Mismarking
Mismarking in
Mismarking is an element of operational risk.[5] The trader engaging in mismarking is sometimes referred to as a "rogue trader."[6]
During market downturns, determining the value of
Notable cases
In 2007, two
Also in 2007, the Royal Bank of Canada, Canada's biggest bank, fired several traders in its corporate bond business, after another trader accused them of mismarking bonds the bank held by overpricing them, and marked down the values of the bonds and recognized $13 million of trading losses relating to the bonds.[14] The bank said it investigated the accusations, and took remedial action.[14] The Globe and Mail noted: "traders might have an incentive to boost [the bonds'] prices because it could have an impact on their bonuses."[14]
In 2008, a Bank of Montreal trader pleaded guilty to intentionally mismarking his trading book in order to increase his bonus from the bank.[15][16]
In 2010, a
Also in 2010, a trader at
In 2016, Citigroup fired a trader for mismarking his portfolio.[22]
Also in 2016, a trader at a company authorized by the Dubai Financial Services Authority (DFSA) was banned for six years from performing any functions in connection with the provision of financial services in the Dubai International Financial Centre after he mismarked his trading book.[23]
In 2019, SEC announced settled charges against a former Citigroup Global Markets Inc. (CGMI) trader for mismarking a book of illiquid credit derivatives while sustaining losses from unauthorized trading in U.S. Treasury securities (USTs).[24]
In 2022, SEC charged James Velissaris, former Chief Investment Officer and founder of Infinity Q Capital Management, with overvaluing assets by more than $1 billion while pocketing tens of millions of dollars in fees.[25]
Regulatory action
United States
To address mismarking, in 2020 in the United States the
See also
References
- Bank of International Settlements.
- ^ a b c Eugene Ingoglia; Todd Fishman, Mark Daniels (April 22, 2020). "Amid falling markets, valuation challenges and mis-marking fraud risks rise". Investigations Insight.
- ^ .
- ^ Kent Oz (2009). "Independent Fund Administrators As A Solution for Hedge Fund Fraud," Fordham Journal of Corporate & Financial Law.
- ^ "Liontrust Asset Management: Annual Report & Financial Statements 2020". MarketScreener. July 21, 2020.
- ^ Peter Nash (2017). Effective Product Control; Controlling for Trading Desks, Wiley.
- ^ a b c d e f g Peter Lattman and Peter Eavis (February 2, 2012). "3 Former Traders at Credit Suisse Charged With Bond Fraud". DealBook.
- ^ Lattman, Peter (April 12, 2013). "Former Credit Suisse Executive Pleads Guilty to Inflating the Value of Mortgage Bonds". DealBook.
- ^ Jacob Gaffney (February 1, 2012). "SEC charges four Credit Suisse bankers in subprime bond fraud". Housing Wire.
- ^ "SEC Charges Former Credit Suisse Investment Bankers in Subprime Bond Pricing Scheme During Credit Crisis". SEC.gov. February 1, 2012.
- ^ a b c "Former Credit Suisse traders charged with fraud; US prosecutors charged three former Credit Suisse traders with inflating the value of mortgage bonds in 2007 as the housing market deteriorated, saying they used the scheme to boost their year-end bonuses". Australian Financial Review. February 2, 2012.
- ^ a b c Joe McGrath (2020). "Why Do Good People Do Bad Things? A Multi-Level Analysis of Individual, Organizational, and Structural Causes of White-Collar Crime," Seattle University Law Review.
- ^ Andrew Hurst (February 19, 2008). "Credit Suisse reveals $2.85 billion write-downs". Reuters.
- ^ a b c Tara Perkins (October 26, 2007). "Trader alleges RBC undervalued bonds". The Globe and Mail.
- ^ Rita Trichur (November 19, 2008). "Rogue gas trader admits to fraud". The Star.
- ^ Tara Perkins (November 18, 2008). "Former trader pleads guilty in fraud that cost BMO $850-million". The Globe and Mail.
- ^ Ridley, Clara Ferreira-Marques, Kirstin (March 17, 2010). "FSA bans former Merrill Lynch trader". Reuters.
{{cite web}}
: CS1 maint: multiple names: authors list (link) - ^ Ian King (March 16, 2010). "Merrill trader banned by FSA for mismarking". The Times.
- ^ Alexis Stenfors (2017). Barometer of Fear: An Insiders Account of Rogue Trading and the Greatest Banking Scandal in History. Zed Books.
- ^ Enrich, David (April 29, 2016). "A Disgraced Trader's Struggle for Redemption". The Wall Street Journal.
- ^ Muñoz, David Enrich, Cassell Bryan-Low and Sara Schaefer (September 22, 2011). "U.K. Sets Its Sights on 'Rogue' Traders". The Wall Street Journal.
{{cite web}}
: CS1 maint: multiple names: authors list (link) - ^ Dakin Campbell (July 26, 2016). "Citi Fired Mortgage Trader in March for Mismarking Portfolio". Bloomberg.
- ^ "Former Dubai trader banned for $11m 'mismarking' scandal", Arabian Business, May 11, 2016.
- ^ "SEC Charges Former Citi Trader with Mismarking and Unauthorized Trading", SEC.gov, Sep 26, 2019.
- ^ "SEC Actions: Fund Investment "Mispricing" & "Mismarking" Cases 2022". www.houlihancapital.com. 4 April 2022. Retrieved 20 September 2022.
- ^ "Good Faith Determinations of Fair Value; Proposed Rule," SEC 17 CFR Parts 210 and 270, Release No. IC-33845; File No. S7-07-20, April 21, 2020.
- ^ Terrence O. Davis (May 28, 2020). "SEC Issues Fair Value Proposal". The National Law Review.
External links
- Vladimir Atanasov, John J. Merrick, Jr., Philipp Schuster (2019) "Mismarking Fraud in Mutual Funds"