Third fine in fortnight as FSA swoops
THE Financial Services Authority (FSA) yesterday imposed a life-long ban and a £140,000 fine on former Morgan Stanley trader Nilesh Shroff, the third sanction against the bank or its former employees in the last two weeks.
The FSA said that Shroff had deliberately disadvantaged his customers by “pre-hedging” their trades without their consent on seven occasions between June and October 2007.
“Pre-hedging” refers to trading by a broker for his firm’s benefit in advance of carrying out a trade for his customer, using information provided by that customer. Where customers instructed Shroff to buy particular stocks, he bought those stocks for the firm first, causing the price to increase before he executed the customers’ trades.
“As an experienced trader, he would have known that his orders were likely to disadvantage his clients,” said FSA director of enforcement Margaret Cole.
The regulator said neither the bank, nor any other individuals, were subject to criticism over the case.
“Shroff deliberately and knowingly violated our policy on pre-hedging client trades. We took immediate action to address his misconduct,” said Morgan Stanley, which fired Shroff in December 2007.
Last week, a former Morgan Stanley trader was banned by the FSA for building up a big unauthorised oil futures position after drinking alcohol over a long lunch. And the bank was fined £1.4m on 13 May for failings that led to a $120m (£76m) markdown to the books of a former senior proprietary trader.