Newspaper article International Herald Tribune

U.K. Regulator Fines UBS for Lax Oversight ; Insufficient Risk Controls Allowed Former Trader to Run Up $2.3 Billion Loss

Newspaper article International Herald Tribune

U.K. Regulator Fines UBS for Lax Oversight ; Insufficient Risk Controls Allowed Former Trader to Run Up $2.3 Billion Loss

Article excerpt

The Financial Services Authority on Monday imposed a Pounds 29.7 million fine on the Swiss bank for failing to prevent a $2.3 billion loss caused by a former trader.

The British Financial Services Authority on Monday imposed a Pounds 29.7 million fine on the Swiss bank UBS for failing to prevent a $2.3 billion loss caused by a former trader.

The fine, the equivalent of $47.6 million, was one of the largest penalties ever issued by the regulator.

UBS was found to have had serious weaknesses in the internal controls of its investment banking unit. The failings allowed Kweku M. Adoboli, then a trader at the bank, to rack up a multibillion- pound trading loss last year after he carried out a series of unauthorized trades.

Mr. Adoboli, 32, received a seven-year prison sentence last week on two counts of fraud for abusing his position at UBS from 2008 to 2011. He was found not guilty on four counts of false accounting.

The F.S.A. had been working with its Swiss counterpart in a yearlong investigation of the trading loss.

British and Swiss regulators said on Monday that UBS had failed to manage the risk-taking of its traders in London.

The lack of supervision from top managers allowed the unauthorized trading to continue for an extended period of time, according to the authorities.

"UBS's systems and controls were seriously defective," Tracey McDermott, director of enforcement and financial crime at the F.S.A., said in a statement. "Failures of this type in firms of the size and standing of UBS not only damage the firms concerned but also wider confidence in the integrity of the markets and the financial system."

The Swiss Financial Market Supervisory Authority said Monday that Mr. Adoboli's activities would have been detected earlier if UBS had had more stringent risk-management systems in place in its London operations.

The Swiss regulator, which does not have the power to levy fines, said it was appointing an independent investigator to oversee improvements in UBS's risk-management systems. …

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