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Third fine in fortnight as FSA swoops

THE Financial Services Authority (FSA) yesterday imposed a life-long ban and a &pound;140,000 fine on former Morgan Stanley trader Nilesh Shroff, the third sanction against the bank or its former employees in the last two weeks.<br /><br />The FSA said that Shroff had deliberately disadvantaged his customers by &ldquo;pre-hedging&rdquo; their trades without their consent on seven occasions between June and October 2007.<br /><br />&ldquo;Pre-hedging&rdquo; refers to trading by a broker for his firm&rsquo;s benefit in advance of carrying out a trade for his customer, using information provided by that customer. &nbsp;Where customers instructed Shroff to buy particular stocks, he bought those stocks for the firm first, causing the price to increase before he executed the customers&rsquo; trades.<br /><br />&ldquo;As an experienced trader, he would have known that his orders were likely to disadvantage his clients,&rdquo; said FSA director of enforcement Margaret Cole.<br /><br />The regulator said neither the bank, nor any other individuals, were subject to criticism over the case.<br /><br />&ldquo;Shroff deliberately and knowingly violated our policy on pre-hedging client trades. We took immediate action to address his misconduct,&rdquo; said Morgan Stanley, which fired Shroff in December 2007.<br /><br />Last week, a former Morgan Stanley trader was banned by the FSA for building up a big unauthorised oil futures position after drinking alcohol over a long lunch. And the bank was fined &pound;1.4m on 13 May for failings that led to a $120m (&pound;76m) markdown to the books of a former senior proprietary trader.