Banks fined for 'lying' about trade

9 January 2008

Nineteen firms, including Bear Stearns, Merrill Lynch, UBS, Deutsche Bank and Lehman Brothers, have been fined by US brokerage regulators for posting inaccurate trading volumes.

Some $2.8 million in total will have to be shelled out by the firms, after their rankings may have been affected by notable exaggerations in their trade.

A study of August 2006 figures showed that the banking giants had all made "substantial overstatements'' in at least one security, the Financial Industry Regulatory Authority revealed.

The firms were asked to employ effective systems to monitor the accuracy of their figures by a September 2006 deadline, but the 19 companies failed to do so.

Nejat Seyhun, a professor of finance at the University of Michigan, was quoted by Bloomberg as saying the number of brokerages involved was "quite significant".

He said that, as the figures published would be used to attract investors, some firms may have suspected their rivals were lying about their success and may have felt compelled "to cheat so that they're not penalized for their honesty''.

Eight firms were charged the highest fine of $200,000, while some only had to fork out $50,000.

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