U.K. Said to Open Probe Into Rigging of Agency-Bonds Market

Updated on
  • Financial Conduct Authority targets London bond traders
  • U.K. follows U.S. criminal investigation of SSA bond market

The U.K.’s financial regulator has opened a probe into possible manipulation in the trading of agency bonds, adding a new front to an existing U.S. criminal examination of the $9 trillion market, according to three people familiar with the matter.

The Financial Conduct Authority, which had been assisting the U.S. Justice Department in the case, has started its own investigation into supranational, sub-sovereign and agency bonds, or SSAs, said the people, who asked not to be identified because the probe is confidential. The review is at an early stage, the people said.

The Justice Department investigation has focused on activity by London-based traders in the debt instruments, people familiar with the matter told Bloomberg News in December. Agency bonds are issued by government-sponsored entities such as the U.S. Postal Service, Freddie Mac, and the World Bank.

The FCA’s involvement shows the inquiry is gathering momentum at a time when the financial services industry is still dealing with global investigations into the trading and sale of currencies and the setting of benchmark interest rates that has already resulted in nearly $20 billion in penalties.

Four Traders

Among those being probed by U.S. and U.K. authorities are London traders: Hiren Gudka who worked at Bank of America Corp., Amandeep Singh Manku from Credit Agricole SA, Bhardeep Singh Heer from Nomura Holdings Inc. and Shailen Pau of Credit Suisse Group AG, the people said last week. 

Gudka left Bank of America in November and Manku left Credit Agricole in December, according to the FCA register of authorized persons, which lists both of them as "inactive." Pau was laid off from Credit Suisse in October and Heer has been suspended, according to people with knowledge of the situation. Heer and Pau both remain "active" on the FCA register.

The four traders didn’t immediately respond to attempts to contact them through LinkedIn, e-mail and mobile phones. Spokesmen for the banks declined to comment on the probe. A spokesman for the FCA declined to comment.

Price Quotes

Both authorities are looking at whether traders at different banks coordinated with each other before deciding who would offer price quotes to potential buyers and sellers, according to the people. The period of trading under review is between 2011 and 2014, one of the people said.

Justice Department prosecutors obtained transcripts of online chat-room conversations indicating possible misconduct and asked banks to delve further into the behavior, people with knowledge of the probe said last year.

News of the FCA’s investigation follows the revelation of a probe into Tony Gray, a senior bond trader at Lloyds Banking Group Plc, in relation to possible manipulation of the British government-bond market. Gray was put on leave by the bank last year and is now back at work. He declined to comment when contacted by telephone two weeks ago.

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