FCA bans former UBS ETF trader
The Financial Conduct Authority (FCA) has banned ETF trader John Christopher Hughes over failings related to USD2.3 billion of unauthorised trading losses incurred by another trader Kweku Mawuli Adoboli.
The FCA found that Hughes is not a fit and proper person and has banned him from performing any function in relation to any regulated activity in the financial services industry.
Tracey McDermott, the FCA's director of enforcement and financial crime, says: “Hughes was the most senior person on the Exchange Traded Funds (ETF) desk. He should have been acting as a role model to others. Instead he failed to report the Umbrella and allowed the Desk’s profit and loss to be misstated over an extended period. This failure contributed to Adoboli’s unauthorised trading continuing unchecked. Approved people should operate to the highest standards of integrity. This means not only doing the right thing themselves but also challenging, and blowing the whistle on, those who are not. Hughes failed to do so with catastrophic consequences.”
Between 1 January 2011 and 14 September 2011Hughes worked in the Global Synthetic Equities division of the London branch of UBS AG (UBS). He was the most senior trader on the ETF Desk (the Desk).
During the Relevant Period, Kweku Mawuli Adoboli, another trader on the Desk, undertook unauthorised trading which caused USD2.3 billion in losses. Mr Adoboli was sentenced to seven years imprisonment in November 2012 after being found guilty of two counts of fraud by abuse of position. Part of the unauthorised trading involved creating and using an undeclared fund of profits, termed the “Umbrella”, which had the effect of manipulating the Desk’s reported profit and loss.
Hughes was aware of the existence of the Umbrella and that it was being used to misrepresent the Desk’s profit and loss. In addition he made enquiries about the Umbrella’s size and influenced decisions about how it would be funded and used.
Hughes did not consider the Umbrella to be honest and knew that UBS would not have authorised its use. Hughes’ conduct in relation to the Umbrella was dishonest and demonstrates that he is not a fit and proper person to perform functions in relation to any regulated activity carried on by an authorised or exempt person.
One of the FCA’s statutory objectives is to protect and enhance the integrity of the UK financial system. One of the ways in which the FCA seeks to achieve this objective is by keeping dishonest individuals out of the financial services industry.