UBS fined $13.3M over unauthorized trades in clients' accounts

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.
JAN 04, 2010
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.

Latest News

More data isn’t the same as more clarity
More data isn’t the same as more clarity

Flyer on wealth management data aggregation, AI agents, and closing the insight-to-action gap.

Ex-JPMorgan banker refiles harassment claims in federal court
Ex-JPMorgan banker refiles harassment claims in federal court

Chirayu Rana has added two executives as defendants after dropping his state case against JPMorgan Chase last week.

Betterment lawsuit just scratches the surface on cash sweep conflicts, says Max CEO
Betterment lawsuit just scratches the surface on cash sweep conflicts, says Max CEO

A class action over the digital brokerage's cash sweep program only hints at an industry-wide reckoning over how client cash is handled, says Gary Zimmerman.

Pontera launches bulk rebalancing to ease advisors' 401(k) workload
Pontera launches bulk rebalancing to ease advisors' 401(k) workload

New tool lets advisory teams manage shared retirement-plan accounts en masse as Vanguard retirement plan data show rising exposures to equities across demographics.

Survey finds many Americans don’t know their own net worth
Survey finds many Americans don’t know their own net worth

Three in four Americans can’t estimate their net worth without checking an app or account, according to a new Western & Southern survey.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income