At least four Morgan Stanley traders have reportedly been fired or placed on leave over allegations that millions in losses were hidden through securities mismarking. (Mismarking occurs when the value assigned to securities doesn’t reflect what they’re actually worth.)
Morgan Stanley discovered faulty pricing had been used for emerging market options contracts that cost the bank up to $150m.
It is not clear how long the faulty values has been applied to the contracts however people that are aware of the issue said that were linked to the Turkish lira, however that currency experienced violent moves in March this year.
The bank is investing the matter, however didn’t comment since it is not clear if the so-called mismarking of the contracts represents faulty pricing or deliberate actions of traders seeking to conceal losses.
Morgan Stanley was not alone last week, as for reported trade room problems. The Bank of England fined the London-based office of Citicorp £44 million ($57 million) “for years of inaccurate reporting to regulators about the lender’s capital and liquidity levels”.
Angela Gallo, a finance lecturer at Cass Business School, commented to Bloomberg:
The probe shows the amount of effort still needed in these large organizations to reduce episodes of misconduct. The frequency of misconduct cases in the U.S. and Europe in recent years speaks very loudly that more fundamental changes are required.
