FSA fines and bans former UBS client adviser for helping to conceal unauthorised trading losses
On 13 November 2009, the FSA published the Final Notice it has issued to Andrew Cumming, a former client adviser in the international wealth management business at the London branch of UBS AG (UBS).
(see http://www.fsa.gov.uk/pubs/final/cumming.pdf)

Mr Cumming helped to conceal losses arising from unauthorised transactions, which were part of the activities that led to UBS being fined £8 million by the FSA on 5 November 2009 for systems and controls failures which enabled four employees to carry out unauthorised transactions with customers’ money.

The FSA fined Mr Cumming £35,000 for failure to act with integrity in breach of Principle 1 of the FSA’s Statements of Principle for Approved Persons, and prohibited him from performing any controlled function for a minimum period of five years on the grounds that he is not fit and proper. The fine has been discounted from £100,000 as Mr Cumming has agreed to early settlement and has proved to the FSA that he is in serious financial hardship. The FSA has also taken into account the fact that Mr Cumming did not initiate these activities, and did not conduct the unauthorised transactions.

At the relevant time, Mr Cumming was approved to perform the “Investment Adviser” controlled function, which became the “Customer” controlled function on 1 November 2007. He provided wealth management services to private banking customers. Between 31 October 2005 and 2 October 2007, at the request of a senior colleague, Mr Cumming signed documents which represented to the customers from whose accounts the funds were transferred that these funds were loans to other customers at high interest rates. This enabled funds to be moved between customer accounts to disguise losses from unauthorised transactions. These documents were prepared on UBS headed paper, and purported to represent that they had been arranged in the normal course of business, and were guaranteed by UBS.

The FSA has found that Mr Cumming signed these documents even though he knew that these “loans” had not been authorised by UBS and were unusual, and that by late 2007, Mr Cumming was fully aware that the “loans” were being used to conceal losses from unauthorised transactions. However, he failed to escalate this matter, signed a further “loan” document and allowed the concealment to continue.

Mr Cumming worked at UBS from 1999 until March 2008, and was dismissed for gross misconduct relating to this matter.
Commenting on this Final Notice, Margaret Cole, FSA Director of Enforcement and Financial Crime, said: “Cumming deliberately misled UBS and its customers. Although he did not stand to make a personal gain, his complicity allowed a colleague to continue making unauthorised trades, while the losses continued to mount up. We are committed to deterring behaviour of this kind by banning and fining anyone found to have committed such misconduct.”

See FSA statement at http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/157.shtml