The Upper Tribunal has upheld an FSA decision to ban and fine two former UBS advisers a total of £1.3m for their involvement in an unauthorised trading scheme.
Former head of the Asia II desk at UBS Sachin Karpe has been fined £1.25m while former UBS client adviser Laila Karan has been fined £75,000. Both have also been banned from working in financial services.
The Asia II desk provided services to customers resident in India, or of Indian origin.
Between January 2006 and January 2008 Karpe carried out substantial unauthorised trading, predominantly in foreign exchange instruments, with a gross value of billions of pounds across 39 customer accounts.
He also made unauthorised transfers and loans between client accounts in order to hide losses from the unauthorised trading. He directed others, including Karan, to help him arrange the transfers and loans, and create false documents for the unauthorised trading.
His scheme resulted in substantial losses for 21 customers. UBS has since paid compensation to the affected customers in excess of US$42m (£27m).
Karpe also established an investment structure to enable a major Indian resident customer to breach Indian law via an investment fund incorporated in Mauritius which led to the customer investing over US$250m (£158m) in the fund. The FSA says Karpe deliberately and repeatedly misled UBS’ compliance department over the investment.
Karpe also misled UBS and senior management about paying compensation to a customer using monies from another customer account.
Between February 2007 and January 2008 former UBS client adviser Karan was aware that unauthorised trading was occurring on some customer accounts, but helped Karpe to hide that this was happening rather than report it.
Karan prepared false, handwritten telephone attendance notes aimed at recording customer instructions she had never received. She also routed transactions through a suspense account in order to conceal their origin and destination, and signed a number of UBS documents recording customer approval of transactions on the accounts, where no such approval had been given.
FSA acting director of enforcement and financial crime Tracey McDermott says: “Karpe exploited and abused his position of trust, and persuaded more junior employees to engage in misconduct to assist him. Such behaviour is in breach of his obligations to his employer, his clients and his colleagues as well as to the regulator. It has no place in the financial services industry.”
She adds: “The Tribunal recognised that Karan did not initiate the misconduct, and was placed in a difficult position by Karpe. However, the findings and the resulting sanctions send a clear message that an approved person must take responsibility for their own actions. Where an approved person is aware colleagues are engaging in misconduct, we expect them to blow the whistle, not to become involved themselves.”
The FSA fined UBS £8m in November 2009 for systems and controls failings related to the unauthorised trading on the Asia II desk. Former Asia II desk client adviser Jaspreet Singh Ahuja was banned and fined £150,000 in December 2011, while fellow former client adviser Andrew Cumming was banned and fined £35,000 in November 2009.