UBS Press release about unauthorized trading
UBS Bank has released a short press release ,with a notable lack of detail (no details of who, when, or where or how long the investigation has run for, or how they found out about it), about unauthorized trading:
“UBS has discovered a loss due to unauthorized trading by a trader in its Investment Bank. The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of USD 2 billion. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected”.
Kweku Adoboli
Kweku Adoboli, has been named as the UBS investment bank trader and he is reported to be in police custody in Bishopsgate police station amid allegations that he carried out unauthorized trading. Mr Adoboli works at the UBS HQ in the City of London, a 2 minute walk from our offices.
UBS Code of Business Conduct and Ethics
On the UBS website you can find The”Code of Business Conduct and Ethics of UBS” which sets out the principles and practices that UBS expects all of its employees and directors to follow unreservedly both in letter and in spirit.
Media attention may shift to who is reponsible for the implemention of the UBS risk policy; internal and external auditors; and supervising mannager. The UBS web page states that (my highlighting) ”principles and standards set out in the Code should characterise all of UBS’s business activities and all its dealings with the firm’s stakeholders including clients, colleagues, shareholders, regulators and business partners. It is the basis for all UBS policies, guidelines and statements relating to each of the firm’s employees’ personal commitment to appropriate and responsible corporate behaviour“.
Violation
Employment lawyers like myself will be interested in the section in the UBS guidance on violations and the consequences of any violation. The UBS view is quite clear , it states: “UBS does not tolerate violations of the Code or other internal and external policies and rules.
Violations of external as well as internal rules will not be tolerated by UBS. Where known issues are not made transparent to management, or where employees materially fail in their duties, disciplinary action will be pursued with vigor.
Management is expected to be diligent in the exercise of their supervisory responsibilities, and any material failure in this regard will be pursued with similar vigor.UBS does not tolerate violations of the Code or other internal and external policies and rules. Violations of external as well as internal rules will not be tolerated by UBS. Where known issues are not made transparent to management, or where employees materially fail in their duties, disciplinary action will be pursued with vigor”.
No doubt the HR department at UBS (and their lawyers) will be pursuing a lot of people with vigor or indeed vigour over the coming weeks and months. The investigation may lead to dismissals on the grounds of gross misconduct, and I expect there to be a swathe of whistleblowing claims by City traders. HR will no doubt be closely looking at employment contracts, and bonus schemes, to find out if there are any clawback provisions and if any members of staff have been rewarded via a bonus plans, or commission payments, on the back of unauthorized trading.
The view from the City
There was an excellent opinion piece in the Financial Times yesterday which noted that Mr Adoboli’s arrest was exactly three years to the day of the collapse of Lehman Brothers (formerly the fourth largest investment bank in America); and there is a worrying feeling of deja vu in the City. With UBS now having to take the pain of this unauthorized trading combined with political stalemate in the US; trade unions contemplating (unwisely in my view) vast industrial action; sluggish growth in Europe and the inevitable fall of Greece that we are not looking up at the moutain peak wondering how we can possibly get back to the pre crash summit, we are putting now up our tents at the base camp hoping to survive the long cold winter.
Amnesty?
I wonder if now is the time for the banks to contemplate an amnesty of sorts for bankers and traders to encourage them to come forward to admit any losses that they have made in the past, or possible exposure to risks in the future – although I admit that this would create havoc to FSA disciplinary procedures, and not be politically popular - clearly something needs to be done. If you can have a knife amnesty (and for good reason too – we should try to get as many knives off the streets as possible in my view) then perhaps we should also consider an amnesty for bankers and traders who have dug themselves into very deep holes, and “need a miracle” . Both are social evils and have a direct effect on families and society – although I admit that the loss of a life from knife crime is a personally tragedy for family and friends and that person can never be replaced. Perhaps now is the time to look at all the options: there are lessons that need to be learned, and very quickly.
Reform on the Horizon?
I am encouraged by a recent press release from the British Bankers Association (BBA) who in response to the HM Treasury white paper A new approach to financial regulation: a blueprint for reform stated that: “The new UK financial regulators currently being created need to be supported by strong systems of governance and accountability“.
Philip Henson,Partner in award-winning law firm, Bargate Murray
Related articles
- UBS loses $2bn in ‘unauthorised trading’ (guardian.co.uk)
- Swiss bank UBS says rogue trader has lost $2-billion (theglobeandmail.com)
- UBS Warns of Big Loss on Rogue Trades (online.wsj.com)
- I need a miracle: rogue trader Kweku Adoboli who lost UBS £1.3bn (telegraph.co.uk)
