The FSA has imposed a fine of £1.75 million (after a 30% discount) on Nomura International Plc (Nomura) for systems and controls failings in relation to book marking within its International Equity Derivatives (IED) business. The failings came to light following the discovery in June 2008 of trader mis-marking in Nomura’s Hong Kong Single Stock book within the IED business. The FSA found the following failures attributable to IED Product Control and Front Office which breached Principles 2 and 3 of the FSA’s Principles for Businesses:

1.    inappropriate communications and disclosures between Product Control and Front Office regarding the independent price verification process;
2.    inappropriate and limited stock selection for testing by Product Control in respect of volatility and dividend marks;
3.    significant failings by Product Control in conducting the IPV process and failings around the testing methodology;
4.    failures by Front Office in identifying marking issues from available information and failure to report and escalate issues that were noted;
5.    inadequate production and utilisation of P&L attribution reports;
6.    failure to adequately monitor volatility marks and a number of systems failures in relation to correlation marking; and
7.    lack of clarity in respect of supervisory responsibilities in Hong Kong IED Front Office.

Copies of Nomura’s final notice and the related press release are available.

read more – http://www.fsa.gov.uk/pubs/final/nomura.pdf / http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/161.shtml