The Financial Services Authority has censured two traders for insider dealing and warned it would take stronger action in future against this type of market abuse.
Darren Morton, director, and Christopher Parry, vice-president, at Dresdner Kleinwort, now part of Commerzbank, were censured by the FSA for market abuse in relation to a new issue of Barclays’ bonds in March 2007.
The FSA says the two traders committed market abuse because they sold the bonds based on inside information.
“Insider dealing is cheating, whatever market it is in,” says Margaret Cole, director of enforcement at the FSA. She warns firms will face tougher sanctions in the future.
Morton and Parry were portfolio managers with Dresdner’s K2 structured investment vehicle, which had $65 million of a Barclays’ floating rate note issue – bonds with a variable coupon – in its portfolio.
On March 15, 2007, Morton was given inside information about a potential new issue of Barclays bonds on more favourable terms than the previous issue. Morton shared this information with Parry.
Acting on this inside information, Morton and Parry agreed to sell K2’s entire holding of the previous issue to two separate counterparties, which were unaware of the new issue. This action caused the two counterparties a loss of $66,000.
More on Structured Products
Chris Leone and Dushyant Chadha replace Paul Galietto
Steffen Scheuble says growth in mainstream strategies may be nearing saturation point
Capital-at-risk product pays out early if crude index is no lower than strike price in 30 months’ time
Investors’ capital at risk if underlying is below barrier level at maturity
Loomis Sayles vice-chairman discusses the US credit markets
The US has recovered from recession but still faces an enormous debt burden. The onus is now on companies to pick up the slack in the economy and keep bonds buoyant
The head of European credit portfolio management at Pimco talks to Credit's Alex Monro about the ongoing Eurozone crisis, and the likely investment themes for 2011.
The European securitisation markets were among the hardest hit by the financial crisis: large losses on a range of securitised products led to a drop-off in investor demand, while prohibitive spreads made...
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.