Prime brokerage accounts

Discussion in 'P2.T9. Current Issues (10%)' started by shanlane, May 10, 2012.

  1. shanlane

    shanlane Active Member

    Hello,

    Please excuse me for the really bad question, but how exactly Did Rusnack use a prime brokerage account to make trades for Allfirst? I just dont know the mechanics of how this works. Did he tell BofA and Citi to make trades for him or did he trade on behalf of the two banks?

    Thanks!

    Shannon
  2. ibrahim-1987

    ibrahim-1987 Active Member

    In short, he made the brokers ( citi & bofa ) act as his backoffice.
    So the entire trade was out of allfirst, and nobody knows what his trades are nor their size.
    Which exacerbated his losses, when he used net settlement.
  3. shanlane

    shanlane Active Member

    Thanks for the response but I am not quite following. So Citi and B of A actually placed the trades for him with brokerage accounts that Allfirst set up through the two banks?

    THanks!

    SHannon
  4. ibrahim-1987

    ibrahim-1987 Active Member

    Hi shanon
    1. Rusnak opened a prime brokerage accounts with citi & bofa.
    2. Mr ray ( treasury fund manager " mid office ") Ordered him to close it.
    3. Rusnak didn't, & no one checked it!!
    4. PBA, allowed rusnak to do the whole trades without any inspection from either mid or back or internal audit.!!!
    5. Rusnak exposure with citi account alone was 1$ bn.
    • Like Like x 1
  5. shanlane

    shanlane Active Member

    Makes sense.

    Thanks!

    SHannon
    • Like Like x 2

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