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FSA/PN/057/2009
29 April 2009

The Financial Services Authority (FSA) has banned and fined Mr Loic Albert Antoine Montserret, a former portfolio manager at BlueCrest Capital Management Limited (BlueCrest), £35,000 for deliberately mismarking his positions in an attempt to avoid losing his job over losses he was making on his trading book.

This is the first time the FSA has both banned and fined an individual for mismarking trading positions.

From November 2007 to May 2008, Mr Montserret was responsible for managing $60 million of the capital in the BlueCrest Multi Strategy Credit Fund (the Fund). During April 2008, changing market conditions resulted in a significant fall in the value of Mr Montserret’s trading book which he knew would put his job at risk. To disguise the extent of his losses, Mr Montserret mismarked four equity index options by valuing them at nearly two to three times their actual market price. The mismarking went on for ten days and resulted, at its maximum, in the fund being overvalued by $8.6 million. On the tenth day, he admitted the overvaluation to the head of his trading desk.

Mr Montserret’s actions also prevented BlueCrest from properly monitoring his trading book. This meant that customers were put at the risk of making investment decisions based on incorrect information.

Margaret Cole, FSA director of enforcement, said:

“Market professionals cannot resort to mismarking whatever the circumstances. Mr Montserret’s behaviour fell short of the standards expected from approved persons and showed a lack of integrity and honesty on his part.

“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.”

In determining the appropriate action to take, the FSA took into account that Mr Montserret admitted his misconduct at an early stage of its investigation. He also qualified for a 30% discount on the fine by agreeing to settle early. Otherwise, the fine would have been £50,000.

Notes for editors

1. The final notice for Mr Montserret gives more information about the case.
2. The FSA makes no criticism of BlueCrest in the final notice.
3. Throughout the relevant period, Mr Montserret acted as a Portfolio Manager on the BlueCrest Multi Strategy Credit Fund. Mr Montserret had sole responsibility for managing the investments of a certain trading book within the Fund. In his capacity of Portfolio Manager, Mr Montserret was responsible for investing funds provided by customers and making investment decisions on their behalf in accordance with the terms of the Fund’s mandate.
4. Customers of the Fund could only implement investment decisions on subscriptions into and redemptions from the Fund after receiving an independent month-end valuation. Mr Montserret’s actions were identified and rectified before the independent month-end valuation was calculated. There is no evidence to suggest that any BlueCrest customers were disadvantaged by Montserret’s actions.
5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.