Chapter III: Vignette : Trading Scandal at Societe Generale

1.)Peter Gumble, European editor for Fortune magazine, comments, "Keivel is a stunning example of a trader breaking the rules, but he's by no means alone. One of the dirty little secrets of trading floors around the world, is that every so often, somebody is caught concealing a  position and is quickly - and quietly- dismissed...[This] might be shocking for people unfamiliar with macho, high-risk,high-reward culture of most trading floors, but consider this: the only way banks can tell who will turn into a good grader and and who won't is by giving every youngster it hires a chance to show his mettle. That means allowing even the most junior traders to take aggressive positions. This leeway is suppose to be matched by careful controls, but clearly their aren't foolproof". What is your reaction to this statement by Mr. Gumble ?

Fraud is an intentional deception made for personal gain or to damage another individual. As what Peter Gumble's statement banks should be aware of their hiring especially to the younger ones. The only way that banks can tell who will turn into a good trader and who won't is by giving every youngster it hires a chance to to show their mettle. Allowing young or out of experience traders is a wrong move because young traders are too aggressive just like Mr. Jerome Keivel. The company has lost their money without knowing taht their employee is making money in their company without any consent.

2.)What explanation can there be for the failure of SocGen's internal control system to detect Kreviel's transactions while Eurex detected many suspicious transactions?

 The SocGen risk-control expert used information provided by Kerviel and his supervisor as well as a compliance officer at the SocGen subsidiary as the basis of both of his replies to Eurex. Upon a more thorough investigation, a major problem became apparent. As SocGen risk-control experts carefully reviewed Kerviel's latest transactions, the SocGen risk-control shocked to discovered that the trades had resulted in a market exposure for the firm of 50 billion euros. SocGen discovered that Kerviel is committing computer fraud and he is using his insider knowledge to falsity of records to earn money.