[author: Charles Sheldon]

On February 9, 2017, the Prudential Regulation Authority (“PRA“) issued a notice imposing fines of £17.75m and £8.925m on Bank of Tokyo-Mitsubishi UFJ (“BTMU“) and MUFG Securities EMEA (“MUFG“), respectively, for failing to be open and cooperative. The fines related to enforcement action by the New York Department of Financial Services (“NYDFS“) against both BTMU and MUFG, following which the PRA deemed that the two banks were in breach of the PRA Fundamental Rules.

In particular, it was deemed that they had breached Fundamental Rule 6, which states “a firm must organize and control its affairs responsibly and effectively,” and Fundamental Rule 7, which outlines “a firm must deal with its regulators in an open and cooperative way and must disclose to the PRA appropriately anything relating to the firm of which the PRA would reasonably expect notice.”

It was found by the PRA that BTMU failed to put in place appropriate procedures, systems and controls for communicating information relating to the NYDFS action, and failed to deal with the PRA openly following it. This was despite the action being linked to BTMU’s conduct in New York.

MUFG was fined by the PRA for a similar offense, as it was deemed to have not been open and cooperative in relation to a NYDFS investigation into an individual at the firm. It was deemed that the PRA had not been informed in a timely manner and was therefore deprived the opportunity to rule on the fitness of the individual.

This is the first time the PRA has issued a fine in breach of Fundamental Rules 6 and 7, and this sends out a warning that the PRA should be informed of any sanctions by the regulator in a timely manner, irrespective of the jurisdiction of the regulator.

The full notice is available here.