How did Peter Young gain infamy as a "rogue trader"?

By Andrew Beattie AAA
A:

Peter Young's notoriety as one of the most memorable rogue traders is not a result of the amount of money he stole, but the bizarre events that followed his arrest and continued throughout his trial. Young was a fund manager for Morgan Grenfell Asset Management, trading for three large European funds seeking international exposure.

Young had made good profits on speculative investments in unlisted stocks in previous years and he continued to ramp up risk in order to maintain his run. To get around fund regulations that stated a fund could own only 10% of any company, Young created a mirror holding company through which to buy a major stake in a company he wanted. He proceeded to hold 10% of both the mirror holding company and the stock he originally targeted. Further, Young went on to use similar methods to circumvent the 10% limit on the amount of the fund that could be put into unlisted stocks. On top of illegal speculation, Young also used a system of warrants and dummy companies to filter the fund's money into his own personal account.

Morgan Grenfell became suspicious when one of Young's investments, Solv-Ex, came under SEC and FBI scrutiny for possible violations. Despite the news and the resulting massive sell-off of Solv-Ex, Young went through with plans to buy the company's shares at a premium. Morgan Grenfell suspended the equity funds that Young was running and began an inquiry. It found that Young was holding over three times the legal limit in unlisted shares and the bank hurried to cover the losses by closing out positions. One of the companies in the fund, Russ Oil, turned out to be wholly owned by Peter Young. He used it as a way to milk money from the fund to pay for his lavish house.

The bank was fined and took losses covering for its investors, but the story barely had begun. Young was charged for conspiracy to defraud investors. The trial became highly publicized when Young wore dresses to the hearings. On top of cross-dressing, and in answer to those who may have thought it all an act, it became known that Young had attempted and botched a do-it-yourself sex change. Although Peter Young was found guilty on all charges, the judge promptly voided the verdict due to reasons of insanity.

(For more on this topic, read Trading's 6 Biggest Losers.)

This question was answered by Andrew Beattie.

RELATED FAQS

  1. What's the safest way to invest in high-yielding dividend stocks?

    Learn about some of the most important safety factors that you need to consider before you invest in high-yielding dividend ...
  2. What is the minimum amount of money that I can invest in a mutual fund?

    Learn about investing in mutual funds even with a smaller initial investment; there are many funds available to investors ...
  3. What does a mutual fund's beta coefficient measure?

    Evaluate the risk associated with a particular mutual fund by determining its beta coefficient, which illustrates the fund's ...
  4. How can I get a mutual fund prospectus?

    Read and understand the prospectus before investing in a mutual fund. You can obtain a copy from the fund company, your financial ...
RELATED TERMS
  1. Historic Pricing

    A method for calculating the value of an asset using the last ...
  2. Financial Action Task Force (FATF)

    An intergovernmental organization that designs and promotes policies ...
  3. Banker Trojan

    A malicious computer program designed to gain access to confidential ...
  4. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
  5. Ulcer Index - UI

    An indicator developed by Peter G. Martin and Byron B. McCann ...
  6. Investment Company Act Of 1940

    Created in 1940 through an act of Congress, this piece of legislation ...

You May Also Like

Related Articles
  1. Pimco has stabilized its Total Return fund, but its returns are still shaky and its sales load is still a fat one.
    Professionals

    A Look At Pimco's Total Return Fund ...

  2. 10 equity mutual funds bargains for any investor or financial advisor.
    Professionals

    10 Equity Mutual Fund Bargains

  3. Africa's economic growth and growing stability has gotten the attention of adventurous investors. What kind of ETF or mutual fund options are available?
    Mutual Funds & ETFs

    Destination Africa: These Funds Offer ...

  4. With the addition of 'Bond King' Bill Gross, Janus is a changed firm. Here's what its fund lineup looks like now.
    Investing Basics

    How Does Janus's Fund Lineup Look Now?

  5. Blackrock has lowered its fees to snag money leaving Pimco's bond funds. But by how much and who's following suit? Read on.
    Investing Basics

    Thank You, Pimco: BlackRock Drops Bond-Fund ...

Trading Center