FSA fines UBS £8 million for unauthorised trading losses

FSA fines UBS £8 million for unauthorised trading losses

The Financial Services Authority has slapped an £8 million fine - its third-largest ever - on UBS for failing to prevent employees from posting unauthorised trading losses to customer accounts.

In levying the fine, the FSA says systems and controls failures at the Swiss bank enabled four employees to carry out unauthorised transactions involving customer money on at least 39 accounts.

The activity, which took place between January 2006 and December 2007 at UBS' London-based wealth management business, only came to light when a whistleblower raised concerns internally.

Upon further investigation, it was discovered that UBS employees had taken part in the trading of foreign exchange and precious metals using customer money without authorisation and allocated losses to customers' accounts. An internal UBS investigation estimated that as many as 50 transactions a day were taking place at the operation's peak.

Margaret Cole, FSA director of enforcement and financial crime, says: "These employees were able to take advantage of UBS' inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal.

"It is imperative, particularly in these more challenging financial conditions, that firms have suitable systems and controls in place to keep their houses in order. Where firms fall short in this regard, the consequences will be severe."

UBS agreed to settle at an early stage of the FSA's investigation meaning it qualified for a 20% discount.

The Swiss bank has since paid out $42 million in compensation to customers hit by the scam.

Comments: (1)

Paul Penrose
Paul Penrose - Finextra - London 05 November, 2009, 14:50Be the first to give this comment the thumbs up 0 likes

Forgive my cynicism, but isn't this common practice in the City - https://www.finextra.com/blogs/fullblog.aspx?blogid=1317 (City exposed as institutionally corrupt and morally bankrupt)