On 5 March 2018, HK SFC publicly criticized Nomura on takeover research.
- Criticized Nomura International (HK) Limited, for breaches of HK takeover code.
- Also cited Lee Yuen Yee, whilst acting as financial adviser to West China Cement.
- Lee is a licensed representative of Nomura Hong Kong, for the regulated activity.
- Work done in relation to possible mandatory offer for the shares of the company.
- Nomura fell within the definition of “associate” of offeree company, for purposes
of HK takeovers code on engagement as West China financial adviser November 2015.
- Bank did not comply with limits on issuance and distribution of research reports.
- On publishing five credit commentaries, and three weekly wraps, on West China.
- Research contained profit forecasts, which were not reported by Lee as required.
- Note 4 to Rule 8.1 of takeovers code provides that a financial adviser to offeree
company should stop issuing research reports on it, except if SFC prior consent.
- Any research reports with profit forecasts must comply with reporting per code.
- Regulator cited public criticism of Nomura HK for their breach of takeovers code.
- In determining sanction, SFC took account of Nomura HK and Lee’s cooperation.
- As well as self-reporting of the breach, and the remedial measures implemented.
On 8 February, HK SFC fined Credit Suisse $39.3mn for regulatory breach.
- Followed self-reporting of breaches, agreed independent reviews, and investigation.
- Failures in segregating client securities, and reporting direct business transactions.
- Complying with short selling, electronic trading requirements, contract note rules.
- Failures in internal controls to ensure suitable investment products sold to customers.
- Co-operation expedited resolution, otherwise sanctions would be substantially higher.
On 23 October, FCA issued £35mn fine to Merrill Lynch for EMIR failings.
- Fined Merrill Lynch International £34,524,000 for breach of Principle 3, Art 9 EMIR.
- MLI agreed to settle at an early stage and qualified for the 30% Stage 1 discount.
- Without the discount, FCA would have imposed a financial penalty of £49,320,000.
- MLI breached Art 9 EMIR by failing to report 68.5mn exchange traded derivatives.
- Also failed in adequate oversight, failed to test its reports, lacked human resources.
- FCA considered breach particularly serious as MLI breached reporting rules before.
- MLI’s trading data system did not record market leg of ETD transactions separately.
- It therefore had to be artificially generated by EMIR reporting system used by MLI.
- System required additional coding and embedded data to identify ETD transactions.
- On implementation in February 2014, error with static data table failed to work properly.
- Error meant that non-EU third party brokers were not be identified on market side.
- As result reports not made to trade repository on market side leg until February 2016.