Genuity research on BMO's "rogue trader"

This will come as a surprise to many of the journalists covering the Bank of Montreal’s (BMO:TSX) $400 million commodity option story. According to the research analyst at Genuity Capital Markets, BMO’s recent issue had as much to do with a so-called “rogue trader” as risk management failures:

“Finally, as news of the trading losses filters out, we are coming to believe that the loss has as much to do with a rogue trader as a failure of the bank’s risk evaluation processes. We acknowledge that even a strong risk monitoring system can be circumvented if an employee intentionally seeks to do so.”

In related news, the counterparty to BMO’s problem, Optionable, has been laid to waste. Now down about 90%.

How a research analyst can know the outcome of BMO’s ongoing internal investigation is beyond me, and the accusation is hard to support in the absence of independent facts. To date, nothing has come to light that suggests reckless employee behaviour. To the contrary, in fact.

If either BMO’s trader or Genuity’s analyst are looking for a good libel lawyer, I recommend Jon Stainsby at Heenan Blaikie (on offence) or Bert Bruser at Blakes (on defence). Best guys in the business!

MRM
(disclosure – I own BMO)

Hat tip to a reader