Prime brokerage accounts

[shanlane]

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

 

[ibrahim-1987]

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.

 

[shanlane]

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

 

[ibrahim-1987]

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.

 

[shanlane]

Makes sense.

Thanks!

SHannon