The big news today is that JPMorgan is going after Javier Martin-Artajo, the former boss of Bruno-Iksil. A Spaniard, Martin-Artajo joined JPMorgan from Dresdner in 2007 as head of credit trading.
Bloomberg reports that JPMorgan has filed a claim against Martin-Artajo personally. The precise nature of the claim is unclear. However, with losses from the Iksil affair totalling $6.2bn, the consequences could potentially be severe. Alternatively, there are rumours that JPMorgan is simply trying to clawback Martin- Artajo's bonus and that he is resisting.
Martin-Artajo has, understandably, availed himself of a lawyer. He is being represented by Greg Campbell at Mishcon De Reya. Campbell didn't immediately respond to our requests for comment. Nor did JPMorgan.
Charles Ferguson, a lawyer at Ferguson Solicitors says it's rare, but not unknown for banks to come after traders and traders' managers in the event of a loss. "I've acted for traders who have been pursued by former employers," he says. "For a bank to be able to reclaim money from you, they will need to prove that you were grossly negligent and have been in breach of contract.
"Merely making a loss while trading would not be a breach of contract," Ferguson adds.
Richard Fox, head of employment law at Kingsley Napley, says it's very unusual for individuals to be sued by banks they've worked for. It sometimes happens that individuals become personally liable in discrimination cases brought by fellow employees, he suggests - but in this case the liabilities are typically a few thousand pounds and the bank bears the brunt of the burden.
The case against Martin-Artajo and the traders he managed may focus on allegedly mis-marked trades. An internal investigation at JPMorgan reportedly found that Artajo encouraged Bruno Iksil to mark his trades at higher prices than they would have fetched in open market trading. Kareem Serageldin, Credit Suisse's former CDO boss is current fighting extradition to the US on charges that he deliberately mis-priced CDOs during the run-up to the financial crisis in order to boost his bonus and achieve a promotion.
If you work as a trader, or a trader manager in an investment bank, do you therefore need to ensure that you can prove your trades are correctly marked - even years after the event? And ought you take out some kind of professional indemnity insurance in case the bank suggests you intentionally marked them wrongly?
Adrian Jenner, head of management liability at Marsh, says that in many cases senior traders at investment banks will be covered by insurance policies already.
"An investment bank will take out a number of insurance policies to cover its employees," Jenner says. "This will include directors and officers (D&O) liability insurance, which will pay the legal and costs and damages if a director or officer is subject to charges of a civil nature." D&O insurance would probably apply even in the event that an individual is sued by the bank itself, says Jenner. However, the insurance will not pay out if criminal charges are brought.
Martin-Artajo is likely to have been an officer-level individual and is therefore likely to have been covered by D&O insurance. But what if you're merely an employee/trader and a bank accuses you of wilfully mis-marking trades? In this case, you wouldn't be covered by the insurance, suggests Jenner. "It's your personal assets on the line." Is there any other insurance policy you could take out yourself? "No," says Jenner.
With this in mind, now may therefore be the time for traders to register their assets in their wives' names.
One employment lawyer with knowledge of the Martin-Artajo case tells us JPMorgan is simply trying to clawback his deferred bonus however. "This is going to be the first of a lot of cases of this nature," he predicts.