A FORMER Merrill Lynch proprietary trader has been banned from working in financial services in the UK for at least five years for “mismarking” his trading positions amid the financial crisis, actions that ultimately cost his employer $456 million.
Alexis Stenfors was suspended in February 2009 after admitting he had “deliberately overvalued” his positions by $100 million between mid-January and mid-February, the Financial Services Authority said yesterday.
Mr Stenfors, who had worked at Merrill since 1995 and was formerly head of trading in Scandinavian interest rate derivatives, was dismissed last June and has now been banned from working with clients or in a top executive position at a UK financial company.
However, the regulator said it would consider reinstating him in five years because he co-operated with their investigation and expressed remorse.
Mr Stenfors was not fined. The authority did not have the power to impose one, due to a regulatory loophole that it has tried to close.
Until recently, proprietary traders were not considered “approved persons” because they did not handle client money, so they were not subject to fines from the authority. But when the authority proposed extending its remit to all “prop” traders in 2008, it learned that it could only apply its rules to those who exerted “significant influence” over a company – a term that generally means an individual who can affect its overall profitability. In practice that means some “prop” traders at very large groups are not covered.
Mr Stenfors’s case was complicated by cross-border rules. Though he worked in London’s City district, he was trading for a branch of an Irish Merrill Lynch subsidiary, so the authority had no power to discipline the group.
The Irish financial regulator has already fined Merrill Lynch €2.7 million ($3.7 million) for the Stenfors episode and a second mismarking incident.
The Irish authority said that it did not have the power to take action against Mr Stenfors personally because he worked at the London branch.
Mr Stenfors’s attorney, Ian Ryan, said his client received no personal gain from his actions.
“It was completely out of character. It was extraordinary market conditions, he hadn’t had a holiday in a year and a half and he was working 18-hour days,” he said. – (Copyright The Financial Times Limited 2010)
