The unauthorised activity, which took place between January 2006 and December 2007 at UBS’ London-based wealth management business, came to light when a whistleblower raised concerns internally.
UBS employees had taken part in the trading of foreign exchange and precious metals using customer money without authorisation and allocated losses to customers’ accounts.
An internal UBS investigation estimated that as many as 50 unauthorised transactions a day were taking place at the operation’s peak.
An FSA investigation found that UBS had failed to manage and control the key risks and the level of risk created by its international wealth management business model.
It also failed to implement effective remedial measures in response to warning signs that suggested the business’ systems and controls were inadequate and did not provide an appropriate level of supervision over customer-facing employees.
UBS agreed to settle at an early stage of the FSA’s investigation meaning it qualified for a 20 per cent discount, without which it would have faced a penalty of £10m. It is the third largest fine the FSA has ever imposed.
UBS has since paid compensation in excess of £25m to affected customers.
FSA director of enforcement and financial crime Margaret Cole says: “The penalty, one of the largest fines we have levied, reflects our tougher enforcement stance and our policy of imposing steep penalties to achieve credible deterrence.
“These employees were able to take advantage of UBS’ inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal.
“It is imperative, particularly in these more challenging financial conditions, that firms have suitable systems and controls in place to keep their houses in order. Where firms fall short in this regard, the consequences will be severe.”