The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Foreign Exchange

FX comment: FSA rules on Alexis Stenfors

The FSA released its final notice about the Alexis Stenfors mis-marking case on Tuesday.

Between mid-January and mid-February 2009, Stenfors mis-marked his Scandi swap and FRA books. By his own admission the books were mis-marked to the tune of $100 million although, on close-out, Merrill made a negative adjustment of $456 million.

In March 2009 the weeklyFiX printed a quote, courtesy of the Financial Times, from the bank’s annual report that “ineffective internal controls at Merrill Lynch caused the firm to understate its 2008 losses by more than $500 million.” The FT added: “The additional $500 million in losses appear to have come from the discovery that Merrill used a flawed model for measuring the value of derivatives that were used in its hedging strategy.” (Alexis Stenfors and Merrill Lynch: More embarrassment for David Gu)

However, this seems to have been a separate incident, if Stenfors’ misdemeanors occurred in early 2009. The following week the FiX reported directly on Stenfors’ trading losses (BofA suffers Merrill FX indigestion) and predicted that further losses would appear.

It seems we were right. Last October, the Irish financial regulator (IFSRA), under which jurisdiction Stenfors’s ex-employer Merrill Lynch International Bank falls, fined the bank €2.75 million for lack of supervision regarding two incidents: the Stenfors case and a second that “occurred between May and August 2009, resulting in losses of $5.3 million.” Details of the second case were kept between IFSRA and Merrill – which is curious since the loss is more than 10 times Stenfors’s.

In conclusion, the FSA “is of the view that Mr Stenfors is not a fit and proper person to perform any function in relation to any regulated activity carried on by any authorised or exempt person or exempt professional firm.” The FSA prohibited Stenfors from trading. Stenfors can apply to have the order revoked after five years. I don’t fancy his chances though.

Stenfors has his own press release in which he says: “I am delighted that this investigation has finally been settled with a fair outcome. I always had faith that justice would be done and I am particularly pleased that I have not been categorized as a dishonest person. Life as a trader can be a very stressful one within, particularly in my case, where I found my working environment very unpleasant for a number of reasons.”

Poor lamb. Obviously still stressed: “within...where” what? Yes, life as a trader can be stressful, that’s why they pay you the big bucks. And the working environment can be very unpleasant when you’ve got it round your neck. But few people try to hide losses – even if they work in institutions with lamentably inadequate controls, as was the case at Merrill Lynch. The quality that inhibits such behaviour is called integrity.

The Oxford English Dictionary defines dishonesty as: “Wanting in honesty, probity, or integrity.” Given that the FSA said: “Mr. Stenfors conduct demonstrated a lack of integrity”, he shouldn’t make too much out of the fact that the word ‘dishonest’ wasn’t actually used.

Stenfors is now studying for a PhD in economics. I hope the examiners have invested in some anti-plagiarism software.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree