FCA drops $9 trillion bond-rigging probe

FCA told four traders at centre of probe that the case was closed

Suzi Ring
Tuesday 31 October 2017 14:21
FCA probe was into possible manipulation of $9 trillion SSA market
FCA probe was into possible manipulation of $9 trillion SSA market

The Financial Conduct Authority has closed a two-year investigation into possible manipulation of the $9 trillion (£6.7 trillion) agency bond market, according to people with knowledge of the situation.

The regulator wrote to traders at the centre of the probe, who worked at lenders including Bank of America and Credit Suisse, in September to inform them of the decision, according to four people, who didn’t want to be identified because the letters aren’t public. A US Justice Department probe is still open, two of the people said.

Hiren Gudka, formerly at Bank of America and Deutsche Bank, ex-Credit Agricole trader Amandeep Singh Manku, ex-Credit Suisse trader Shailen Pau and Bhardeep Singh Heer of Nomura all received letters from the FCA, according to the people. No details on why the probe had been closed were provided by the regulator, two of the people said.

Investigations by UK, US and European Union authorities into the supranational, sub-sovereign and agency bond, or SSA, market emerged nearly two years ago, over allegations traders had been coordinating price quotes to potential buyers and sellers. The FCA and US Justice Department interviewed a number of people, including potential targets, earlier this year. Agency bonds are issued by government-sponsored entities such as the US Postal Service, Freddie Mac, and the World Bank.

Lawyers and spokespeople for the men declined to comment, as did spokesmen for the FCA and Justice Department. A spokesman for the EU didn’t immediately respond to requests for comment.

The probes, which focused at least initially on the period 2011-14, came shortly after UK and US authorities had levied billions of dollars in fines over the rigging of key interest-rate benchmarks and manipulation in the foreign-exchange market. Credit Suisse, Deutsche Bank and Bank of America said in their 2016 annual reports they had received information requests from regulators on the SSA market.

The investigations spurred a law suit from the Boston Retirement System, a pension fund representing municipal employees in May 2016, against the five banks. The suit has since expanded to include a number of other plaintiffs such as the City of Atlanta Firefighters Pension Fund, with five more banks added as defendants, according to court filings.

Depending on the securities included, the SSA market can range from $9 trillion to $15 trillion, according to data compiled by Bloomberg in 2016.


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