Agency Bond Traders Said to Face Questions in Rigging Probe

  • U.S. Justice Department, U.K. FCA interviewing bond traders
  • Four London traders from different banks under investigation

American and British investigations into possible manipulation of the $9 trillion agency bond market are escalating as authorities seek to interview traders, according to people familiar with the matter.

The U.S. Justice Department and U.K. Financial Conduct Authority have in recent weeks separately sought to speak with people about trading in supranational, sub-sovereign and agency bonds, said four people, who asked not to be identified because the matter is confidential. Among those investigators want to talk to are potential targets of the probe, two of the people said.

The probes by U.S. and U.K. agencies, along with the European Union, into trading of so-called SSAs emerged a year ago. They focus on allegations that individuals who spent time on London trading desks at five banks -- Bank of America Corp., Deutsche Bank AG, Credit Agricole SA, Nomura Holdings Inc. and Credit Suisse Group AG -- coordinated price quotes to potential buyers and sellers. Agency bonds are issued by government-sponsored entities such as the U.S. Postal Service, Freddie Mac, and the World Bank.

Among those being investigated are London traders Hiren Gudka, formerly at Bank of America and Deutsche Bank, ex-Credit Agricole trader Amandeep Singh Manku, ex-Credit Suisse trader Shailen Pau and Bhardeep Singh Heer of Nomura, people familiar with the case have said. All of them stopped trading at those banks, according to U.K. records. It wasn’t clear whether some remained employed. None have been accused of any wrongdoing.

Probes Continue

Authorities are continuing to pursue allegations of wrongdoing on trading desks after securing billions of dollars in fines over the rigging of benchmark interest rates and currency trades. The activity also suggests that leadership changes at the Justice Department haven’t halted ongoing investigations into corporate wrongdoing by financial institutions.

Spokespeople for the Justice Department and FCA declined to comment. Lawyers for Manku, Pau and Gudka either declined to comment or didn’t immediately respond to requests for comment. Heer, through a spokeswoman at Nomura, declined to comment.

In its 2015 annual report, Credit Agricole said it was cooperating with demands for information from several regulators involving the SSA bond market and activities of other financial institutions. Credit Suisse also noted in its report from the same year it had received information requests from regulators about the agency bond market.

Spokespeople for Credit Agricole, Credit Suisse, Nomura, Deutsche Bank and Bank of America all declined to comment.

Small Group

While the investigation initially caused several banks to examine whether improper trading was rampant in the agency bond market, the criminal probe appears to be focused on whether a small group of traders violated antitrust and fraud laws, two of the people said.

Gudka left Bank of America and Manku left Credit Agricole in the latter part of 2015, while Pau left Credit Suisse in February 2016, according to the FCA register of authorized persons. Heer was suspended from Nomura, people with knowledge of the situation have said.

U.S. prosecutors obtained transcripts of online chat-room conversations indicating possible misconduct and asked banks to delve further into the behavior, people familiar with the situation have said previously. The period of trading under review then was 2011 to 2014, the people said.

The SSA market is generally defined to include international development organizations, government-sponsored entities and some sovereign debt. Depending on the securities included, the market can range from $9 trillion to $15 trillion, according to data compiled by Bloomberg in 2016. The bonds generally have high credit ratings because of explicit or implicit guarantees they carry.

In May, the Boston Retirement System pension fund sued five banks over the claims. That case was followed by others.

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