FSA fines Nomura £1.75 million

FSA fines Nomura £1.75 million



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Nomura International Plc has been fined £1.75 million by the FSA for widespread systems and controls failings around the trading of its complex and high risk financial products.

The systems and controls around marking its International Equity Derivatives (IED) books reportedly fell far short of those expected by the regulator for a business working in trading this kind of risky financial product.

It was said that Nomura breached two FSA Principles, in that the firm failed to conduct its business with due skill, care and diligence and failed to take reasonable care to organise and control its affairs responsibly.

The failings were considered particularly serious as they were “fundamental and systemic and persisted over a prolonged period of time”, until they were identified by Nomura in June 2008.   

Margaret Cole, FSA director of enforcement and financial crime, said: “Firms must ensure their systems and controls develop at the same rate their business operations grow; if this doesn’t happen – as in Nomura’s case – they run the risk of having systems that are inadequate for their business.

“Financial instruments must be valued correctly by traders and a firm’s systems and controls must be able to minimise the risk of traders mis-marking their positions. When a firm’s systems and controls fall short of required standards, we will not hesitate to take action.”

The regulator stated that Nomura had cooperated fully with the investigation, and because it agreed to settle at an early stage of the FSA's examination it qualified for a Stage 1 discount under the FSA's settlement discount scheme. Without the discount, the fine would have been £2.5 million.

According to the FSA, Nomura commissioned internal and external reports on its systems and controls in this area and has already taken “extensive remedial action”.

 

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