A FORMER senior UBS trader has been banned by the City watchdog over failings related to the UK’s largest ever fraud, involving Yorkshire-educated rogue trader Kweku Adoboli.
John Christopher Hughes was the most senior employee on the trading desk where Adoboli’s fraud resulted in losses of £1.4 billion.
But he failed to blow the whistle on his colleague’s activities resulting in “catastrophic consequences”, the Financial Conduct Authority (FCA) found.
The FCA ruled that Mr Hughes’s “dishonest” behaviour showed he was not a “fit and proper person”, and banned him from the financial services industry.
Adoboli, Adoboli, who was educated at Ackworth Quaker School in West Yorkshire, was jailed for seven years in November 2012 after being found guilty of two counts of fraud.
Part of his unauthorised trading had involved creating and using an undeclared fund of profits, known as the “Umbrella”.
The FCA said that Mr Hughes knew of the existence of the Umbrella and that it was being used to misrepresent the trading desk’s profit and losses. He also asked about its size and “influenced decisions about how it would be funded and used”.
He “did not consider the Umbrella to be honest” and knew that UBS would not have authorised it, the watchdog said.
“When an individual such as Mr Hughes occupies a position of trust and displays a lack of honesty the potential risk to the integrity of the UK’s financial system is great,” it said.
“Mr Hughes’ failure to inform the firm of the Umbrella’s existence prevented the firm from identifying Mr Adoboli’s unauthorised trading, which ultimately caused losses of 2.3 billion US dollars.”
Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “Hughes was the most senior person on the Exchange Traded Funds 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.”
Mr Hughes was suspended by the bank shortly after Adoboli’s arrest and dismissed for gross misconduct in January 2012. He had joined the Swiss banking giant in September 2005.
UBS was fined £29.7 million by the FCA’s predecessor, the Financial Services Authority, in the wake of Adoboli’s conviction and sentencing. It said the firm’s systems and controls had been “seriously defective”.