Stuart Scott, HSBC’s head of FX trading Europe, Middle East and Africa, has been dismissed, a source with knowledge of the matter says.
HSBC declined to comment when contacted.
But sources tell Profit & Loss that Scott is alleged to be the senior FX trader at the centre of the US Department of Justice (DoJ) investigation into claims he may have leaked confidential information to a hedge fund (Squawkbox, 27 November).
First reported in the Wall Street Journal, the alleged leak occurred while the bank was advising Prudential on a “huge acquisition” and was working on a related multibillion-dollar currency transaction.
London-based Scott rejoined HSBC in 2006, after having left to join RBS as a yen trader in 2003. Prior to this, he had also spent six years trading spot FX in Hong Kong and London for HSBC.
The trade is believed to have taken place in March 2010.
A senior HSBC trader allegedly alerted a trader at Moore Capital Management about the impending transaction. The HSBC trader also allegedly sold large quantities of GBP ahead of Prudential’s order, gaining a likely profit.
HSBC is understood to have self-reported the alleged incident to US and British authorities.
The bank is believed to have been assisting UK insurer Prudential to sell billions of GBP and buy billions of USD to finance the insurer’s planned $35 billion acquisition of the Asian life-insurance unit of American International Group.
Yet due to the sheer size of the connected currency trade the deal would have had to first be signed off by a superior at the bank, sources add.
This could indicate that other individuals may also be under investigation in connection with alleged transaction.
Profit & Loss sources at the time confirmed that traders in the bank were speaking to hedge funds at the time, as “several funds prefer talking to the trading desk rather the sales team” when discussing market colour.
HSBC was also one of the five banks fined in November by global regulators for misconduct in the FX markets. A sixth bank, Barclays, has not yet reached a settlement with the regualtors.
While the initial settlements were predominantly in relation to alleged manipulation of the 4pm Fix, the current investigation by the DoJ may indicate a new focus on how banks share market-sensitive information with clients.
The DoJ is said to be negotiating settlements in a big finalise its FX investigation early next year.
Institutions are understood to have until mid-December to cooperate with the US regulator.