City regulators have been forced to reduce a £3.6m fine for rigging Libor imposed on City broking house RP Martin because the broker said it faced collapse if it had to pay the full sum demanded.
The Financial Conduct Authority – levying its sixth penalty for rigging the benchmark interest rate – reduced the fine to £900,000 and then applied a further discount to reward the firm's co-operation, taking the amount finally demanded to just £630,000. The broker is also being given three years to hand over the cash.
Almost two years after its first Libor fine on Barclays in June 2012, the FCA cut its penalty after taking into account a $1.2m (£700,000) fine levied by the US regulator the Commodity Futures Trading Commission on the broking house.
Tracey McDermott, the FCA's director of enforcement and financial crime, said the broking firm saw compliance as a hindrance. "The culture at Martins was that profit came first," she said.
Martins is the second inter-dealer broker to be fined, after ICAP was penalised last year. Such inter-dealer brokers act as intermediaries between banks and were involved in setting the price of Libor, which was based on rates that banks on a specially-selected panel thought they were likely to be charged for borrowing from each other.
"Interdealer brokers are expected to act as trusted intermediaries and are key conduits of market information. Martins abused this position of trust by providing false information to panel banks, with no regard for the integrity of the market. This is unacceptable behaviour from any market participant," McDermott said.
RP Martin said its new senior management team co-operated fully with the FCA and CFTC in their investigations and entirely respect the fine and sanctions imposed: "Over the last 12 months the board comprehensively restructured the firm's governance, systems and controls, and compliance procedures."
The CFTC said that brokers at RP Martin accepted payments of more than $400,000 through what are known as "wash trades" intended to generate commission for the broking firm.
The US regulator said that the brokers used "multiple means" to assist a trader at Swiss bank UBS, including offering "spoof" bids to influence the Libor rate in the Japanese Yen.
Transcripts of phone calls show references to a "geezer at UBS", and promises to buy lunch for the whole trading desk.
Gretchen Lowe, acting director of the CFTC's enforcement division, said: "Today's action is part of our on-going efforts to ensure that the Libor rate is free of fraud and manipulation.".
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