UBS fined for plundering accounts
Regulators in Britain fined UBS £8 million ($13.3 million) on Thursday after finding that four employees at the bank’s international wealth-management unit in London had carried out unauthorized trading on at least 39 accounts. The (now former) dealers at UBS plundered customer accounts to trade and dumped the resulting losses on them, Britain’s financial regulator said, further denting the battered Swiss bank’s reputation.
The Swiss bank, whose reputation has suffered since the start of the financial crisis, also paid more than $42 million in compensation to clients.
The leading markets regulator in Britain, the Financial Services Authority, cited UBS “for systems and controls failures” that allowed unauthorized transactions in the trading of currencies and precious metals from January 2006 to December 2007.
The NY Times reports that the activity came to light after a whistle-blower reported a proposed transfer of funds from a customer’s account to the personal account of an employee identified in the regulator’s report as “Desk Head A.”
The fine was one of the largest the authority has ever imposed. “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,” said Margaret Cole, the Financial Services Authority’s director of enforcement and financial crime. “Where firms fall short in this regard, the consequences will be severe.”
“UBS deeply regrets this incident and, having fully co-operated with the FSA’s investigation, we are now pleased that this matter has been settled so that we can move forward,” it said in a statement. UBS “already taken full remedial steps.”
The regulator’s report said that the annual bonuses of UBS client advisers and desk heads were tied to their financial performance.
The fine was more unwelcome news for UBS, long considered one of the world’s most conservative banks. Based in Zurich, it was bailed out by the Swiss government last year after losing tens of billions of dollars in the American mortgage securities market.
UBS also was engaged this year in a battle with the United States government over claims that it had helped wealthy clients to evade American taxes. As part of a settlement, the bank was required to disclose account details of more than 4,450 American clients. The bank conceded this week that the deal was having a “profound impact on our efforts to rebuild confidence in our company and on staff morale.”
The Financial Services Authority said that an internal UBS investigation had found as many as 50 unauthorized transactions a day at the peak of the activity. Employees used the money without authorization and allocated losses to customers. The four employees — who were not identified — have since left the bank.
http://www.nytimes.com/2009/11/06/business/global/06ubs.html?_r=1
http://www.reuters.com/article/marketsNews/idUSL545519620091105
