Jefferies accused of yielding to pressure to win clients

The City watchdog is investigating an American investment bank over claims that senior managers improperly interfered with the work of analysts in its research department, an employment tribunal was told yesterday.

Jefferies is facing claims from Milan Radia, one of its former leading analysts, that he was forced to change a report under pressure from a potential client of the bank and that he was asked to attend float pitches, in breach of market rules.

In a legal claim submitted to a London employment tribunal, Mr Radia alleged that Jefferies had broken rules over the use of equity research to win initial public offerings. He accused the bank of bringing analysts to deal pitches alongside bankers and of allowing bankers to interview potential recruits to its research department.

Mr Radia said that equity research analysts at Jefferies had been paid by the bank for “their specific work on winning IPO and other investment banking transactions”. He also alleged that senior bankers had asked for “certain text” to be included in research reports “in an attempt to gain favour with decision-makers on pitches for forthcoming IPO transactions”.

A lawyer for Mr Radia told the employment tribunal yesterday that the Financial Conduct Authority was investigating Jefferies, having informed the bank on March 28 that it was the subject of an official review over the allegations.

The claim is the second brought by Mr Radia, formerly managing director at Jefferies, after he lost an earlier tribunal for discrimination based on disability. He had alleged that his bonus was cut after he returned to work following treatment for leukaemia eight years ago. In February a tribunal rejected the claim and said that Mr Radia “in a number of respects . . . did not tell the truth or misled the tribunal”. He was dismissed by Jefferies after the judgment.

He has brought a fresh claim for unfair dismissal based on his previous whistleblowing against the bank on its breaches of research rules. Sam Neaman, representing Mr Radia, told the tribunal that his claims included allegations relating to a research report that he wrote on Telecity, a formerly London-listed data centre business, as well as the potential flotation of Moneybookers, a payments and money transfer company now known as Skrill.

Mr Neaman told the tribunal that David Weaver, a former senior investment banker at Jefferies, had “succumbed” to pressure from Telecity to ask Mr Radia, one of the bank’s top technology analysts, to alter a report.

Huw Tucker, international chief financial officer of Jefferies, told the tribunal that he had not been aware of Mr Radia’s specific allegations but that he was aware of the FCA investigation.

“We did have a board meeting with the FCA where they informed us of the investigation,” Mr Tucker said. He told the tribunal that he had been informed at the weekend that the FCA’s review of the Telecity claim had been closed.

A spokeswoman for Jefferies said: “As was the case with Mr Radia’s first tribunal claim which he lost on all points, this claim has no merit and we are confident that we will prevail.” The FCA declined to comment. The case continues.