Fiserv is reporting a one-time loss of $10 million in its securities processing division that resulted from an alleged fraudulent trading scheme at one if its broker-dealer clients. The loss has been offset by a $10 million gain from the sale of shares, and the company has reaffirmed guidance for trading in the first quarter.
Fiserv says insurance may cover part or all of the $10 million loss. The company also intends to chase the broker-dealer and its principals for the claim.
The broker-dealer client involved in the loss specialised in selling short for its own account. A recent sharp rise in the value of a security being sold short prompted discovery of the apparently fraudulent trading scheme.
When the client went bust, Fiserv stepped in as its clearing agent and bought securities to cover the shortfall.
Describing the incident as "unusual", Fiserv says it has not prevoiusly experienced any losses of this nature and reaffirmed Q1 earnings guidance of 37 to 39 cents per share, in line with analyst estimates.