UBS AG

On 5 August 2009, the FSA imposed a financial penalty on UBS AG (UBS) of £8,000,000 for breaches of Principles 2 and 3 of the FSA's Principles for Business (the Principles). The breaches of the Principles occurred between 1 January 2006 and 31 December 2007 (the Relevant Period) in relation to the systems and controls around the international wealth management business conducted with non-UK resident clients from UBS' London Branch. The FSA has not made any findings in relation to the domestic wealth management businesses conducted either via UBS' London Branch or via UBS Wealth Management (UK) Limited. During the Relevant Period, UBS breached Principle 2 by failing to conduct its international wealth management business from the London Branch with due skill, care and diligence and breached Principle 3 by failing to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. The breaches became apparent when, as a result of concerns raised by an employee, UBS discovered that certain UBS employees on one desk in the international wealth management business had been involved in unauthorised foreign exchange and precious metals trading across 39 customer accounts during the Relevant Period (the Unauthorised Trades). The actions of these employees caused losses to customers who have since been compensated by UBS. To date, UBS has paid compensation in excess of USD 42 million to affected customers. The Unauthorised Trades were concealed from customers (and from UBS itself), by the deliberate actions of employees who effected, amongst other things: (i) unauthorised internal transfers between the accounts of affected customers; (ii) the use of an internal suspense account; and (iii) the creation of unauthorised purported loans between affected clients. During the Relevant Period, there was insufficient focus by UBS on the key risks associated with its London Branch's international wealth management business which dealt with international, high net-worth customers with sophisticated financial and wealth management needs. The FSA acknowledges that UBS has now made changes to the systems and controls environment around its international wealth management business so as to correct the defects identified therein.