Feeds

Regulators probe SocGen over rogue trader scandal

Will the SEC get in on the act?

Intelligent flash storage arrays

Société Générale may face a US inquiry on its handling of the rogue trader scandal that cost the company €4.9bn ($7.2bn).

The US Securities and Exchange Commission wants to see if the French bank violated US laws in the way it unwound its position after it was dropped in a hole by rogue derivatives trader Jérôme Kerviel.

Société Générale (SocGen) trades in the US and its shares are traded in the country as American Depositary Receipts (ADRs). That gives US regulators a potential interest. However, Kerviel's misjudged positions were restricted to the main European markets; the SEC's preliminary inquiry could conclude that the matter is best left to the French authorities, the Financial Times reports.

It has yet to be determined how and why Kerviel, a junior trader, secretly built up huge and risky positions in the derivatives market. The SocGen affair is the focus of five inquiries in France as well the possible SEC probe. Separately, the US attorney in Brooklyn is investigating the possibility that a leak of insider information prompted stock sales ahead of SocGen’s announcement of the disaster on 24 January.

Senior European Union politicians yesterday attacked SocGen for "abject carelessness" in failing to prevent the biggest rogue trader losses in financial history. Charlie McCreevy, the EU’s internal market commissioner, said SocGen had ignored warnings from Eurex, a leading derivatives exchange, over trades conducted by Kerviel.

A former inspector of trading operations at SocGen said his team was under-resourced, at least during his watch. "Inspectors do not have enough power in the bank, we are not given the time we need, or the means to check things out," Maxime Le Grand told AFP. SocGen strongly disputes this criticism.

Kerviel appears to have acted alone in sinking his employers into a huge hole. He joined the bank as a developer in 2000 working on the middle office systems that control how much a trader, or group of traders, can risk.

The role gave Kerviel the knowledge of how to manipulate the system when he became a junior trader in 2005. His role as a hedger involved covering the bank's exposure to large losses by taking positions opposite to those taken out by more senior traders. Trading limits in the order of tens of millions of dollars ought to have been applied, but Kerviel circumvented these controls.

Société Générale's own explanation of how the fraud took place, and the sequence of events leading up to its discovery, can be found here.

Kerviel admits to gaming the systems, but claims he was only working to increase bank profits. His lawyers say he's being used as a scapegoat for a wider range of problems at the bank, which has, they say, been hit particularly hard by America's sub-prime mortgage crisis.

Kerviel was charged with abuse of confidence and hacking offences on 28 January and released on bail. An investigating magistrate rejected prosecution attempts to charge him with fraud, CNN reports. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
WHY did Sunday Mirror stoop to slurping selfies for smut sting?
Tabloid splashes, MP resigns - but there's a BIG copyright issue here
Spies, avert eyes! Tim Berners-Lee demands a UK digital bill of rights
Lobbies tetchy MPs 'to end indiscriminate online surveillance'
How the FLAC do I tell MP3s from lossless audio?
Can you hear the difference? Can anyone?
Google hits back at 'Dear Rupert' over search dominance claims
Choc Factory sniffs: 'We're not pirate-lovers - also, you publish The Sun'
While you queued for an iPhone 6, Apple's Cook sold shares worth $35m
Right before the stock took a 3.8% dive amid bent and broken mobe drama
Inequality increasing? BOLLOCKS! You heard me: 'Screw the 1%'
There's morality and then there's economics ...
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.