Further to an investigation into Saxo’s anti-money laundering protocols, Finanstilsynet (Danish FSA) launched an investigation into Saxo Bank and its platform SaxoTrader in 2009 and 2010, from which they have published a series of reports during July 5 to 7 2010.
The report from the second Danish FSA investigation accuses Saxo of failing to protect investor interests adequately.
Strangely, in the introduction letter to the report, dated July 5 2010, the Danish FSA writes (translated from Danish): “Since the press has raised uncertainty with regards to the bank’s integrity and loyal execution of customers orders, and since Finanstilsynet has received a complaint that the bank has conducted front-running or in other ways, not executed customers orders in line with the bank’s own trading procedures or Best Execution Policy, the Finanstilsynet finds that there is a need to investigate the bank’s handling and execution of orders.”
The Danish press, particularly newspapers Børsen and EPN have been fiercely reporting on Saxo Bank, documenting allegations and rumours from customers and former employees. As a consequence of the latest run in with the Danish FSA, Saxo Bank’s directors have now refused to speak to the Danish press and communication is through press releases only.
There is no doubt the Danish FSA has felt under pressure to act.
In the latest Danish FSA report, the main issue that crops up is concern that Saxo might not be following best execution policy when manually executing large orders that come through on SaxoTrader. The Danish FSA says it was prompted to investigate by the press and by complaints from Portuguese asset managers, Fortune, who said that there were discrepencies between Saxo’s rates on some currency pairs and that of the market rate.
This begs the question, since when did financial authorities spring into action on the back of media speculation?
The Danish FSA has referred the case to Det Finansielle Virksomshedsraad (Danish financial business council) which has ordered an independent investigation into Saxo’s manual trade handling. This must be completed by October 1 2010, it says: “Since this will require a lot of resources and require an investigation of all trades, this investigation is based on a sample of manual trades. The lawyer who will be in charge of the investigation, due to resource, time and risk considerations, recommended the choice of one or two types of financial products to focus the investigation around. The choice can, for example, be based on the following criteria:
How many trades – relative to the total number of trades on a given product – is handled manually by Saxo Bank’s traders?
How long does it take from when the order is sent by the customer to the execution of the trade by Saxo Bank’s traders?
Trades that are executed on rates which are far from the relevant benchmarks
The investigation’s results will be summarised in a written report, which concludes to what extent there exists divergence from the banks execution policy and general execution procedures in the manual execution of customers’ trades, the circumstances of this divergence and whether they are of a character and scope that implies a systematic execution process that diverges from the bank’s best execution policy and trading rules, as well as trades that are executed in line with the principal of best execution.”
Commenting on the investigation, a spokesman from Saxo Bank, says: “On behalf of the Bank, Bjorn Krog Andersen welcomes the order to conduct such an investigation. This is a fraction of all the trades performed by clients through the Bank. Saxo Bank fully understands that the Danish FSA cannot conduct such an investigation on its own and the Bank looks forward to collaborating with the Danish FSA to have this investigation performed as soon as possible.”
The Danish FSA has yet to comment on the progress of this investigation.
