UK watchdog fines former trader £750k

THE FSA yesterday banned and fined a former trader £750,000 for deliberately
mismarking his trading positions, in the third-highest fine the City watchdog has ever imposed on an individual.

Between July 2006 and June 2008, Nabeel Naqui, ex-managing director at Toronto Dominion Bank, persistently mismarked his trading book to overvalue his performance,
Naqui, the former head of the bank’s credit products group desk in Europe and Asia Pacific, sent figures to the bank’s global middle office without telling staff there that they had been altered.

The bond trader had worked for Toronto Dominion since 2004.

Naqui’s activities were uncovered when his book was transferred to a new trader after he was dismissed from the bank in June 2008 for “gross misconduct”. The pricing issues led the bank to announce a writedown of C$96m (£48m) in July 2008.

“Confidence in the financial system relies on someone in Naqui’s position to be trusted to mark his book in line with the market,” said Margaret Cole, the FSA’s managing director of enforcement and financial crime.

She added: “Our tough action in this case should serve as a deterrent to others who might damage market confidence by acting in a similar manner”.

Toronto Dominion was fined £7m on 17 December 2009 for repeated systems and controls failings in relation to the case.

The fine was the fourth largest fine imposed by the FSA at the time and had been reduced from an earlier figure of £10m after the bank fully cooperated with the investigation.

NABEEL NAQUI

EX-TRADER, TORONTO
DOMINION BANK
NAQUI accused Toronto-Dominion of making him a “scapegoat” for its own failures in January 2010 after the bank tried to claw back C$5m – the sum of his bonuses and the cost of the investigation into his pricings.

Naqui protested that his recorded prices differed from dealers’ quotes because of “his own assessment of the correct price”. He said his pricing exposed “systemic flaws that existed within the claimant’s own pricing mechanisms which failed to produce breakevens that were consistent with input prices” and had “repeatedly” told senior management that its pricing system was flawed.

The FSA said that the bank had failed to spot discrepancies between the price quoted by the markets for the products and prices Naqui quoted because of a lack of “adequate product knowledge and experience of backroom staff”.

Naqui’s £750,000 fine is the third largest ever levied on an individual by the FSA. The highest – which was £2.8m – was handed to Simon Eagle, a trader who ramped shares, in May.