On April 29, the UK Financial Services Authority (FSA) published the Final Notice issued to Mr. Loic Montserret, a former manager with BlueCrest Capital Management Limited (BlueCrest). The FSA fined Mr. Montserret £35,000 (approximately $52,000) and issued a prohibition order banning him from performing any controlled function at an FSA-regulated firm. This is the first time that the FSA has both banned and fined an individual for mismarking trading positions.  

Mr. Montserret was a portfolio manager for one of BlueCrest’s funds and had sole responsibility for managing the investments of one of that fund’s trading books. The FSA makes no criticism of BlueCrest in the final notice.  

After a significant fall in the value of the trading book for which Mr. Montserret was responsible, he mismarked four equity index options, valuing them at a multiple of between two and three times their true market price. The mismarking continued for 10 days until Mr. Montserret admitted his conduct to the head of his trading desk. At its worst, his conduct resulted in the Fund being overvalued by $8.6 million.  

The FSA found that Mr. Montserret breached Statement of Principle 1 of the FSA's Principles for Approved Persons, acting without honesty and integrity. His actions prevented BlueCrest from effectively monitoring his trading book and resulted in customers receiving incorrect information on the Fund's valuation. This created a risk that customers would make investment decisions based on that incorrect information. As it happened, the Fund’s independent month-end valuation was not affected, so the risk did not crystallise.

Margaret Cole, FSA Director of Enforcement, said, “It is important that investors can trust market professionals to always do their job appropriately and fairly. Our tough action in this case should serve as a deterrent to others who might damage market confidence by acting in a similar manner.”  

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