- FCA fines firm $9 million over attempted $150 million trade
- Ameriprise Financial unit also facing Otkritie lawsuit
Threadneedle Asset Management Ltd. was fined 6 million pounds ($9.1 million) by the U.K Financial Conduct Authority for control failings in its handling of an attempted fraud linked to bankers at Russian lender Otkritie Financial Corp.
Threadneedle, a unit of Ameriprise Financial Inc., allowed a fund manager to initiate, execute and book a trade in Argentinian warrants at four times market value in 2011, and failed to provide accurate information to the regulator, the FCA said. The firm’s back office staff prevented the trade from being completed and there was no loss to its clients.
The employee involved has been dismissed and controls improved, Threadneedle said in a statement. “We acknowledge that our response was not as full as it should have been and we have apologized to the regulator.”
Threadneedle received a 20 percent discount for agreeing to settle, avoiding a fine of 7.5 million pounds.
Otkritie has sued former employees and Threadneedle in London to recover losses from the warrants fraud, which saw traders siphon off funds from the Moscow-based bank to buy luxury villas, diamonds and Ferraris. Threadneedle, which lost a bid to have Otkritie’s $120 million lawsuit thrown out in August, says it denies the claim and will defend it. The Russian lender has already won rulings against the former employees.
The U.K. regulator wrote to Threadneedle in April 2011, citing concerns over errors on its fixed-income desk and querying why fund managers could initiate, execute and book their own trades. In August 2011, one month after Threadneedle said it had taken action, a fund manager on the emerging-markets desk booked a $150 million trade at four times market value. The person didn’t manage the funds and didn’t have the authority to make the trades.
Threadneedle’s back office identified the trade and didn’t settle it. If it been completed, it could have caused a $110 million loss to client funds, the FCA said.