UBS fined over trading scandal
A UK watchdog has fined UBS £29.7 million for “significant control breakdowns” that allowed a rogue trader to lose $2.3 billion at the Swiss bank in 2011.
In the third-largest fine in its history, the Financial Services Authority criticised the bank for having ineffective computer risk controls and “poorly executed and ineffective supervision” that allowed Kweku Adoboli repeatedly to breach risk limits and book fictitious trades.
Adoboli was convicted of fraud last week and sentenced to seven years in jail.
The failings took place in the London branch of UBS, so the FSA and the Swiss regulator Finma investigated jointly.
Finma, which does not have the power to fine, said it had appointed an independent investigator to make sure UBS puts corrective measures in place and implements them fully. The Swiss regulator also plans to hire an audit firm to review whether the measures implemented by UBS have proven effective. UBS fired or suspended more than a dozen staff in the aftermath of the trading scandal. It also clawed back deferred share awards for some staff and reduced the bonus pool for the overall investment bank by three-fifths.
In addition, it launched a spate of changes to its risk management and controls including mandatory risk training for all its staff globally.
UBS said: “We have fully co-operated with the regulators’ investigations and we now accept their findings and the penalties incurred. We are pleased that this chapter has been concluded and that the regulators have acknowledged the steps UBS has taken since this incident.”
The UK fine is one of the first levied under the FSA’s new penalty policy, which seeks to link size of fine to the revenues of the division involved. In this case, UBS was fined 15 per cent of the annual revenue of the global synthetics equities trading division where Adoboli worked. – (Copyright The Financial Times Limited 2012)