...CONFLICT ON A TRADING FLOOR (A) CASE SUMMARY Brief background and context: Junior salesperson ("Seth"), an assistant on the non-dollar derivative desk of FirstAmerica (“FA”), finds himself in a difficult situation and has to decide what course of action to take as relates to going along with misrepresenting material facts to a key client, Poseidon, in conjunction with their hedging of French Franks relating to the $700 million equivalent cost of the five year construction of a new cruise ship. Seth is a relatively new employee at FA and was recruited by one of his key managers, a salesperson named Linda. Linda is asking Seth to “play along” with her questionable sales tactics so as to make the trading desk at FA a huge profit and herself a very large $1 million bonus. Seth would earn a bonus of about 70% of his base salary. Seth is ethically conflicted, as he does not feel that Linda’s tactics are honest and perhaps even legal. Who are the key players involved: (i) “Seth” – the junior salesperson at FA (ii) Linda – a top salesperson on the FX desk at FA and Seth’s boss; recruited Seth in (iii) Roger – floor trader at FA (iv) Peter – Sales Manager for Derivatives at FA (v) CFO of Poseidon What are the main issues/allegations? (i) Is fraud being committed by any or all of the following: a. Sending the Telerate page that grosses up for withholding tax, but withholding tax does not apply to cross currency swaps b. Convincing the CFO...
Words: 733 - Pages: 3
...Presentation 1: Conflict on a trading floor And before a blind person you shall not put a stumbling block Leviticus, 19. CASE (FIELD) Conflict on a Trading Floor (A) by Joseph L. Badaracco Jr., Jerry Useem Source: HBS Premier Case Collection 5 pages. Publication date: Oct 20, 1993. Prod. #: 394060-PDF-ENG A junior salesperson on FirstAmerica Bank's trading floor is assisting a top salesperson, Linda, on a deal to finance the construction of a new cruise ship for Poseidon Cruise Lines. While the terms of the deal are being worked out, he realizes Linda has taken advantage of the Poseidon executives' unfamiliarity with complex financial structures to build an outrageously high profit margin into the deal. When the executives become suspicious of the prices FirstAmerica is quoting, Linda asks the protoganist to send them an intentionally misleading fax so that the deal will not be held up. Holding the personal belief that "before a blind man you shall not put a stumpling block," he does not know if he can bring himself to send the information. Back ground: One guy ( Mr. Big as assumed name ) had been worked on the FirstAmerica Bank’s main trading floor in New York, Specialized in cross-currency interest rate swaps as an assistant manager. March 1986 At work he worked with 3 vice president and especially Linda who has a extremely volatile and hot temper, but she was good at her work to pursuing new business, close the deal and ensuring that she received...
Words: 1617 - Pages: 7
...ICMR Case Collection C op y ICFAI Center for Management Research ot Governance Issues at the New York Stock Exchange N BECG 035 D o This case was written by K. Subhadra, under the direction of Sanjib Dutta, ICFAI Center for Management Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or in effective handling of a management situation. 2004 ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means electronic or mechanical, without permission. For enquiries regarding bulk purchases and reprint permissions, please call 91-40-23430462/63 or write to ICFAI Center for Management Research, 49, Nagarjuna Hills, Panjagutta, Hyderabad 500082, India or email icmr@icfai.org. Copies of this case can also be purchased online from the ICMR website, www.icmrindia.org. BECG/035 GOVERNANCE ISSUES AT THE NEW YORK STOCK EXCHANGE “The New York Stock Exchange is long overdue for a very serious and thorough examination and overhaul of its governance. The very fact that they nominate their own board without any input from anyone else should not be tolerated.” - Nell Minow, Editor, Corporate-Governance Research Firm - The Corporate Library in August 2003.1 op y “Today, we take an important...
Words: 8454 - Pages: 34
...particularly the segregation of duties. When Nick Leeson got the job opportunity in Singapore, he was hired as the general manager of the trading floor and also was the person responsible for the settlement which means that he was making the trading transactions and at the same time recording and reporting them into the accounting system. It is a big problem because the positions assumed by Nick are related to generating revenue and doing the record keeping which are 2 areas that can create a conflict of interest, in retrospect those functions should have been held by two different persons and the communications process between them should be monitor to reduce the possibility of collusion or fraud. Another lack in control activities was the total absence of an authorization system. As we saw in the movie, when BeauMarchais asked him to buy 4000 contracts, even though the market average trade was 20000, he did not need any authorization nor anybody review the transaction to be sure that it was in accordance with the company objective. In another instance, he was able to transfer 7.8 billion yen between accounts. To avoid questionable situations and be able to make people accountable for their actions, they could program in the system a limit that when reached, asked two supervisors to record and co-sign the transaction, or implement a trading limit which unable the trader to continue his activities, unless a superior gives his authorization, if he gets to a certain volume of trades...
Words: 844 - Pages: 4
...phenomenal success. It was a completely new experience for the users which played an instrumental role in its success. These reasons make FB a very lucrative medium for companies to advertise their products and services to a vast gamut of potential and current consumers across geographies. FB does not need to hire people for its content which itself is user generated. Established brands become the revenue source for FB where they try to pull users through their advertisements. Smaller enterprises are also providing as well as finding business through and to FB respectively. Facebook going Public Knowing that its size it would be difficult to keep its financing private, FB went on to become public on May 18th, 2012 starting off with a floor price of $38. It was the most closely watched IPO after Google’s. Valued at $104 bn, it was comparable to Pespsi at $106 bn and was equal to the combined worth of Goldman Sachs and Nike. Zuckeberg’s in his letter at the time of IPO stated that one of the reasons...
Words: 1050 - Pages: 5
...founded in London, UK, in 1763 as a merchant bank. During 80’s it started to have big international success. And in 1995 it collapsed because of general manager in charge of setting up the trading operations in Singapore (Mr. Leeson). The whole story started when Mr. Leeson found out that there was an error, when one of his phone clerks sold the contracts rather than bought them. That day the loss was calculated to be 20,000 Pounds. The only thing he could do was to close the deal only in the upcoming Monday. Because of a busy day on Monday, Mr. Leeson forgot and now this was a problem that could affect not only the clerk but also him. So, he decided to hide this error permanently in an account 88888, but after some days this error could cost the firm 60,000 Pounds so this became a very serious problem that could cause Mr. Lesson troubles with his position in the company and also affect his bonuses (which until now were really high). So he decided to hide this error, and lots of others made by him or his team, which they reached the loss of almost 1 billion dollars. Why did Mr. Leeson behave that way? While reading the case, you can understand that one of Mr. Leeson’s ambitions was to become a floor trader. When he was sent to Singapore, his position was to control both settlement and floor operations and this was not a common practice for Bearings. This way he could control the firm’s operations and also in the same time work in the back office, which gave him a lot of freedom...
Words: 3333 - Pages: 14
...Chapter 8: Institutions and Procedures in Secondary Markets A. Exchanges and Floor Markets The Securities and Exchange Act of 1934 defined an exchange to be: any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood, and includes the market place and the market facilities maintained by such exchange. An exchange is typically a physical or virtual meeting place drawing together brokers, dealers and traders to facilitate the buying and selling of securities. Thus, exchanges include the floorbased markets as well as many virtual meeting sites and screen-based systems provided by Electronic Communications Networks (ECNs). In the United States and most other countries, exchange transactions are executed through some type of auction process. Exchanges in the United States are intended to provide for orderly, liquid and continuous markets for the securities they trade. A continuous market provides for transactions that can be executed at any time for a price that might be expected to differ little from the prior transaction price for the same security. In addition, exchanges traditionally served as self-regulatory organizations (SROs) for their members, regulating and policing their...
Words: 13751 - Pages: 56
...institutionalized that house and became Bruges Bourse .The idea spread quickly in neighbor countries. The Dutch later started joint stock company, which let share holders invest in business ventures and get a share of their profits or losses.In 1602, the Dutch East Indian Company issued the first shares on the Amsterdam Stock Exchange.It was the first company to issue Stocks and bonds.In 1688, the trading of stocks began on a stock exchange in London. It was the first stock exchange in history. A stock exchange is a form of exchange which provides services for stock brokers and traders to buy or sell stocks, bonds, and other securities.Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments,and capital events including the payment of income and dividends.Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds.Stock exchanges often function as "continuous auction" markets, with buyers and sellers consummating transactions at a central location, such as the floor of the exchange. To...
Words: 6099 - Pages: 25
...Ethics Enron's culture during their heyday encouraged an entrepreneurial spirit along with a “loose tight” management style that has been highlighted in the media and the Darden CD as being part of their success (Darden CD). However, according to Hatcher (2003), Enron had a culture of “anything goes as long as it makes money”. For example, in a thesis written by Boje, Alder, and Black, the authors claim that Enron used theatre to influence how decision makers accurately or inaccurately interpreted the information presented. As part of this "anything goes culture" between 1998 and 2001 Enron set up a fake Hollywood type trading floor on the 6th floor of Enron corporate headquarters using simulated statistics and their employees pretending to be "energy service traders to influence investors, regulators and employees (Boje, 2004). Although it maximized shareholder equity one would consider this behavior unethical. What about Enron's ethics program? Enron’s Code of Ethics was published in 2000, and even included a forward written by its chairman Kenneth L. Lay, in which he states “Enron’s reputation finally depends on its people, on you and me.” However, even with this senior level "endorsement", Enron’s Code of Ethics, their policies and procedures and the associated training were not enough to circumvent the wanton fraud at Enron that resulted in the largest bankruptcy in American history (Wilkinson, 2005). Why did Enron’s ethics policy fail? One of the reasons that their...
Words: 611 - Pages: 3
...Introduction Dark pools are a complex topic subject to misunderstanding amongst the broad public, media, and government regulators. To help provide a better perspective, we discuss the evolution of equity markets that led to the development of electronic trading, dark pools, and current market structure. We move on to analyze dark pools and their overall impact on trading. We then discuss further aspects of dark pools in particular, and consider regulation and global trends in market structure. Historical Perspective on Equity Markets The first modern equity market was established in the Netherlands in 1610 with the publically traded shares of the Dutch East India Company. Financial transactions had taken place since the dawn of civilization, but 1610 was a milestone towards the development of the equity markets we know today. Because equity securities represent transferable ownership interests in corporations, dividing business organizations into small, affordable pieces made it easier for entrepreneurs to raise capital from multiple sources. At the same time, limited liability allowed investors to diversify their investments without fear of incurring risk of personal accountability. Enhanced liquidity also eased transfer of ownership. Secondary markets for the securities of public firms quickly developed as the number of companies increased. Merchants and traders bought and sold securities just like other commodities, and specialization soon flourished. Stock exchanges...
Words: 4062 - Pages: 17
...‘Why I left Goldman Sachs’ by Greg Smith Précis by Pete Laburn Landing a job at Goldman Sachs Greg Smith is a pharmacist’s son from Johannesburg, South Africa, who won a scholarship to Stanford University in America. He grew up in Edenvale, as the eldest of three siblings in a Jewish middle class family, and earned a place among the 32 people, out of the 3000 international students, who applied for a full scholarship to Stanford. Three years later, in 2000, Greg was awarded a summer internship at Goldman Sachs. Of the intern class in any year, only 40% of students would be offered a full time job at Goldman Sachs after the summer. The internship programme was very strenuous and difficult, but showed that the firm took its culture seriously and taught all potential employees about giving clients good service. The internship programme gave students an opportunity to show their merit over a 10 week period as opposed to relying on a 30 minute interview. The firm stressed the importance of giving clients the correct information, not making things up or exaggerating, but being upfront and honest, even when you make a mistake. Teamwork was also highly valued at Goldman Sachs. From Goldman’s first days until 1999 (130 years) it had prided itself on serving as an adviser to its clients, with fiduciary responsibility. A fiduciary stood in a special position of trust and obligation where the client was concerned. This role was applicable when the firm was advising the client about...
Words: 5456 - Pages: 22
...culture” where employees are encouraged to refer friends and family as potential employees. This helped the company re-staff after 9/11 in a remarkably short time. Today, it has retention levels above those of its peers. This supportive and innovative culture also helped to inspire loyalty in the firm’s clients after 9/11. In addition to being named overall winner, Lutnick was also recognized as the winner in the Financial Services category. Because the attacks had devastated Cantor Fitzgerald so badly, the firm was not expected to survive. Remarkably, within a week the firm managed to get its trading back online. 'The best way to show someone you love them is to care for the people they love,' Mr Lutnick said. When the first plane hit the north tower at 8.46am, it destroyed the stairwells, making it impossible for anyone above the point of impact around the 94th to 98th floors to descend. The north tower collapsed at 10.28am. Mr Lutnick can still feel and see the horror of that day. 'It was black outside, there was no air outside, so I knew that people inside the trade center couldn't possibly be alive,' Mr Lutnick said recently from the company's offices in midtown Manhattan. Among them were his brother, Gary, and his best friend, Doug Gardner, Cantor's CFO. When the smoke cleared, the towers lay in rubble. So did parts of Cantor. 'What we had was secretaries that had lost their bosses, divisions of 86 who had only four remaining,' Lutnick said. 'There were many divisions...
Words: 6961 - Pages: 28
...A report on the negotiation between X and Y Executive summary: It is summary of the main points and the conclusion of the report. It gives the reader a quick overview of the total situation. Introduction: It informs the reader about the goals of the negotiation and also about the participants, the time and the venue Results: It is the body of the report. It gives the facts and basic items about the process of the negotiation and the results of the contract from the point of view of the writer. It is usually divided into several paragraphs. Paragraph one: pre-negotiation strategy prepared by each group. Goals: high priority items, bottom line and trading cards. Balance of power and the strategy used during the negotiation. Paragraph two: the order of discussion of the items. It is about what occurred during the negotiations, whether it followed your strategy and how successful it was. Paragraph three: the main points of the contract. Conclusion It is about what the writer thinks about the facts and how she interprets them Recommendation (if any): Recommendations are practical suggestions to deal with the situation and ideas for making sure contracts in the future are carried out more successfully. Long-range sporting Goods, Inc. of Elizabeth, New Yersey, has contacted Allsport Distributors as a possible agent for their golf clubs and bags in China. Long-range Sporting Goods: mid-to-luxury range of golf clubs, emphasis on up-market segment...
Words: 429 - Pages: 2
...National Chengchi University Department of Finance ETP Graduate Investments Fall 2014 Case Discussion Questions Instructor: Professor Edward H. Chow 周行一 Case study: financial bubble Case: Trouble with a bubble (9-808-067) 1. Why did Irving Fisher believe that stock prices had reached a permanently high plateau? 2. Why did the stock market crash in 1929? 3. Why did influential individuals like Fisher, Keynes and Rockefeller believe that the downturn would only be temporary? Case study: investment banking business and global financial crisis Case: Investment banking in 2008 (A): Rise and fall of the Bear (KEL378) 1. What role did Bear’s culture play in its positioning vis-à-vis its competitors, and what role might that culture have played in its demise? 2. How did Bear’s potential collapse differ from that of LTCM in the eyes of the Federal Reserve? 3. What would Bear have done differently to avoid its fate? A. - In the early 2000s? B. - During the summer of 2007? C. - During the week of March 10, 2008? 4. Who stood to benefit from Bear’s implosion? 5. Is market perception of liquidity more important for an investment bank than it is for an traditional manufacturing or distribution business? If so, why? 6. How could Bear have addressed perceptions of its liquidity? Could it have stopped the run on the bank, and if so, how? 7. Did Bear’s failure undermine the viability of so called “pure-play” investment banks? 8. What role should the Fed...
Words: 1913 - Pages: 8
...Introduction Operated through a complex, cryptic structure Bernie Madoff, CEO of Bernie L. Madoff Investment Securities (BMIS), perpetuated the most embellished Ponzi scheme the world has ever seen. The basis of the securities fraud that took place approximately between 1991 – 2008 was influenced by Bernie Madoff’s reliance upon an unqualified staff, outdated software, organizational seclusion, a personal halo effect, and weaknesses in the regulating body. Madoff had the confidence of the public, yet to pull off such an elaborate scheme, he relied on a startling number of family members, vital accomplices working on the illegal trading floor such as Frank D. Pascali, IT staff members, and a separate BMIS branch of international employees in the U.K. to seemingly legitimize the whole thing. Domestic and European institutional investors, friends and acquaintances of Madoff’s, and an additional couple of thousand people who had exposure to BMIS funds, trusted as much as their entire life or retirement savings. Investors were dumbfounded when the jenga-like pyramid came crashing down on them, despite many caveats from whistleblowers. Leading up to December 11, 2008, the date Bernie Madoff was taken into federal custody, he acted especially cross and frantic, specifically when the SEC was mentioned. Another sign of the impending collapse was Bernie’s reluctance to accept any more large sums of money, contrast to the usually receptive Bernie (Henriques). As a result of Madoff’s...
Words: 3388 - Pages: 14
