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SocGen- Jerome Kerviel
- 1. Sign in to begin: Password User Sign in 1
- 2. SocieteGeneraleThe Company INTRODUCTION Global Presence with over 20 million customers worldwide Founded in 1864 Core Businesses: Corporate + Investment Banking Retail Banking Global Investment Services Over 130000 employees 2
- 4. 1. Name: Jerome Kerviel Age : 31 years 2008 FLASHBACK: ROGUE TRADER Education: Masters of Finance, University of Lyon Starting Position: Risk Management Office “The Mine”, Back-office systems & security systems Ending Position: Lower-level trader, Delta One- Trade index futures as a way to hedge company risk and make small profits Co-workers’ impressions: “quiet and unassuming trader”, “unimpressive education background”, “motive to impress his seniors” 4
- 5. 2. Job Role: Purchase European stock index futures And sell others as a hedge. Job Goal: Create small, low-risk profit stream based on Large volume. 2008 FLASHBACK: ROGUE TRADER 3. What Kerviel Actually Did: Bypassed all internal controls and made high risk unauthorized trades for a total of $87 billion in trades. He bypassed controls by creating fictitious trades in “trading book” to offset his trades. 5
- 7. “A cocktail of IT failures” System Vulnerabilities IT controls including: General Controls Application Controls Security Policies KEY CONCEPTS 7
- 8. System Weaknesses CONTROL FAILURE Management | Organization | Technology Unauthorized Access Internal Control Breach Managers’ failure to identify key errors 8
- 9. Responsibility for losses “THE BLAME GAME” Kerviel’s ethical misconduct Failure of internal controls Management and Supervisors IT Audit Controls 9
- 10. Fraud Prevention Techniques PROACTIVE PREVENTION Randomize internal checks Track changes in trading books Effective Supervision and Reviews Mandatory Vacation Days 10
- 12. Understand importance of data security
- 13. Actually follow Company policies11
- 14. Fraud Reaction Techniques REACTIVE PREVENTION Crucial to appropriately act upon fraud within company Conduct strict management reviews Conduct audit on internal controls and responsible management 12
- 15. Redesigning Internal Controls CONTROLS REDESIGN 13
- 16. Allen, P. (2008, January 28). Jerome Kerviel behind SocieteGenerale fraud. Retrieved July 4, 2011, from The Telegraph: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4667707/Jerome-Kerviel-behind-Societe-Generale-fraud.html Gauthier-Villars, D. (2010, October 6). Rogue French Trader Sentenced for 3 years. Retrieved July 4, 2011, from Wall Street Journal: http://online.wsj.com/article/SB10001424052748703726404575533392217262322.html Hurst, A., & Leveque, T. (2008). "SocGen Discloses Details". Retrieved July 4, 2011, from Market Watch: http://www.marketwatch.com/story/societe-generale-traders-named-as-jerome-kerviel-report Parase, N. (2008, January 25). French Bank Trader Says Rogue Trader Lost $7 Billion. The New York Times . BIBLIOGRAPHY 14
- 17. That’s him! APPLAUSE….. It’s good we found the guy who lost 5 billion! Need a little chip in the stock market? might need 180,000 years of life 15