FSA Fines Morgan Stanley for Trader Mis-Marking May 14, 2009 URL: http://www.advancedtrading.com/showArticle.jhtml?articleID=217500103
The Financial Services Authority (FSA) has levied a 1.4 million pound fine against Morgan Stanley for failing in its systems and controls related to a trader mis-marking a trade.
The trader, Matthew Sebastian Piper, was also fined 105,000 pounds and banned from trading. The mis-marking led to a $120 million negative adjustment for Morgan Stanley in June of 2008.
According to a statement by the FSA, Morgan Stanley failed to effectively use the controls it had in place for dealing with illiquid financial products and also failed to ensure adequate supervision of Piper's books. In addition the FSA said the firm failed to prevent or detect the trader mis-marking in a timely manner.
Piper had mis-marked positions he traded for Morgan Stanley and attempted to hide the losses by manipulating the processes the firm has in place to monitor trading activity.
In the statement, Margaret Cole, FSA director of enforcement, said, "Market confidence is likely to be damaged by sudden and unexpected write downs and revaluations of securities. Firms must take care to ensure their traders operate within a proper control environment. Financial instruments must be priced correctly by traders, particularly in more challenging conditions and when it comes to illiquid products."
She added, "Piper has been banned because his misconduct was deliberate, frequent and repeated over a six-month period. He was a senior and experienced trader who held a position of trust at the firm. This was clearly a serious breach of the standards of behaviour we expect of approved persons."
Morgan Stanley fully cooperated with the FSA and agreed to settle during an early stage of the investigation.