Nomura International has been fined £1.75m for widespread systems and controls failings relating to its International Equity Derivatives (IED) business.
The FSA says the failings came to light following the discovery, in June last year, of mis-marking of volatility levels in the firm's Hong Kong Single Stock book.
It resulted in a negative valuation adjustment of £10.8m and, following re-assessments across its other IED books, a further negative adjustment of £5.5m.
The regulator says Nomura's book-marking procedures "fell far short of those expected" for high risk financial products.
Nomura's shortcomings were particularly serious, the FSA adds, because they were systemic and occurred over a prolonged period of time
Margaret Cole, FSA director of enforcement and financial crime, says: "Financial instruments must be valued correctly by traders and a firm's systems and controls must be able to minimise the risk of traders mis-marking their positions.
"When a firm's systems and controls fall short of required standards, we will not hesitate to take action."
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