UBS has been fined £29.7 million (reduced from £42.4 million, with 30% Stage 1 discount) by the FSA for systems and controls failings that allowed former UBS trader Kweku Adoboli to generate substantial losses totalling US$2.3 billion. The FSA fine comes just one week after Mr Adoboli’s conviction for fraud and sentencing to seven years’ imprisonment.
In its Final Notice, the FSA highlighted (in particular) the deficiencies of UBS’s Exchange Traded Funds Desk and Operations Division which had failed adequately (1) to question significant increases in (fictitious) profits; (2) to enforce risk limits; and (3) to investigate anomalies in recorded trades and their subsequent reconciliation. The penalty also reflected a previous sanction in 2009 for similar deficiencies in UBS and a failure by UBS to act on its own findings from a review conducted in the wake of the Societe Generale rogue trader incident of 2008.
The Final Notice contains useful commentary on the levels of trader supervision expected by the FSA.