and on carrier bags, failed to give a clear, simple and prominent warning that a customer’s liability may exceed their initial deposit; a carrier‑bag promotion offering a “free £25 bet” required an initial spread bet (so was not free). The FSA also found that City Index had ineffective systems and controls for approving financial promotions; the register entry records only the financial penalty and does not record any redress, settlement discount or appeal.