The basis of the FCA fine revolves around the reporting of transactions, for instance stocks, bonds and derivatives trades. Supplying the regulator with individual trade information, including details such as the counterparties involved, price and quantity, is a requirement under the EU’s Mifid directive. The FCA uses these to identify and investigate suspected market abuse.
According to the regulator, between November 2007 and February 2012, RBS incorrectly reported some 44.8 million transactions and failed altogether to report a further 804,000. This amounts to some 37% of relevant transactions carried out by the group over that time frame.
RBS’s transaction reporting errors included incorrect prices, as well as failing to include needed information to enable the FCA to identify trade counterparties.
This does not mean mis- pricing took place but rather the information supplied regarding the transaction was inaccurate. The FCA has said there has been no loss to consumers, investors or other market users as a result of the errors and noted RBS did not profit from the transaction failings.
The regulator deemed the reporting failures as a serious breach resulting from an overly convoluted system. Following the takeover of ABN Amro Bank NV in 2007, RBS ended up with 38 different transaction recording systems and had three different Approved Reporting Mechanisms (ARMs) in order to deliver its transaction reports.
In early 2010 RBS recognised its overly complex and fragmented recording and reporting systems required significant work to ensure they were effective, according to the FCA. "Even at that stage RBS failed to appreciate the full scale of the reporting problem across the business, and the establishment of effective transaction reporting systems and controls was not adequately prioritised," the FCA said.
