A senior trader at Morgan Stanley in London who cheated seven institutional clients was banned for an unspecified period yesterday from working in the City, the third trader at the bank to be outlawed in a fortnight.

Nilesh Shroff, who also was fined £140,000, disadvantaged clients by exploiting knowledge of their planned buy and sell orders to trade in advance for the benefit of the bank, according to the Financial Services Authority (FSA).

In a prohibited activity known as pre-hedging, a form of front-running, Mr Shroff used his knowledge of client instructions to conduct similar trades before executing the client trades. The effect was to move prices adversely for the client and favourably for the bank.

Sources at Morgan Stanley insisted that there was no wider systemic or management problem at the bank. According to a source, the three incidents occurred several months apart and took place in separate business units. It was a coincidence that the FSA’s enforcement actions concluded at the same time. The bank noted that it was sanctioned or criticised in only one case.

Mr Shroff, who previously worked for Goldman Sachs and HSBC, conducted banned pre-hedging trades on seven occasions between June and October 2007, the FSA found. He was dismissed for gross misconduct in December 2007. The manager of the client in the case where Mr Shroff was caught, named Mr B of Customer A in the FSA evidence, described the deceit as an “outrage”. The FSA estimated that A would have lost £98,000, or 16 basis points, on its £61.25 million of orders, had it not been compensated.

The six other clients are understood to have been alerted to the scandal but did not ask to be compensated because the sums were very small.

Morgan Stanley said: “Mr Shroff deliberately and knowingly violated our policy on pre-hedging client trades. We took immediate action to address his misconduct, ultimately dismissing Mr Shroff.”