Morgan and ABN Amro fined pounds 350,000 for misconduct
Thursday 01 April 1999
The LSE revealed yesterday it had fined the two a total of pounds 350,000, following a series of infringements in autumn last year. In a statement, the LSE said that both Morgan Stanley and ABN Amro had been found guilty of an "act of misconduct" after acting on instructions from a client that included a request to manipulate the price of a particular London stock.
Morgan Stanley, which infringed the exchange's misconduct rules on just one occasion, received the lesser fine of pounds 100,000. ABN Amro, found to have infringed the rules on several occasions, was fined pounds 250,000, the second-largest public penalty in LSE history.
The fines relate to a series of trades in a single UK stock carried out on behalf of a single US fund manager. Neither the fund manager - understood to be the subject of a wider investigation by the US Securities and Exchange Commission - nor the UK company affected by the dealings has been named.
An exchange spokesman declined to comment on whether the UK company was aware of the unorthodox dealings in its shares. There was widespread speculation in the markets yesterday that the US fund manager was a troubled hedge fund attempting to cover a derivatives position. In autumn last year, many equities, bonds and currencies suffered highly volatile swings as hedge funds struggled for financial survival in the wake of the Russian debt default.
Regulators were alerted to the attempts at market manipulation in October after the LSE's electronic monitoring system found evidence of a number of unusual trading patterns. A routine investigation was launched, and ABN Amro - also understood to be involved in the SEC investigation - was found to be the source of the unusual trades. In the course of its inquiry into ABN Amro, the exchange found Morgan Stanley had taken similar instructions from the same client on one occasion in early September. The LSE spokesman did not elaborate on the precise nature of the trades or whether the attempts at market manipulation had succeeded.
In January, after ABN Amrohad been made aware of the regulatory investigation into its share dealings, it parted company with an equity trader, although the bank declined to confirm the events were linked.
ABN refused to add any detail to the LSE statement. "For legal reasons we cannot elaborate," said a spokesman.
Morgan Stanley is understood to have taken a series of internal disciplinary steps following the launch of the regulatory inquiry, but is thought to have stopped short of dismissing the traders involved.
The largest public fine handed down by the LSE was in December 1997 when US bank JP Morgan was ordered to pay pounds 350,000 after two of its traders attempted to manipulate the FTSE 100 index. The traders in question were subsequently dismissed from the bank.
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