Central Bank fines investment firms Octagon Online Services and Lambay Capital

Two investment firms have been fined a combined €154,000 by the Central Bank for regulatory breaches.

The bank’s enforcement division yesterday confirmed settlements with Octagon Online Services to the tune of €105,000, and Lambay Capital, which trades as MKW Futures, for €49,000 regarding breaches of obligations. Both firms had previous instances of such failures.

Octagon acts as an intermediary for investors looking to deal in US-based securities and it earns commission on each trade placed by clients.

The Central Bank found, between June 2014 and late February 2015, the company traded in financial instruments using its proprietary capital without authorisation.

On two occasions, in 2002 and 2008, the Central Bank warned the company against this practice and threatened enforcement activity should Octagon exceed the limits of its authorisation in this way.

“This is the second time Octagon has breached its authorisation in this way and the conduct occurred despite Central Bank warnings not to engage in unauthorised activity,” said the Central Bank.

It said Octagon’s case was “a particularly serious breach”, only resolved after Central Bank intervention.

The findings said Octagon was not well enough controlled to comply with regulatory obligations and continued with its breach despite doubts.

The firm agreed to appoint a dedicated in-house compliance officer as part of its settlement.

Lambay/MKW, meanwhile, was fined for overstating its funds, four times, by including unaudited profits in its quarterly returns and failing to implement adequate accounting procedures.

According to the regulator, the overstatement of funds could have resulted in a capital breach going undetected.

“The Central Bank expects regulated financial service providers to be sufficiently well controlled to deal with their regulatory environment and their supervisors in an informed and compliant way.

"This includes providing accurate and complete information to us,” said Derville Rowland, director of enforcement at the Central Bank.

“While the facts and breaches in these two cases are different, they share a common feature: each firm forgot, on an institutional level, its historic regulatory failings and prior dealings with the Central Bank.”