London: A British court has upheld the Financial Services Authority’s decision to fine and ban two former advisers at Swiss bank UBS for unauthorized trading worth billions of pounds.
The penalties signal there will be no let-up in the watchdog’s tougher approach to abuses. UBS has already paid over $42 million compensation to customers affected.
The Upper Tribunal directed the FSA to fine Sachin Karpe 1.25 million pounds ($2 million) and Laila Karan 75,000 pounds - cut from 90,000 due to financial hardship - and ban both from performing any role in regulated financial services.
“Karpe exploited and abused his position of trust, and persuaded more junior employees to engage in misconduct to assist him,” the FSA’s acting director of enforcement, Tracey McDermott, said in a statement.
“Karan sought to categorise herself as a victim in this matter. Where an approved person is aware that colleagues are engaging in misconduct, we expect them to blow the whistle, not to become involved themselves,” McDermott added.
The watchdog found that Karpe, who headed the Asia II Desk at UBS international wealth management business in London between January 2006 and January 2008, carried out substantial unauthorized trading with a gross value of billions of pounds, predominantly in foreign exchange instruments.
He also made unauthorized transfers and loans between customer accounts to cover losses from his trades and directed Karan and others to help him.
Karpe helped an Indian customer breach Indian and UBS rules to invest $250 million in a Mauritius incorporated fund, and also misled UBS and senior management about paying compensation to one customer from the account of another.
Karan, who reported directly to Karpe and worked as a client advisor on the Asia II Desk, between February 2007 and January 2008, did not instigate the unauthorized trading, but was aware of it, the FSA said.
The Tribunal agreed with Karan that she did not instigate unauthorized trading but said a ban was still appropriate as she produced documents and records to help hide the abuses.
“We are told that Mr Karpe was a senior, successful, respected and credible personality. We do not, however, accept that Ms Karan was putty in his hands,” the Tribunal said.
In November 2009, the FSA fined UBS 8 million pounds for systems and controls failures in relation to the unauthorized activity on Asia II Desk.
The FSA had already fined and banned two other former Asia II Desk Client Advisers, Jaspreet Singh Ahuja and Andrew Cumming, 150,000 pounds and 35,000 pounds, respectively.