The Financial Services Authority said today that it had banned Morgan Stanley commodities trader David Redmond for two years, because he deliberately concealed a $10m trading position he’d taken out on his return from a boozy client lunch. Now in light of recent events, the fate of a trader won’t arouse much sympathy – but given that he didn’t actually any lose any money or break any trading rules, we can’t help feeling this draconian punishment might have something to do with the FSA’s desire to prove its ‘light-touch’ days are over…
Liquid lunches have been a City staple for years, of course. Casual drinking might be technically frowned upon by the HR department, but on our (sadly infrequent) visits to the Square Mile’s finest culinary establishments, there’s been no sign of a booze ban. Particularly during the City’s recent boom, you were far more likely to see a bunch of traders in designer suits breaking out the Bollinger and braying loudly about the ten mill they’d made that morning. And Redmond’s lunchtime session sounds suitably epic: apparently he was out from 13.14 to 16.41.
Soon after his return to the office, he got trapped in a short position and went crazy, making a trade on average every 7.5 seconds for an hour-and-a-half – before concealing the position and going home (at least he didn't go and photocopy his bottom too). The next morning he returned and traded his way out of it (at a small profit) without explaining himself to his superiors. Apparently, it was this subterfuge what done for him: the hair-shirted FSA said today that his conduct ‘showed a lack of honesty and integrity that falls short of the standards the FSA expects of approved persons’. He’s now been banned for two years.
Before we roll out the public stocks, it’s worth remembering a few things. Redmond was trading the bank’s own money, so no customers were at risk. He wasn't noticeably drunk. He didn’t exceed his trading limits. He actually made a profit. Even by the FSA’s own admission, his behaviour was out-of-character and unpremeditated, and he’s both expressed remorse and co-operated fully with the enquiry. So it’s hard to escape the feeling that in the old days, he’d have got a stern talking-to and the whole thing would have been hushed-up. Could it be that the FSA is determined to prove to the world that there’s a new kind of sheriff in town?
Then again, it wasn’t just the FSA; Morgan Stanley immediately suspended Redmond and later dismissed him even before the enquiry took place (thus earning themselves serious brownie points with the regulator). Things have definitely changed for the City – and arguably that change is for the better. Even if local restaurateurs may not agree...
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Trader's boozy bet results in two-year FSA ban