Nomura hit for £18 million by rogue trader and FSA
A rogue trader at Nomura has cost the investment bank £16.3 million and seen the London end of the firm fined £1.75 million by the Financial Services Authority for failing to keep adequate systems and controls.
The fine is the fifth-largest imposed by the City watchdog this year and continues a series of increasingly tough penalties imposed by it on firms for not policing their staff adequately at the height of the financial crisis.
The rogue trader who was based in Hong Kong did not profit from his misdemeanours but could have enhanced his career and bonus by covering up his trading positions. He has since been sacked.
No client lost money in the scam which saw the trader mis-mark his trades so that they looked better than they really were.
His actions were spotted by another Nomura trader who is based in London where the international equity derivatives business is based. He blew the whistle to compliance officers who told the FSA.
The FSA today said that Nomura would have been fined £2.5 million if it had not co-operated fully and pleaded guilty to the failings quickly.
The trader's mis-marking led directly to a £10.8 million cut in the values of investments he had held for Nomura and a subsequent review across all the international equity derivatives books threw up a further £5.5 million of mark downs.
Margaret Cole, head of enforcement and financial crime at the FSA, said: "Firms must ensure their systems and controls develop at the same rate their business operations grow; if this doesn't happen — as in Nomura's case — they run the risk of having systems that are inadequate for their business. Financial instruments must be valued correctly by traders and firms' systems and controls must be able to minimise the risk of traders mis-marking their positions."
A spokesman for the firm said: "Nomura identified the mis-marking in June 2008 and took immediate action. We conducted a full review and kept the regulator fully informed. Our response was prompt and transparent, as recognised by the FSA, and we now consider the matter behind us."
