INVESTMENT BANKS: scandal prompts review of controls


UK financial institutions will be looking to lawyers to review their internal controls following the multi-billion-pound rogue trading scandal at French bank Société Générale, it was suggested this week.



The warning came as the Financial Services Authority (FSA) stepped up its crackdown on alleged insider trading with the criminal prosecution of an in-house lawyer.



Commentators noted that the French scandal is likely to prompt internal reviews at UK investment banks concerned that they may be vulnerable to rogue traders. Junior trader Jérôme Kerviel is being investigated in relation to ¤4.9 billion (£3.7 billion) of losses at Société Générale. He has been charged with breach of trust, falsifying documents, and breaching computer security.



Martyn Hopper, regulatory partner at City firm Herbert Smith, said: 'Although the issue [has] arisen in Paris rather than London, there will be a lot of concerns here. The financial institutions and the regulator will be examining what controls are in place.' He added that solicitors will be well-placed to advise on this.



Alan Hodgart, founder of legal consultancy H4, said: 'Every investment bank is vulnerable, no matter what checks you put in... A lot more goes on than is ever found out.'



Meanwhile the FSA last week began its prosecution of Christopher McQuoid, former general counsel of TTP Communications. Mr McQuoid has pleaded not guilty to charges that he was involved in insider dealing of TTP shares before it was taken over by Motorola. It is the first time the FSA has used its powers to bring a criminal case.



Rachel Rothwell