A Morgan Stanley trader fooled systems meant to limit risk-taking at the investment firm, causing millions of dollars of losses, the Securities and Exchange Commission alleged Tuesday.
Larry Feinblum, 35, was barred from working in the brokerage business and agreed to pay a $150,000 fine under an enforcement settlement with the SEC. He neither admitted nor denied wrongdoing.
Feinblum and a colleague hid risks associated with their trading by entering sham “swap orders” in Morgan Stanley’s risk management system on at least 32 occasions, the SEC said in an administrative order. Feinblum and his colleague had no intention of executing those hedges and promptly canceled them, the SEC said.
The traders knew that the system recognized the fake trades as real, the SEC said.
When Feinblum’s alleged deceptions came to light in 2009, the firm terminated him, the SEC said.
A lawyer for Feinblum said he could not comment without authorization from his client.
Morgan Stanley did not respond to a request for comment after business hours Tuesday.