PracticeConsultingCity controls face review

City controls face review

The Securities and Futures Authority could soon find itself under pressure to change financial-control arrangements governing City traders, according to the liquidator leading the corporate recovery team of failed Griffin Trading.

Griffin was brought down in December by the actions of rogue trader John Park, who lost #6.2m. As a result, 110 independent LIFFE traders who used Griffin to clear their trades have had their accounts frozen and face losing half of their capital due to the nature in which the accounts were held.

Grant Thornton partner Finbarr O’Connell said this week: ‘The problem lies with the fact that the traders had their money held in a segregated account, which means that there is one pooled account divided between the company and the client.’

This is in contrast to the more protected system of designated accounts whereby the local’s funds are safe.

Both Grant Thornton and the SFA have said a similar disaster could easily occur elsewhere, and O’Connell said the company was keen to provide information to the authority to help change the system if that was found to be the solution.

Grant Thornton is currently working on reconciling the client accounts in order to return the lost money to traders as soon as possible.

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