FSA fines UBS worker for role in illegal trading

The Financial Services Authority (FSA) banned and fined a former client advisor at UBS for documenting false loans to try and conceal losses arising from unauthorised trading.

Earlier this month UBS received a £8m fine for failing to prevent employees from illegally trading with client money. UBS has since repaid the affected customers in excess of US$42m by way of redress.

Andrew Cumming, a former client adviser at the London branch of UBS’ international wealth management business, was fined £35,000 and banned from the industry for five years.

Paperwork signed by Cumming, who worked in UBS’ international wealth management business, helped to document false loans which were used to conceal losses arising from the illegal trading.

UBS employees used customers’ funds to trade illegally. The customers whose funds were used were told they were providing loans to other UBS customers with promises of high rates of interest. To make these ‘loans’ appear official, documents were produced using UBS headed paper and sent to customers stating that the ‘loans’ were guaranteed by the firm.

Cumming signed these documents on several occasions between October 2005 and October 2007 despite being asked by a senior colleague to do so, said the FSA.

By late 2007, Cumming was fully aware that the ‘loans’ were being used to conceal losses which had arisen as a result of unauthorised transactions but he failed to escalate this knowledge. Instead, Cumming signed a further ‘loan’ and allowed the ruse to continue.

Margaret Cole, FSA director of enforcement and financial crime, said: “Cumming deliberately misled UBS and its customers. Although he did not stand to make a personal gain, his complicity allowed a colleague to continue making unauthorised trades, while the losses continued to mount up.”

Cumming qualified for a 30% discount in respect of his financial penalty because he agreed to settle at an early stage of the FSA’s investigation. The FSA could have imposed a financial penalty of £100,000.

Cumming worked at UBS’ London branch from 1999 until March 2008, when he was dismissed for gross misconduct relating to this case.