The FCA has fined Macquarie Bank Limited - London Branch (MBL) £13m for serious failings that allowed one of its employees to record over 400 fictitious trades.
From June 2020 to February 2022, Travis Klein, a trader based on MBL’s London Metals and Bulks Trading Desk was able to record and take steps to conceal over 400 fictitious trades in MBL’s internal systems in a bid to hide his trading losses.
The fictitious trades were not detected earlier because of significant weaknesses in MBL’s systems and controls, some of which the firm had been previously made aware of. Despite knowing of the weaknesses, MBL failed to put effective and timely plans in place to fix them.
As a result, Mr Klein, a relatively junior trader, was able to bypass 3 key internal controls without detection for over 20 months. The FCA has banned Mr Klein from the financial services industry for acting dishonestly and without integrity and would have fined him £72,000 if his application for serious financial hardship had not been successful.
The fictitious trades cost MBL an estimated USD $57.8m to unwind but did not affect customers or the market overall. If MBL had taken timely action to plug these gaps in their systems and controls, this cost could have been substantially reduced or avoided altogether.
Steve Smart, joint executive director of enforcement and market oversight, said:
'MBL’s ineffective systems and controls meant that one of its employees could, at least for a time, hide trading losses which cost the firm millions to unwind.
'This should serve as an example to those we regulate; risk can come from within. You need the right systems to identify it so it can be tackled early.'
Notes to editors
- Final Notice 2024: Macquarie Bank Limited - London Branch.
- Final Notice 2024: Travis Lloyd Klein.
- Macquarie Bank Limited (MBL) is a company incorporated in Australia which forms part of a global financial services group. It operates in the UK through its London Branch and has been authorised by the FCA since December 2001.
- The FCA has imposed a financial penalty of £13,031,400 on MBL pursuant to section 206 of the Act for breaches of Principle 3 of the FCA's Principles for Businesses. MBL would have been fined £18,616,403 but it agreed to resolve these matters and so qualified for a 30% discount.
- Mr Travis Lloyd Klein (Mr Klein) was a trader on the Metals and Bulks Trading Desk at Macquarie Bank Limited from August 2017, initially working in Sydney Australia. From October 2018, Mr Klein worked at MBL’s London Branch.
- From 5 December 2018, Mr Klein was a Certified Employee at MBL for the purpose of client dealing and was therefore subject to the FCA's Individual Conduct Rules, including the requirement to act with integrity.
- The FCA has also made an order prohibiting Mr Klein from performing any function in relation to any regulated activity carried on by an authorised person, exempt person, or exempt professional firm, pursuant to section 56 of the Act.
- Find out more about the FCA.