The Dubai Financial Services Authority barred Noyan Ayhan from engaging in financial services functions in or from the Dubai International Financial Center for allegedly hiding trading losses of approximately US $11 million from his unnamed employer bank. According to DFSA, Mr. Ayhan purportedly hid his losses by mismarking trading positions of his trading desk that included positions in Turkish government bonds and related swaps from April 30 to July 22, 2014. Mr. Ayhan also colluded with brokers at various local Turkish banks to post orders on the last trading day of April, May and June 2014 for trades in Turkish government bonds on the Borsa Istanbul, charged the Dubai regulator. The DFSA claimed that Mr. Ayhan engaged in this activity with other brokers to create closing prices that would match his month-end marks in order to avoid detection by his employer’s Financial Management team which, as of the last day of each month, compared independent price valuations with internal trading books’ month-end marks. According to DFSA, when interviewed by his bank employer, Mr. Ayhan said he “aggressively marked” his bonds but did not engage in mismarking, and did not remember any conversations with brokers regarding month-end trades even after being shown transcripts of conversations. Under DFSA’s bar order, Mr. Ayhan may request a variance or revocation of his work restriction after six years.
Culture and Ethics: Apparently, on June 16, 2014, in the middle of Mr. Ayhan’s ongoing alleged fraud, Mr. Ayhan requested a subordinate to falsely mark the book of his trading desk when he was out of the office one day while on leave. Although the subordinate questioned Mr. Ayhan’s proposed marks, terming them “absurd,” he followed his boss’s instructions when Mr. Ayhan said he would correct them the following day and disclose the “true” profit and loss to management. The next day, Mr. Ayhan returned to work and advised his subordinate that he would not correct the marks or disclose the true P&L to management. Although DFSA's decision notice does not disclose whether the subordinate at that time informed his employer bank’s management of Mr. Ayhan’s behavior, it is alleged that Mr. Ayhan’s purportedly wrongful practices continued for at least one more month. All employees within a company must continuously be reminded of their obligation to report improper, let alone illegal, conduct to designated persons. Reporting wrongful conduct internally (without fear of retaliation) must be imbedded in the culture of each legal entity.