Hong Kong regulators fine Merrill Lynch US$450,000 after executive's concealment of losses in a trading account went undetected by the bank for nearly a year
May 31, 2010
– Hong Kong regulators have fined U.S. investment bank Merrill Lynch $450,000 after an executive's concealment of losses in a trading account went undetected by the bank for nearly a year.
Hong Kong's Securities and Futures Commission, or SFC, announced the fine against Merrill Lynch (Asia Pacific) Ltd. and Merrill Lynch Futures (Hong Kong) Ltd. in a statement on Monday.
The SFC said a Merrill Lynch managing director falsely marked a trading book in exotic options by manipulating its valuation model from December 2007 to October 2008, concealing actual losses in the account by inflating its value by $25 million. The regulators didn't identify the executive.
The SFC said in its statement that the investment bank "accepts that its systems and controls fell short of those expected." It said Merrill Lynch cooperated with the investigation and that the bank's failure to detect the losses wasn't intentional.
It wasn't immediately clear if the SFC would also take action against the Merrill Lynch executive who covered up the losses.
The SFC and Merrill Lynch both declined to comment further.
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