Morgan Stanley trader fined, banned
Published: Wednesday | May 27, 2009
The Financial Services Authority said senior trader Nilesh Shroff used the technique, which takes advantage of customer orders to benefit a trading firm, on a number of occasions in the second half of 2007.
When clients told him to buy particular stocks, he bought those stocks for the firm first, causing the price to increase before he executed the customers' trades. If the customer order was to sell, he first sold on behalf of the firm, decreasing the price.
"(Shroff) repeatedly abused his position of responsibility as a senior trader," the FSA said in a statement, fining him pound140,000 (US$224,000).
"As an experienced trader, he would also have known that his orders were likely to disadvantage his clients," Margaret Cole, the FSA's director of enforcement, said. "The FSA will take action against those who act without honesty and integrity and who do not follow our rules."
Erroneous information
Earlier this month, the FSA fined Morgan Stanley £1.4 million for failing to prevent traders from reporting erroneous information about their trades and fined and banned proprietary trader Matthew Piper £105,000.
The regulator said Morgan Stanley had failed to effectively use its controls for dealing in illiquid financial products and failed to ensure adequate supervision of Piper's books.
It added the firm also failed to respond quickly enough to increased volatility and decreasing liquidity in the credit markets by adjusting their control system, which would have enabled it to detect traders' mis-marking more quickly.
In a separate case last week, the regulator banned Morgan Stanley trader David Redmond for deliberately hiding a risky trading position from his bosses.
In the cases of Redmond and Shroff, the regulator said no blame was attached to the bank, which had forbidden their actions.
Morgan Stanley alerted the regulator to all three cases and all three traders have been dismissed by the bank.
- AP
