UPDATE 2-Tullett CEO asks FSA if firm faces Libor investigation

Tue Mar 5, 2013 6:22am EST

* Says no response from watchdog

* Internal inquiry found no evidence of manipulation

* Underlying 2012 pretax profit down 15 pct

* Full-year dividend up 2 pct

By Tommy Wilkes

LONDON, March 5 (Reuters) - Broker Tullett Prebon has asked Britain's financial regulator to clarify whether it is being investigated for possible involvement in rigging interest rates after internal inquiries found no evidence of wrongdoing.

Chief Executive Terry Smith said he had contacted the Financial Services Authority (FSA) after press reports linked the firm to the Libor scandal, but the watchdog has so far declined to say whether the broker is formally under investigation.

"No regulatory body has told us we are under investigation," Smith told Reuters after Tullett announced its full-year results on Tuesday.

"In the light of the press coverage, we did actually contact them (the FSA) and said ... please you can help us with this, and they've given us no response to that."

An FSA spokesman declined to comment on Smith's claim.

Documents published by the FSA in its settlements with UBS and Royal Bank of Scotland for their part in the rigging of Libor (the London interbank offered rate) point to the central role some brokers played in the scandal.

Brokers are not involved in the setting of the benchmark interest rate, but they can act as conduits of information.

In settlements with RBS, global regulators said last month that so-called "wash trades" - a fake trade used by a bank to pay brokers through commissions - were frequently used by derivatives traders at the bank to reward unnamed brokers for their help in influencing Libor setting by other banks.

Tullett's Smith said that the firm's internal investigations had found wash trades, including interest rate products, but that these were a common way for brokers and clients to remunerate each other and that there was no evidence they were linked to Libor manipulation.

"We've spent quite a bit of time trawling through messages between people and trades to see whether there was any pattern of activity and haven't found any," he said.

"We've got a small number of wash trades. (But) sometimes people decide they owe us money and they've got no means of paying us other than a wash trade."

Rival ICAP has said that it found no signs of telltale wash trades in its own internal investigation.

Tullett has not suspended any of its staff, Smith said.

REVENUE SLOWDOWN

Meanwhile, Tullett said that a slowdown in its revenues had continued into this year as tough market conditions eat into client demand for trading financial products.

The broker, which matches buyers and sellers of currencies, bonds and swaps, said on Tuesday that revenues for the year to Dec. 31 came in at 850.8 million pounds ($1.3 billion), down from 910.2 million pounds a year earlier.

Analysts at Societe Generale had forecast revenues of 865.1 million pounds for 2012.

Underlying pretax profit was down more than 15 percent, falling to 114.7 million pounds from 136.1 million pounds a year ago, and it is increasing the full-year dividend by 2 pct to 16.85 pence per share.

Smith said that business had made a "reasonable" start to this year, with revenues for January and February down 5 percent year on year, though big moves in currencies such as the yen and sterling had helped the broker.

Tullett also said that increased regulatory costs in 2013 would offset its action last year to reduce fixed costs.

The chief executive said that less than 5 percent of eligible staff had taken up an offer, reported by Reuters in January, to delay their bonus payments until April, which would have allowed them to benefit from a tax cut for Britain's best-paid workers.

Shares in Tullett were up 3.5 percent at 1054 GMT.

Thomson Reuters, parent company of Reuters, has been calculating and distributing Libor rates for Libor's sponsor, the British Bankers' Association, since 2005.

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