Here’s UBS’s Exposure to the Rogue Trader Scandal

  Google+  Twitter | + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

UPDATE: UBS (NYSE:UBS) could be fined as much as 50 million pounds ($79.7 million) and new supervisory measures for oversight failures, the Financial Times reported Thursday.

Following a two-month long trial in London, former UBS trader Kweku Adoboli was sentenced to seven years in jail on two counts of fraud for causing a $2.3 billion unauthorized trading loss last year.

UBS AG

What is the Story Behind This Rogue Trading Scandal?

Adoboli, who worked in UBS’s global synthetic equities division since 2006, pleaded not guilty to the two fraud charges as well as four counts of false accounting, arguing the bank’s managers had pushed traders to take risks. As Bloomberg reported on Tuesday, Adoboli admitted to causing the loss, but was adamant that his behavior was not dishonest because it was the only way he could reach the bank’s set goals.

Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.

According to the BBC, Adoboli told the jury that risk-taking was encouraged until they got “a slap on the back of the wrist.” In comparison, the prosecution informed the jury that his trades had been “unprotected, unhedged, incautious, and reckless.”

Dishonesty was the crucial word for the prosecution. Andrew Penhale, the deputy head of fraud at the Crown Prosecution Service, said “Behind all the technical financial jargon in this case, the question for the jury was whether Kweku Adoboli had acted dishonestly, in causing a loss to the bank of $2.3 billion.” While he was cleared of the false accounting charges, the 10-member jury determined that he had in fact acted dishonestly.

How Will This Affect UBS’s Stock?

Honestly, not much. An $80 million fine and some new oversight requirements will be more or less a footnote in a future 10Q. The stock performed well this week, so this entire scandal is mostly baked into the current stock price.

Investing Insights: Is Bank of America’s Stock a Buy After This Upgrade?

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business