FSA Fines UBS GBP29.7 Million for Unauthorized Trading Failing

LONDON--The U.K. Financial Services Authority, or FSA, said Monday it has fined UBS AG (UBS) 29.7 million pounds for systems and controls failings that allowed an employee to cause substantial losses totaling 2.3 billion dollars as a result of unauthorized trading.

MAIN FACTS:

-Trader, Kweku Adoboli, has been convicted of two counts of fraud by abuse of position and sentenced to seven years' imprisonment.

-Systems and controls failings revealed serious weaknesses in the firm's procedures, management systems and internal controls.

-FSA believes UBS failed to take reasonable care to organize and control its affairs responsibly and effectively, with adequate risk management systems and failed to conduct its business from the London Branch with due skill, care and diligence.

-UBS agreed to settle at an early stage and therefore qualified for a 30% discount under the FSA's executive settlement procedures; Were it not for this discount, the fine would have been GBP42.4 million.

-UBS agreed to engage an independent firm to conduct a substantive investigation into the unauthorized trading incident, expending considerable resources--GBP16 million to date--in doing so.

-UBS's new senior management has committed significant resources to undertake an extensive program of remediation.

-UBS has taken disciplinary action against employees who were involved in the events which gave rise to these breaches, including clawing back bonuses and withholding 50% of their deferred compensation from relevant individuals totaling more than GBP34 million.

-FSA conducted its investigation in coordination with the Swiss Financial Market Supervisory Authority, FINMA, which has also made its findings public.

-FINMA has also taken action against UBS in relation to the breach which is the subject of this Notice and UBS has undertaken to comply with the separate requirements imposed on it by FINMA.

-Write to Ian Walker at [e-mail]

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