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.
The week on Risk.net, July 7-13, 2018Receive this by email