Morgan Stanley Asia’s internal compliance system was criticised by District Court judge Andrew Chan Hing-wai in yesterday’s insider trading verdict for failing to prevent malpractices by its employees.
While ruling Du Jun, Morgan Stanley Asia’s former managing director, was guilty of insider dealing, he reserved some of his criticism for the compliance system operated by the US investment bank.
Chan said the control system in Morgan Stanley “was not performing its function properly and effectively”.
Du’s lawyer, Alexander King, pointed out that his client had applied and got approval to trade the shares of Citic Resources Holdings from the bank’s compliance department so the deals were “honest”.
The judge, however, said Du had not told the truth to the compliance department, which was why he received approval.
“If he had told the compliance department that he had got the inside information, the compliance officers would not have approved his tradings,” he said.
The judge said the compliance department’s watch list of stocks had not been closely updated with the deals being made by Morgan Stanley. The watch list refers to the list of stocks that the investment bank’s staff are banned from trading to prevent insider dealing or conflict of interest.
In addition, the department had not clearly informed which employees were banned from trading related shares.
The judge said senior officials of Morgan Stanley had raised doubts about Du’s trading of Citic Resources shares from February to April 2007, but compliance officer Samantha Ng had not picked up Du’s misconduct until Citic Resources announced the deals in May that year.
“There is evidence of a lack of communication between the control department and the fixed-income division of Morgan Stanley,” the judge said.
During the trial, prosecutor Charlotte Draycott said the compliance system at Morgan Stanley “was run in a haphazard and inefficient manner”.
She said Ng mistakenly believed Du wanted to trade Citic Pacific shares instead of Citic Resources. “[Her] sloppy approach may be explained by the fact that she had never found irregularity on the watch list’s employee trading sheet, or maybe that failure to see any irregularity was explained by her sloppiness.”
A Morgan Stanley spokesman said: “The firm constantly strives to enhance our internal procedures, controls and surveillance capabilities. We continue to devote significant resources to training and to reinforcing our overall culture of compliance.
“The wrongdoing by a former employee of our firm was a violation of Morgan Stanley’s values and policies. Morgan Stanley expects all of our employees to uphold the highest ethical standards. The conduct, which occurred in 2007, was identified by the firm and reported, and the employee was terminated.”
Ng left Morgan Stanley in August 2007, according to a source familiar with the matter.
1 comment:
Judge raps Morgan Stanley for failed check
Bank’s control system ‘not proper and effective’
Enoch Yiu
11 September 2009
Morgan Stanley Asia’s internal compliance system was criticised by District Court judge Andrew Chan Hing-wai in yesterday’s insider trading verdict for failing to prevent malpractices by its employees.
While ruling Du Jun, Morgan Stanley Asia’s former managing director, was guilty of insider dealing, he reserved some of his criticism for the compliance system operated by the US investment bank.
Chan said the control system in Morgan Stanley “was not performing its function properly and effectively”.
Du’s lawyer, Alexander King, pointed out that his client had applied and got approval to trade the shares of Citic Resources Holdings from the bank’s compliance department so the deals were “honest”.
The judge, however, said Du had not told the truth to the compliance department, which was why he received approval.
“If he had told the compliance department that he had got the inside information, the compliance officers would not have approved his tradings,” he said.
The judge said the compliance department’s watch list of stocks had not been closely updated with the deals being made by Morgan Stanley. The watch list refers to the list of stocks that the investment bank’s staff are banned from trading to prevent insider dealing or conflict of interest.
In addition, the department had not clearly informed which employees were banned from trading related shares.
The judge said senior officials of Morgan Stanley had raised doubts about Du’s trading of Citic Resources shares from February to April 2007, but compliance officer Samantha Ng had not picked up Du’s misconduct until Citic Resources announced the deals in May that year.
“There is evidence of a lack of communication between the control department and the fixed-income division of Morgan Stanley,” the judge said.
During the trial, prosecutor Charlotte Draycott said the compliance system at Morgan Stanley “was run in a haphazard and inefficient manner”.
She said Ng mistakenly believed Du wanted to trade Citic Pacific shares instead of Citic Resources. “[Her] sloppy approach may be explained by the fact that she had never found irregularity on the watch list’s employee trading sheet, or maybe that failure to see any irregularity was explained by her sloppiness.”
A Morgan Stanley spokesman said: “The firm constantly strives to enhance our internal procedures, controls and surveillance capabilities. We continue to devote significant resources to training and to reinforcing our overall culture of compliance.
“The wrongdoing by a former employee of our firm was a violation of Morgan Stanley’s values and policies. Morgan Stanley expects all of our employees to uphold the highest ethical standards. The conduct, which occurred in 2007, was identified by the firm and reported, and the employee was terminated.”
Ng left Morgan Stanley in August 2007, according to a source familiar with the matter.
Post a Comment