UK's Financial Services Authority: Managing Director Banned And Fined £750,000 For Mismarking

Date 16/12/2010

The Financial Services Authority (FSA) has banned and fined Nabeel Naqui, the former Head of the Credit Products Group (CPG) Europe and Asia Pacific at Toronto Dominion Bank (Toronto Dominion), £750,000 for deliberately mismarking his trading positions and misleading fellow staff to conceal his losses over a period of two years.

Between July 2006 and June 2008, Naqui, a Managing Director at Toronto Dominion, headed the CPG Europe and Asia Pacific desk. As well as being Head of Desk and responsible for other traders, Naqui was responsible for trading credit default index and tranche products.

Over this period Naqui persistently mismarked his trading book in order to overstate his performance and took steps to ensure that this was not detected, providing deliberately altered quotes to those conducting an independent valuation of Toronto Dominion's trading positions.

Naqui was made redundant at the end of June 2008 and during the transition of his trading book to a new trader, pricing issues were uncovered. Following enquiries by Toronto Dominion into the pricing issues a downward valuation of CAD$96million (£48million) was made to Naqui's book. This adjustment was announced to the market on 4 July 2008.

Naqui was aware that such conduct would not have been tolerated as the FSA took enforcement action against Simon Brignall, another trader at Toronto Dominion, who was sanctioned for mismarking, on 16 November 2007. Naqui's misconduct overlapped with that of Brignall and his mismarking continued even after Brignall had been banned by the FSA.

Margaret Cole, the FSA's managing director of enforcement and financial crime, said:

"Market professionals cannot resort to mismarking in any circumstances. Naqui was a senior and experienced trader. Confidence in the financial system relies on someone in Naqui's position to be trusted to mark his book in line with the market. Naqui's actions amounted to a sustained course of deliberate and dishonest misconduct and fell short of the standards expected from approved persons. Our tough action in this case should serve as a deterrent to others who might damage market confidence by acting in a similar manner."

Toronto Dominion was fined £7m (reduced from £10m for early settlement) on 17 December 2009 for repeated systems and controls failings in relation to this case.

Background

1. The Final Notice for Nabeel Naqui.
2. The Final Notices for the FSA's previous action against Toronto Dominion and Simon Brignall.
3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.