Bankers learn it's one strike and out

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If the rhetoric is anything to by, it should be. After scandals surrounding Enron, Parmalat and overblown equity research, tolerance for dubious practices is at an all-time low. Yet a ban or suspension is not always a precursor to early retirement.

Henry Blodget, the internet analyst at Merrill Lynch, who is famed for private e-mails disparaging stock he had publicly recommended, made a modest comeback as a freelance journalist with Slate, Microsoft's online magazine. He then re-entered the world of analysis with his own company, Cherry Hill Research. The company issued research on ways of launching an initial public offering, with the promise of more to come.

Blodget is not the first to seek career redemption: in the past few years, others have travelled a similar route from ignominy to respectable re-employment.

Like Blodget, many come back as self-employed or in a different role to the one from which they were banned or suspended. Paul Ebling, former deputy compliance officer at Morgan Grenfell Unit Trust Managers, was suspended in 1998 and is now a project director at the Accounting Standards Board. James Archer, one of the trio of the "Flaming Ferarri" traders expelled in 2001 for market manipulation, subsequently found a job at Hertford Asset Management, an unregulated firm. Gavin Simpson, a director at Hertford, said Archer had been employed on the grounds that he was working in a different capacity when he committed his offence.

Rehabilitated bankers are predictably reticent about discussing their new careers. Blodget failed to respond to a request for an interview and employers of reformed regulatory offenders are similarly taciturn. Graham Kane, former managing director of Morgan Grenfell Unit Trust Managers, was temporarily suspended in 1998 but now works at UBS Asset Management as head of retail. The bank declined to comment. Michael Ackers was fined 70,000 (€102,900) by the Financial Services Authority, the UK regulator, last year after a share price manipulation scandal at ABN Amro.

He remains employed in the bank's equities division. ABN Amro also declined to comment.

The harsh punishments meted out by the US Securities and Exchange Commission and the FSA vary in accordance with the severity of the offence. As well as being fined $4m (€3.3m), Blodget was permanently stopped from working in equity research. This year, the FSA has banned at least 10 financial services employees from resuming employment in the area of their misdemeanour.

The SEC does not keep figures for banned financiers and declined to comment on its policy. However, Chris Mixter, former enforcement division chief litigator and attorney at investment bank Morgan Lewis in New York, said the US regulator had toughened its stance and the number of permanent bans had risen. In the UK and the US, banned employees may petition the regulator to have the expulsion lifted but this happens rarely.

In name at least, temporary bans or suspensions offer an easier route to redemption. Once a ban has expired, the FSA allows people to re-apply to become registered persons.

Kane was forbidden from working in fund management for 16 months before re-registering with Old Mutual Fund Managers and later joining UBS.

The process is similar in the US: brokers and analysts must register with the National Association of Securities Dealers before they can resume work. To do this, however, they need a job.

Convincing a new employer to take you on can be difficult. Although some high-profile ex-offenders find new jobs, many do not. Pat Conti, a partner with the business crimes group of Crowell & Moring, a Washington DC solicitor, said being suspended by the SEC for more than 60 days was the financial equivalent of a death sentence.

He said: "The stigma ruins people's careers." A spokesman for a US bank in London agreed: "We would definitely not employ someone who has been banned or suspended. It's a question of market reputation."

A former bank employee who was suspended and now works in a different industry, said re-entering the industry as an approved person was all but impossible. "It's a career destroyer. Once you've been suspended you're seen as incompetent and a risk. Every time you apply for a job you need to prove you are infinitely better than all the other candidates."

For some, the only option is to switch to a career in an unregulated sector. Conti said several of his former financial services clients had opened hedge funds. Others are thought to head for such sectors as money broking, which are also outside the regulators' remit.

Both options could one day prove appealing to the Citigroup government bond traders who last month sold €11bn ($13.4bn) worth of government bonds only to buy back €4bn minutes later for a profit. The bank is under investigation by seven European regulators for the trades.

If Citigroup and its traders are found guilty of contraventions, the combined wrath of Europe's regulators is likely to prove inconsequential compared with the risks associated with financial misdemeanours in China, which recently sentenced four bankers to death. Against this backdrop, those who escape with no more than their careers in tatters can consider themselves lucky.

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