StoneX Financial to pay £55,000 fine under settlement with LME
The London Metal Exchange (LME) today posted a notice of disciplinary action as to StoneX Financial Ltd (IFC).
The notice records a settlement between LME and its Category 1 Member, StoneX Financial which includes a financial penalty of £55,000.
Following an investigation by the LME, the Exchange and IFC have reached settlement pursuant to Regulation 14.45, Part 2 “Membership, Enforcement and Discipline” of the LME Rulebook.
The alleged misconduct by IFC relates to a breach of paragraphs 7 and 17 of Notice 19/226 dated 17 July 20191 and Regulation 12.6(b) of Part 2 “Membership, Enforcement and Discipline” of the Rulebook, which requires that a Member shall organise and control its internal affairs in a responsible and effective manner, with appropriate and adequate risk management systems.
IFC failed to report its daily position reporting (DPRS) files in an accurate and timely manner, as required by Notice 19/226 on 6 separate days in January 2021. On 4, 12 and 14 January 2021 IFC’s DPRS files were submitted late. In relation to the 4 January submission, there were also inconsistencies in IFC’s Warrant Holdings file and Large Position file. Also, on 7, 8 and 20 January 2021 IFC’s DPRS files contained errors. After IFC had rectified the errors, IFC’s submission of its DPRS files on these dates was late.
During the investigation, the LME also identified that between November 2020 and March 2021 (the “Reporting Period”), IFC had submitted a significant number of inaccurate commodity position report (CPR) files. The LME considers that the CPR Reporting Failures occurred as a result of several control failures.
These failures included the following: (i) an over-reliance on third party vendors to generate accurate CPR files; (ii) an inadequate systems and controls environment with regard to accurate CPR reporting. For example, the systems that IFC had in place to detect errors regarding CPR submissions to the LME only related to the delivery of the file to the LME rather than the content of the file submission; and (iii) inappropriate escalation procedures for the identification and management of reporting errors which led to inaccurate CPR files continuing to be submitted to the LME during the Reporting Period.
The LME considers that the CPR Reporting Failures constitute a breach of Regulation 12.6(b) of Part 2 of the Rulebook.
The Exchange notes that StoneX Financial was open and cooperative with the LME during the Investigation. The LME also understands that following the Relevant Period, IFC has implemented a series of changes to its systems and controls regarding the submission of accurate position reporting files.
The LME and IFC agreed a settlement in which IFC will pay a financial penalty of £55,000 in respect of the Position Reporting Failures. This penalty consists of two elements: a penalty of £5,000 in respect of the DPRS Errors and a penalty of £50,000 in respect of the CPR Reporting Failures.