Swiss and British regulators said Friday that they have launched formal enforcement investigations into a case of alleged rogue trading that was uncovered at UBS AG last year.
Last September, the UK Financial Services Authority and the Swiss Financial Market Supervisory Authority announced that they had initiated investigations into the trading losses incurred in the London office of UBS’ investment banking unit. Today, the regulators said that they have now commenced a formal enforcement investigation in the case.
An alleged episode of rogue trading led to a US$2.3 billion loss at the Swiss firm, which found that the unauthorized trading was conducted by a trader in its global synthetic equity business in London. In the wake of the scandal, the firm underwent an executive shake up, including the replacement of its CEO, and the bank pledged to focus on simplifying its investment banking business.
The Swiss regulator reports that it has now initiated formal administrative enforcement proceedings against UBS under Swiss law and is in close contact with the FSA, which has also commenced a formal enforcement investigation against UBS. The Swiss regulator says it will assess and rule upon the adequacy of the controls that were in place to prevent and detect unauthorized trading within the investment bank and their compliance with its legislation and regulations.
Following its own internal investigation last year, UBS said that its management determined that its internal controls were not effective, and it identified two specific deficiencies.