UBS Confirms Unauthorized Trading
Tuesday, September 20, 2011
In an updated statement, Swiss bank UBS confirms discovery of unauthorized
trading in its investment bank. The unauthorized trading was conducted by a
trader in its Global Synthetic Equity business in London.
In its release it states that: “We have now covered the risk resulting
from the unauthorized trading, and the equities business is again operating
normally within its previously defined risk limits. The loss arising from this
matter is USD2.3bn. As previously stated, no client positions were affected.”
It adds: “The loss resulted from unauthorized speculative trading in
various S&P 500, DAX, and EuroStoxx index futures over the last three months.
The positions taken were within the normal business flow of a large global equity
trading house as part of a properly hedged portfolio.”
“However, the true magnitude of the risk exposure was distorted because
the positions had been offset in our systems with fictitious, forward-settling,
cash ETF positions, allegedly executed by the trader. These fictitious trades
concealed the fact that the index futures trades violated UBS's risk limits.”
“Following inquiries directed to him by UBS control functions that were
reviewing his positions, the trader revealed his unauthorized activity on September
14, 2011.”
It continues: “UBS's Board of Directors has set up a special committee
to conduct an independent investigation of the unauthorized trading activities
and their relation to the control environment.”
The trader in question has been charged by UK authorities with fraud by abuse
of position. |
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