A Study of Unauthorized Trading and Its Influences on Investment Banking
Introduction
How often do you see in the news that a rogue trader has been arrested? In this research project, we will aim to study unauthorised trading and assess how it influences investment banking general. The research will also help us have an improved mastery and a better understanding in the field of investment banking with a broader view of the repercussions faced by rogue traders, and also the full extent of the consequences the banks involved must assume and try to solve. We will also investigate the widespread of this practice in the UK and analyse how detrimental and lucrative it can be, in addition to the potential damages it carries for the bank. Also we’ll look at what the government has planned to reduce rogue trading and increase security in banks. Unauthorised trading in practice occurs when a trader buys or sells a security in an investor’s account without prior confirmation and approval by the management. This means that this trader who is a legitimate employee of the bank is trading outside the rules and regulations laid down by the organisation. My objectives are as follow:
To define unauthorised trading and assess its effects on investment banks
To show that the practice is widespread in the UK
To demonstrate that the practice can be lucrative but also has the potentials to seriously damage the bank
To reveal that unauthorised trading is the result of inappropriate internal control
To identify and evaluate actions taken by the government to control unauthorised trading in the banking sector
Literature review
At present, there are two types of customer accounts in the security market- discretionary and non-discretionary. In a discretionary customer account, also known as managed account, the trader can make transactions without prior approval by the customer. However, unauthorised trading occurs when these transactions aren’t made within the agreement set up between the trader and customer. On the other hand, in a non-discretionary customer
How often do you see in the news that a rogue trader has been arrested? In this research project, we will aim to study unauthorised trading and assess how it influences investment banking general. The research will also help us have an improved mastery and a better understanding in the field of investment banking with a broader view of the repercussions faced by rogue traders, and also the full extent of the consequences the banks involved must assume and try to solve. We will also investigate the widespread of this practice in the UK and analyse how detrimental and lucrative it can be, in addition to the potential damages it carries for the bank. Also we’ll look at what the government has planned to reduce rogue trading and increase security in banks. Unauthorised trading in practice occurs when a trader buys or sells a security in an investor’s account without prior confirmation and approval by the management. This means that this trader who is a legitimate employee of the bank is trading outside the rules and regulations laid down by the organisation. My objectives are as follow:
To define unauthorised trading and assess its effects on investment banks
To show that the practice is widespread in the UK
To demonstrate that the practice can be lucrative but also has the potentials to seriously damage the bank
To reveal that unauthorised trading is the result of inappropriate internal control
To identify and evaluate actions taken by the government to control unauthorised trading in the banking sector
Literature review
At present, there are two types of customer accounts in the security market- discretionary and non-discretionary. In a discretionary customer account, also known as managed account, the trader can make transactions without prior approval by the customer. However, unauthorised trading occurs when these transactions aren’t made within the agreement set up between the trader and customer. On the other hand, in a non-discretionary customer
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