Probe
RP Martin suspends chief amid Libor probe
RP Martin has removed its chief executive and an executive director from their posts amid a probe into the firm’s role in the manipulation of Libor that saw two former employees arrested in December.
David Caplin, the interdealer broker’s chief executive, and Alan Farnan, an executive director, have been suspended amid inquiries into RP Martin’s role in the Libor affair, said people familiar with the situation.
Their suspension marks a new stage in the fall-out suffered by financial institutions as a result of the Libor probe, amid wider questions over whether executives at banks and interdealer brokers knew of alleged Libor rigging, which so far has been blamed on a handful of lower-level traders and brokers.
Two RP Martin brokers, Terry Farr and Jim Gilmour, were arrested by the UK’s Serious Fraud Office along with Tom Hayes, a former trader at UBS and Citigroup, who was subsequently charged by the US Department of Justice in its own investigation.
All three men were bailed pending further inquiries and have not been charged in the UK with any wrongdoing.
Recent settlements with UBS and the Royal Bank of Scotland in the Libor probe have shed light on the shady role played by interdealer brokers in the alleged manipulation. The regulators have alleged that they provided a conduit for both misinformation and as a way for a trader at one bank to orchestrate moves in Libor submissions at other banks.
The UK financial regulator said, in anonymised findings in its case against UBS, that the bank made “corrupt brokerage payments”. UBS paid $1.5bn to settle with UK and US authorities in December.
RP Martin brokers also facilitated so-called wash trades with UBS and RBS, according to anonymised findings against both banks by the UK financial regulator.
RP Martin is the firm where the regulator alleges that a few employees benefited from nine so-called wash trades, where buy and sell trades are matched purely for the purposes of generating commission rather than for any commercial rationale. In RP Martin’s case, these trades totalled commissions of £170,000, the anonymised findings allege.
Employees at larger interdealer brokers such as ICAP and Tullett Prebon have also been drawn into the worldwide probe, where at least 10 authorities are focusing on about 20 of the world’s biggest financial institutions.
Mr Caplin, 52, widely known as “Mustard”, has been at RP Martin for at least 17 years. Since a management buyout backed by private equity group Gresham in 2005, RP Martin has expanded rapidly through acquisitions.
The company has traditionally been strongest in the cash money markets, trading over-the-counter derivatives such as forward rate agreements.
RP Martin and the Financial Conduct Authority declined to comment. A message sent to Mr Farnan via LinkedIn was not returned. Mr Caplin could not be reached for comment. Both men are still listed as active on the FCA’s regulatory register.
(Published by Financial Times – May 15, 2013)