Threadneedle Asset Management fined £6m by City watchdog Financial Conduct Authority over fraud near-miss

 
Catherine Neilan
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Threadneedle Asset Management has been fined more than £6m after the company narrowly avoided being made a victim of fraud by a member of staff.

The City watchdog said the company did not have sufficient controls in place, which left it vulnerable to an attempted $150m (£98m) fraud carried out by Vladimir Gersamia, a fund manager on its emerging markets debt desk, in 2011.

The Financial Services Authority, as it was then, flagged some of these concerns just months before the trade took place. Threadneedle dismissed these fears, saying it had individuals in place who were able to take responsibility across its fixed income division.

"This overstated the position," the City watchdog said today. "In fact, the individuals had not taken on all the responsibilities outlined in TAML’s response and consequently, the FSA’s concerns had not been fully addressed."

Shortly after Threadneedle's response, Gersamia initiated, executed and booked a $150mtrade on behalf of funds at four times its market value. The trade did not go ahead because Threadneedle had not traded the specific warrants before.

Although it was stopped before the trade went ahead, the regulator said it was concerned that the rogue manager was able to proceed as far as they had done. If the trade had gone through, it would have resulted in a $110m loss.

Gersamia has since been dismissed and the case taken to High Court.

Today, the FCA confirmed Threadneedle had been fined £6.04m, having a received a 20 per cent discount, which lowered the charge from more than £7.5m.

A Threadneedle spokeswoman said: "While we are pleased to have thwarted a complex attempted fraud, we regret that a subsequent review of our fixed income trading identified areas of weakness. In July 2013 an independent auditor appointed under FCA instruction confirmed the weakness had been fully addressed.

"In addition, a communication to the regulator was not sufficiently clear and we have apologised for this. We have co-operated with the regulator throughout the investigation. We are pleased to move on from these historic events and continue to focus on delivering for our clients."

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