Inter-dealer Broker Tullett Prebon (Europe) has been fined £15.4m by the UK’s Financial Conduct Authority (FCA) for lapses in its risk management controls for broker conduct.

The regulator alleged that the firm’s rates unit reported improper trading activity, including wash trades that “involves no change in beneficial ownership and has no legitimate underlying commercial purpose”.

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The misconduct occurred between 2008 and 2010.

According to the FCA, the firm’s senior leadership ignored red flags and falsely believed that effective systems were deployed for broker conduct supervision.

At the same time, Tullett Prebon was accused of failing to cooperate with the regulator.

FCA said that it asked the firm to send broker audio tapes in 2011. However, the firm sent the required in 2014.

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Despite these failures, Tullett Prebon became eligible for a 30% discount on the penalty for agreeing to settle the issue, or else would have been hit with a £22m fine.

FCA executive director of enforcement and market oversight Mark Steward said: “While these trades did not mislead the market, nor amount to market abuse, the wash trades were entirely improper, undermining the proper function of the market.

“Senior management and compliance were cocooned from seeing the misconduct, and systems and controls failed to probe broker conduct, even when warning signs were visible.

“The case against Tullett Prebon was a long and complex one. The firm’s failure to be open with the FCA about the existence of key evidence reflected a high degree of culpable incompetence and prejudiced the FCA enquiries.”