Bank of England officials were first warned that hedge funds had paid for privileged access to press conferences a year before the issue erupted into a public scandal, a report has found.
Threadneedle Street failed to properly investigate 2018 tip-offs about misuse of an ultra-fast audio feed which gave traders early recordings of Bank press conferences, according to an internal investigation.
The Bank was then engulfed in December last year by a furore over Statisma News, which sold access to an audio feed installed at the institution's offices by an affiliate firm, Encoded Media.
This audio-only feed delivered market sensitive press conference coverage to subscribers, seconds ahead of a video stream used by other observers. It potentially gave a crucial advantage to high-frequency traders dealing in currencies and bonds.
In a report published on Wednesday, investigators said: “with the benefit of hindsight, this misuse by a third party supplier of the Bank’s audio feed could have been identified sooner by the Bank”.
In late 2018, an “external party” raised specific concerns with the Bank over Encoded Media’s use of the feed.
The report said: “This was not fully investigated because it was not considered possible in the Bank’s press conference environment. This was based on the Bank’s understanding of the facts, but it was incorrect.”
Officials dismissed the claim even though Encoded had asked the Bank to ensure its audio feed was active during press conferences after this was installed in 2017.
The Bank also admitted that it was slow to monitor social media adverts advertising “inappropriate access” to its press conferences, despite messages circulating on Twitter boasting of Statisma’s speed advantage over other providers.
Encoded's contract was cancelled in the wake of the scandal, but a spokesman declined to comment on whether any Bank staff had been disciplined or dismissed over the breaches.
The investigation found that responsibility for press conferences was split between the central bank's technology, communications and security divisions, and said there was a lack of clarity over their individual roles and responsibilities.
The Financial Conduct Authority watchdog (FCA) investigated the security breach after being alerted by the Bank, but has now ended its probe.
Investigators said: “We do not believe the audio feed contained any inside information, nor have we found any activity of concern or misconduct.”
The Bank has now set out a series of its own recommendations for future conduct including maintaining a “detailed” inventory of third-party IT equipment on site, subject to security reviews.
It will also make more efforts to respond to firms advertising “inappropriate access” to Bank information and consider potential latency - or speed - issues in future publications.
Separately, Threadneedle Street suffered a second embarrassing blow after chief operating officer Joanna Place admitted it was unlikely to meet diversity targets.
Women hold 32pc of senior management roles at the Bank, below the target of 35pc by the end of this year. They also make up 46pc of other positions, compared to a year-end target of half.
Covid has been partly responsible for the missed target as the pandemic slowed down job movers, Ms Place said. She told a Bloomberg diversity conference: “I do believe that the outcomes will be significantly better than if we had set ourselves a slightly softer target.”