UBS is Expected to Face a Multi-Million Dollar Fine in Rogue Trader Fiasco.

November 24, 2012 – UBS is expected to face a multimillion-dollar fine in connection with the $2.3 billion trading loss caused by a former trader:  Update from a January 30, 2012 post.

The potential fine by British authorities against the Swiss bank may be £30 million to £50 million, or $47 million to $80 million, and could be announced as early as next week, according to one person, who spoke on the condition of anonymity.

On Tuesday, the former UBS trader Kweku M. Adoboli (pictured above) received a seven-year jail sentence on two counts of fraud in connection with the loss for abusing his position at the Swiss bank from 2008 to 2011. Mr. Adoboli was found not guilty on another four counts of false accounting. Editors note: Steal $2.3 billion and get seven years in jail – rob a bank and get 30 year?

The Financial Services Authority, the British regulator, and the Swiss Financial Market Supervisory Authority opened a joint inquiry last year into the enormous trading loss. On behalf of the regulators, the accounting firm KPMG conducted a $20 million investigation into the internal failures at the Swiss bank that led to Mr. Adoboli’s trading loss.

The potential penalty could be one of the largest fines levied by the Financial Services Authority of Britain. The regulator fined the British bank Barclays £59.5 million this year in connection with the manipulation of the London interbank offered rate, or Libor. JPMorgan Chase was also penalized £33.3 million in 2010 for failing to protect British clients’ money from 2002 to 2009.

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LONDON—Kweku Adoboli, the UBS AG trader accused of making unauthorized transactions that cost the Swiss bank as much as $2.3 billion, pleaded not guilty to two counts of fraud and two counts of false accounting in a London court on Monday.

British authorities arrested Mr. Adoboli in connection with allegations of rogue trading in mid-September but the trader entered a plea for the first time only on Monday. The 31-year-old trader had more than once requested additional time to evaluate the evidence and obtain legal advice before deciding on a plea.

In a statement last September, UBS attributed the multibillion dollar loss to “unauthorized speculative trading in various S&P 500, DAX, and EuroStoxx index futures over the last three months.” The bank said the transactions were carried out by a trader on its Global Synthetic Equities desk in London. At the time, people familiar with the matter identified that trader as Mr. Adoboli.

Though UBS said that the rogue trades occurred in the months immediately before Mr. Adoboli’s arrest in September, U.K. prosecutors have charged the trader with crimes stretching as far back as 2008.

In a hearing last autumn; Mr. Adoboli said through his lawyer that he was “sorry beyond words.” On Monday, the trader appeared in a gray suit and blue tie, speaking only to confirm his name and his not-guilty plea on each of the four counts.

The scandal over the alleged rogue trading has rocked the Swiss bank in recent months, leading to the resignation last September of UBS chief executive Oswald Grübel and a joint investigation by British and Swiss financial regulators.

Though that joint investigation was initially seen as more of a fact-finding mission to determine what went wrong, people familiar with the situation told The Wall Street Journal this week that the regulators are now likely to penalize UBS for gaps in oversight that permitted the alleged rogue trading.

The U.K. Financial Services Authority and the Swiss Financial Market Supervisory Authority, or Finma, are likely to soon complete the investigation but it could take longer for the regulators to bring any enforcement action.

Mr. Adoboli, who grew up in Ghana and attended a private boarding school in Britain, is the son of a United Nations official and a graduate of the University of Nottingham. He began working at UBS in London after graduating from university, working his way up to a position on the company’s London equities desk from a back-office job.

Monday’s plea hearing comes about a month after Mr. Adoboli dropped his lawyer from the London law firm Kingsley Napley and switched to an attorney from another London law firm, Bark & Co., which specializes in matters related to fraud.

The judge at London’s Southwark Crown Court said Mr. Adoboli’s trial would begin Sept. 3rd. (Credit the Wall Street Journal – Business)

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Disaster researcher and current financial and economic news and events: Accidents, economics, financial, news, nature, volcanoes, floods, earthquakes, fires; airplane, ship & train wrecks; tornadoes, mine cave-ins, hurricanes, pestilence, blizzards, storms, tzuami's, explosions, pollution, famine; heat & cold waves; nuclear accidents, drought, stampedes and general. Futures trader using high volume and open interest futures markets. Also, a financial, weather and mundane astrologer with over 30 years of experience. Three University degrees from California State University Northridge: BS - Accounting MS - Busines Administration BA - Psychology Served in the U. S. Army as an Armored Platoon Leader in the 5th Battalion, 68th Armored Regiment, 8th Infantry Division (Retired). Have published three books and 36 articles available for sale through my blog: Commodology - Secret of Soyobeans (Financial Astrology) Timing is the Key (Financial Astrology) Scum City, a fiction novel (no longer available, under contract to major publisher) Currently resident of Las Vegas, NV, USA
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