THE FINANCIAL Regulator’s office has confirmed it is the official lead agency for an inquiry into a potentially huge irregularity in the books of a London-based trader working for Merrill Lynch.
The trader works for the London branch of Merrill Lynch International Bank Ltd, a Dublin-registered company with an address at Treasury Buildings, Lower Canal Street. The company’s directors include former senior civil servant Paddy Teahon and former chief executive of the Financial Regulator Liam O’Reilly.
The regulator’s office is working with the Financial Services Authority in London and authorities in the US. Merrill Lynch is owned by the Bank of America. A report in the Financial Times at the weekend said the trader had been suspended after accumulating more than £284 million (€316 million) in undisclosed losses in recent months.
The Irish regulator was informed on February 18th that there may be a problem with the company, a spokeswoman confirmed. Under international regulatory rules, the Irish regulator has responsibility for the inquiry as the company the trader worked for is Irish-registered.
According to the company’s latest accounts, it is the primary non-US banking arm of Merrill Lynch. It has branches around the globe. Its after-tax profits in 2007 were $715 million (€565 million). Profit from dealing during the year, according to the accounts, was $1.1 billion. The auditors are Deloitte Touche, Dublin.
Officials from Merrill Lynch were poring over the books of currency traders at the weekend after an “irregularity” was found within its trading operation in London. A report in the New York Times said attention was focused on the accounts of Alexis Stenfors, a foreign exchange trader.
His losses, when they came to light, were said to have so alarmed management at Bank of America that they examined the books of other traders who were on holiday. Mr Stenfors recorded a trading profit for the year of about $120 million, according to the New York Times, which quoted him as calling the issue a “misunderstanding”.
A Merrill Lynch spokesman said: “During a recent evaluation of certain trading positions, we discovered an irregularity. We informed regulators immediately and are working closely with authorities to thoroughly investigate the matter.” Bank of America bought Merrill Lynch last September with the help of the US government.
