The Financial Services Authority has fined Société Générale £1.575 million for failures that led to 80 percent of its transactions being reported inaccurately.
The extent of the failures meant that the bank did not submit accurate reports for over two years. Between November 2007 and February 2010, SocGen failed to report, or inaccurately reported, 18.8 million of its 23.5 million reportable transactions.
Firms are required to have systems and controls in place to ensure they submit accurate data for reportable transactions by close of business the day after a trade is executed. The FSA uses this data to detect and investigate possible market abuse, such as insider trading and market manipulation.
As a branch of a European Economic Area (EEA) authorised firm, SocGen was not required to comply with the FSA transaction reporting requirements until the Markets in Financial Instruments Directive (MiFID) came into force. However, the directive became effective for transaction reporting on 5 November 2007, which means that from then on, SocGen should have been in compliance with the FSA’s rules.
According to the FSA’s decision notice, after the MiFID, SocGen’s transaction reporting regime relied on a variety of internal systems and external approved reporting mechanisms across its different business areas.
The authority found that SocGen had four distinct structures within its transaction reporting process for different types of transactions with no overall oversight of the process.
Furthermore, the FSA said that the accumulation of inaccurate reports was due to a widespread use of inaccurate static data, or a misapplication of accurate static data across all business lines.
In addition to the reporting failures, SocGen breached FSA rules by not retaining all relevant transaction reporting data. This data should be made available to the FSA for at least five years.
SocGen’s reporting breaches occurred despite repeated reminders from the FSA. Margaret Cole, director of enforcement and financial crime at FSA, said: “SocGen failed to accurately report a very high proportion of its transactions for a significant length of time.
This failure is a serious breach of our rules as it can have a damaging impact on our ability to detect and investigate suspected market abuse.
“This is the sixth case in the last year where we have taken action against a firm for failures to make accurate transaction reports. We will continue to monitor the quality of firm reporting and we are committed to taking action where necessary to ensure firms comply with their reporting obligations.”
The FSA said that SocGen has now taken steps to address the reporting issues, including commissioning a formal review of its transaction reporting process.
The bank avoided an original £2.25 million fine from the FSA by settling at an early stage of the investigation to qualify for a 30 percent discount.