FCA Fines Metro Bank £10M for Compliance Breach

The Financial Conduct Authority (FCA Financial Conduct Authority (FCA) The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol Read this Term) announced its action against another bank on Monday: the financial market regulator fined London-headquartered Metro Bank more than £10 million for publishing incorrect information to investors.

The UK regulator further took action against Metro Bank's former Chief Executive, Craig Donaldson and former Chief Financial Officer, David Arden for "knowingly concerned" about the reach of the listing rules. Donaldson has been fined £223,100, while Arden has to pay £134,600.

Metro Bank has to report its prudential position on a quarterly basis, including the Risk Weighted Assets (RWA) on which its regulatory capital requirements are based. However, the bank published incorrect RWA figures in the quarterly update posted on 24 October 2018.

According to the FCA, the bank was aware of the incorrect figure but did not explain it in the quarterly update. It did not even seek legal advice on "whether the incorrect RWA figure ought to be qualified or explained in the October Announcement." Thus the bank failed to ensure that the quarterly announcement was "not false and misleading and did not omit relevant information."

The bank announced the correct RWA figure in January 2019, resulting in a 39 percent slide in the Metro Bank's share price. However, the regulatory penalty did not hurt the investors' sentiment as the Metro Bank share price has gained, as of press time, since the market's opening on Monday.

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Individual Appeals

Donaldson and Arden were penalized as they were aware of the incorrect RWA figure but did not take any action. Though Metro Bank has accepted the FCA's decision, the two former executives appealed against the regulatory decision in the Upper Tribunal.

"Listed firms must ensure that the information they are disclosing to the market is right. This is what investors are entitled to receive," said Mark Steward, FCA's Executive Director of Enforcement and Market Oversight. "The UK's Listing Rules impose high standards on issuers and their officers, which Metro Bank, Mr Donaldson and Mr Arden failed to meet in this case."

On top of that, the FCA heavily penalized financial services giants for their lapses in anti-money laundering (AML Anti-Money Laundering (AML) Anti-money laundering (AML) is a term that describes laws, processes, and regulations that are intended to prevent illegally obtained funds from being disguised as income gained through legitimate means. The fundamental purpose of the AML laws is to help safeguard, detect, and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.Most exchanges have AML measures that include identity verification Anti-money laundering (AML) is a term that describes laws, processes, and regulations that are intended to prevent illegally obtained funds from being disguised as income gained through legitimate means. The fundamental purpose of the AML laws is to help safeguard, detect, and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.Most exchanges have AML measures that include identity verification Read this Term) compliances. It recently slapped a £107.7 million fine on Santander UK for AML compliance breaches. Other significant fines were against Standard Chartered Bank for £102.2 million, HSBC Bank plc for £63.9 million and NatWest for £264.8 million.