UK regulator fines UBS $13.3 million for allowing unauthorized transactions by employees
By: ROBERT BARR
Associated Press
11/05/09 11:15 AM EST
LONDON — Swiss bank UBS AG has been fined 8 million pounds ($13.3 million) for management failures which allowed employees to make unauthorized trades with customers' accounts, Britain's financial regulator said Thursday.
The fine is the third-largest ever imposed by the Financial Services Authority.
Margaret Cole, the regulator's director of enforcement and financial crime said the fine included a 20 percent discount from the maximum because UBS cooperated at an early stage.
Four employees and at least 39 accounts in UBS' London-based wealth management business were involved in the unauthorized transactions in 2006 and 2007.
"These employees were able to take advantage of UBS' inadequate systems and controls, giving them free rein to make unauthorized trades with customer money that they were then able to conceal," said Cole.
UBS has paid more than $42 million compensation to the wealthy customers who were affected.
The FSA and UBS both declined to say whether the employees faced prosecution, nor would they comment on the motive for the activity.
However, the FSA suggested that UBS management's emphasis on performance in determining employees' earnings was a factor.
"UBS was undergoing a period of substantial growth in relation to its international wealth management business and accordingly, financial performance of employees was a material factor in assessing their remuneration, in particular discretionary annual bonuses for desk heads and client advisers," the FSA said.
A whistle-blower brought the bank's attention to a proposed transfer of a customer's funds to the personal account of the head of a desk in the division.
"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 authorization and allocated losses to customers' accounts," the FSA said.
It added that as many as 50 unauthorized transactions a day were taking place at the operation's peak in 2006 and that weaknesses in controls allowed the employees to allocate losses to customer accounts.
The agency said UBS relied too much on employees' honesty, and that it failed to manage and control key risks, carry out effective remedies and provide adequate supervision.
"UBS has already taken full remedial steps," said Oliver Gadney, director of media relations at UBS in London. The four employees are no longer at the bank.
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On the Net: http://www.fsa.gov.uk
