MF Global hit by rogue trading
LOSSES & LAWSUITS
LONDON & BERMUDA - Another rogue trading scandal has taken place at futures broker MF Global. A US-based broker at the firm, headquarted in Bermuda, exceeded his personal account ceiling before losing $141.5 million on unauthorised wheat futures. Meanwhile, two London-based equity traders at investment bank Lehman Brothers have been suspended after irregularities were found in their valuations of complex equity derivatives.
Lehman Bros has said its investigation is not fraud-based and it is working with the Financial Services Authority (FSA) in connection with its internal investigation.
MF Global blamed the fraud on a failure of its retail order computer systems, allowing the broker to take on the excessive positions. The firm said it discovered the trade soon after it had taken place, in addition to shoring up risk controls and hiring an external consultancy to investigate the incident. MF has since fired the trader involved, although the business will have to cover the loss - 6% of its capital.
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