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SocGen: Another Trader is Detained

SocGen confirmed that police have searched its trading floor and held a new trader and former colleague of rogue trader Jerome Kerviel, for questioning. Some records were also taken away by officers. Meanwhile, the UK's FSA highlighted measures banks should take to protect themselves against "rogue trader" risk...

SocGen confirmed that police just searched its trading floor and held another trader and former colleague of rogue trader Jerome Kerviel, for questioning. Some records were also taken away by officers.It is not the same broker from the bank's Fimat unit - now Newedge - who was held for questioning last month and has since been named as a witness.

[Last month, investigators looking for clues that Kerviel had an accomplice uncovered 2,000 pages of potentially compromising instant messages that Kerviel exchanged with Moussa Bakir, his broker at Newedge. France's Nouvel Observateur magazine revealed the messages.]

The person just arrested is believed to be among one of Kerviel's friends listed on his Facebook profile. He is reportedly an employee of SG Securities, which is SocGen's share brokerage arm.

Police are now trying to establish whether the broker may have helped Kerviel place tens of billions of euros in unauthorised deals at the bank.

In the meantime, the UK's financial watchdog, the FSA, has called on UK banks to review their systems and controls, to prevent other rogue trading scandals.

The FSA says it has spoken informally to 50 of London's largest trading banks and found that many are reviewing systems and identifying gaps in trading controls following the SocGen case.

The watchdog highlighted measures firms should take to protect themselves against "rogue trader" risk. These include:

-- Front office culture and governance, in particular traders encouraged to take two-week continuous holidays, and appropriate segregation of front office staff from middle and back office functions;

-- The use of suspense accounts;

-- The quality of management information, both routine and outside normal parameters; and -- Elementary IT precautions, such as whether access to systems is password dependent.

The FSA highlighted the concern that current volatile market circumstances significantly heightens the chances that inappropriate practices may "quickly lead to record losses".

"So early discovery and remedial action are even more important than in 'normal' times," the FSA said in a statement.

Meanwhile, Kerviel, who has been blamed for $7.2 billion losses at SocGen, remains in custody in a Paris prison. He is being investigated for breach of trust, computer abuse and falsification.

He previously said that he acted alone, but insisted his bosses ignored his massive trades as long as he was making profits.SocGen confirmed that police have searched its trading floor and held a new trader and former colleague of rogue trader Jerome Kerviel, for questioning. Some records were also taken away by officers. Meanwhile, the UK's FSA highlighted measures banks should take to protect themselves against "rogue trader" risk... Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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