• FCA probing whether trader drove down bond prices for profit
  • Gray back at work after Lloyds conducted internal review

Tony Gray, a senior trader at Lloyds Banking Group Plc, is at the center of a U.K. Financial Conduct Authority investigation into possible manipulation of the British government-bond market at the bank, according to two people with knowledge of the matter.

Gray was put on leave by Lloyds last year after the U.K. regulator started looking into whether the trader manipulated the price of U.K. gilts in government auctions, said the people, who didn’t want to be identified because the probe is private. Gray was reinstated after the bank carried out an internal investigation, the people said.

The U.K. regulator has spent the last five years investigating rigging in some of the world’s biggest markets, with fines running into the billions of dollars against banks and traders for manipulation of the London interbank offered rate and key foreign-exchange benchmarks. The U.S. Justice Department is separately investigating the $12.8 trillion market for U.S. Treasuries as well as possible manipulation in the trading of agency bonds -- $9 trillion or more in debt issued by the likes of German states, government entities and the World Bank.

Gray declined to comment when contacted by telephone. Lloyds said in an e-mailed statement "the group does not comment on speculation." A spokesman for the FCA declined to comment.

Gray is head of gilt trading and has been at Lloyds since July 2010, according to his LinkedIn profile. He is listed as active on the FCA register.

Lloyds agreed in 2014 to pay $370 million to U.K. and U.S. authorities for rigging Libor and trying to manipulate fees payable to the Bank of England for the firms’ participation in a special government liquidity program during the financial crisis. As part of that resolution, Lloyds admitted to the misconduct and entered into a two-year deferred-prosecution agreement with the Justice Department that requires the lender to cooperate with prosecutors and not commit additional crimes.

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