Another Morgan Stanley Trader Gets Banned And Fined For Going Rogue
Morgan Stanley have been having a rough regulatory ride over the last few weeks, with three of their traders having their knuckles rapped and told to buck their ideas up. The latest is Nilesh Shoroff, who has been fined £140,000 and banned by the Financial Services Authority, the UK’s financial services regulator, from working in trading ever again. He’s going to become that guy you see in betting shops who’s weirdly well-dressed yet extremely agitated.
Shoroff was a naughty boy and “pre-hedged” his clients’ money, making the same trade that your client has ordered slightly before putting their order through; by making the same trade slightly earlier, the price is usually adversely affected for the client, with your trade prompting it to go down if you’re selling or up if you’re buying. Basically it dicks over your client for your own gain, and is a scumbag thing to do. Shroff acted totally against Morgan Stanley’s rules, and has thus been sent packing.
Morgan Stanley was also blameless for the case of its commodities trader David Redmond, who was banned for two years by the FSA last week. 28-year-old Redmond thought it would be fine to have a three and a half hour lunch accompanied by delicious booze, before going back to work for a few hours from 5pm; instead of just pretending to do work while scoping internet lolz as the rest of us would have done, he decided to trade in some oil futures, leaving Morgan Stanley losing $10m at one point. Don’t drink at the casino – that’s the first rule of gambling! Fortunately for him, he managed to wrest a profit from the deals by closing them the next day, but Morgan Stanley weren’t impressed at him hiding his position from them, hence the ban.
But Morgan Stanley were at massive-fine-inducing fault recently, with their failure to notice Matthew Piper, one of their credit default traders, mispricing trades by manipulating data and hiding it from Morgan Stanley’s valuation bods. Morgan Stanley got fined £1.4m for not spotting the rogue trader sooner; that’s added to the $120m writedown the bank had to make thanks to losses on the mispriced trades; Piper got fined $105,000, was banned from any job above bank clerk or kitchen porter, and has the occasional stabbing pain as Morgan Stanley execs go to work on the Piper voodoo doll they had made.
Morgan Stanley are also the latest bank to lamely rejig its compensation structure – they’re bumping up executive base salaries rather than giving out bonuses, increasing them by as much as a third. It’s all well and good not to dole out bonuses that don’t reflect the bank’s performance, but do these salaries really incentivise performance? And just bashing bonuses in general is pretty unsophisticated – surely a long-term performance related system, that encourages stable business practice and less risky instruments through compensation, is the better option. Otherwise there is that danger the talent, greedy as it nevertheless often is, will head outside the City.
Posted by Ben Beaumont-Thomas in Hot Money | May 27, 2009 11:22AM |