Tuesday 9th April 2019
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Global financial services firm INTL FCStone Financial has been fined and censured by the stock market operator for recklessly breaching listing rules a number of times since its accreditation less than four years ago.
The New Zealand Markets Disciplinary Tribunal found INTL FCStone fell short of its obligations on two occasions last year, taking its total breaches of listing rules to seven since its accreditation as an NZX clearing participant in November 2015.
While the breaches weren't related to the firm's creditworthiness and were operational in nature, the tribunal said the significant number of issues over a short period of time showed INTL FCStone was reckless and didn't have systems in place to prevent a repeat.
"INTL FSCtone was reckless because it did not take adequate steps to prevent the recurrence of the breaches, despite being reminded several times by NZX and New Zealand Clearing Ltd to meet its clearing and settlement obligations at their respective New Zealand times," the tribunal said.
"This engagement with INTL FCStone should have given it the opportunity to review and improve its overall processes for satisfying its New Zealand Clearing obligations."
The tribunal said the recurring nature of the issues posed a risk to the confidence and integrity in the markets, and was an inconvenience to New Zealand Clearing, which had to escalate the problem and chase up the firm for payments.
Last July, INTL FCStone breached its mark-to-market settlement obligation by not holding sufficient funds to meet its net open positions, and in September, it didn't hold enough collateral to meet its initial margin obligation.
INTL FCStone was accredited to the derivatives market in late 2015 as a general clearing participant, and had been a participant in the dairy derivatives market since 2010. Its accreditation was seen at the time as giving the local dairy derivatives market a presence in the US commodity market.
The tribunal accepted INTL FCStone's cooperation and its efforts to address the problem as mitigating factors. It also said the firm wasn't seeking to benefit from the breaches, and that it didn't break the rules intentionally.
INTL FCStone settled with the tribunal on March 18, agreeing to pay a $40,000 penalty and cover NZX's costs of $4,500, without admitting or denying the findings. It will also cover the tribunal's costs.
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