(Adds details on RP Martin ownership)
By Kirstin Ridley
LONDON May 15 RP Martin was fined $2.3 million
by British and U.S. regulators over allegations its traders
manipulated benchmark interest rates, a penalty reduced by two
thirds because the small UK brokerage was unable to pay the full
U.S. and European authorities have to date fined 10 banks
and brokerages around $6.0 billion to settle allegations they
rigged the London interbank offered rate (Libor) and its euro
cousin Euribor and prosecutors have charged 16 men with
RP Martin, also known as Martins, is paying 630,000 pounds
to the UK regulator and $1.2 million to a U.S. watchdog to
settle claims its brokers helped rig Libor, used to price
roughly $450 trillion of financial products from loans to
The Financial Conduct Authority (FCA) said it would have
fined RP Martin 3.6 million pounds, but the brokerage had been
unable to pay that sum on top of other Libor-related fines.
The FCA, unlike some of its regulatory peers, reduces fines
in cases of financial hardship. This is the first time it has
used that power in the Libor scandal.
"The culture at Martins was that profit came first," Tracey
McDermott, head of enforcement and financial crime at the FCA,
said on Thursday.
"Compliance was seen as a hindrance... In this environment,
broker misconduct was almost inevitable. Similar cultural
failings at other firms have caused havoc in the financial
RP Martin, which has already been fined 200,000 euros by the
European Commission for allegedly participating in illegal
Libor-related cartels, was the first brokerage to see staff
arrested in Dec. 2012 and later charged in the investigation. It
suspended its chief executive and a director in May 2013.
The brokerage said it accepted the fines.
"Over the last 12 months the board comprehensively
restructured the firm's governance, systems and controls, and
compliance procedures," it said.
One source familiar with the situation said private equity
group Gresham, which had held a significant stake in RP Martin,
had transferred its holding to Stephen Welch, the new head of
the business a few months ago and that Welch is now the majority
owner. Neither Welch nor RP Martin returned calls for a comment.
Interdealer brokers have become a focus for the inquiry
because of the role they play in matching buyers and sellers of
bonds, currencies and swaps, for which they charge a fee.
It is the second penalty slapped onto an interdealer broker
since market leader ICAP was fined $87 million last
Sept. over allegations it also manipulated yen Libor. That
brokerage remains under investigation by the European Commission
and prosecutors have charged three of its brokers with
Regulators said that between January 2007 and December 2010,
RP Martin brokers colluded with a trader at UBS as
part of a co-ordinated attempt to influence yen-denominated
Libor. They provided a conduit for misinformation, created false
or "spoof" orders and were rewarded with so-called "wash
Such a trade - when a trading firm buys and sells the same
contract - has no legitimate commercial purpose, but generates a
According to the U.S. Commodity Futures and Trading
Commission (CFTC), the unnamed UBS trader asked RP Martin as far
back as 2006 to assign him a junior yen broker "whom he could
mould into the type of broker he wanted".
The FCA said UBS made at least 600 requests to RP Martin
over the period, which brokers accommodated when a large trade
was involved or when they wanted to boost their commissions.
Several brokers and other individuals spanning two desks,
including three managers, had been part of the scheme that laid
bare RP Martin's inadequate management systems, controls and
oversight, the FCA said.
UBS was fined a record $1.5 billion to settle its Libor case
with global authorities in 2012.
($1 = 0.5960 British Pounds)
(Additional reporting by Aruna Viswanatha and Susan Heavey in
Washington, editing by Alexander Smith and Erica Billingham)