February 3, 2012 / 11:04 AM / 6 years ago

Ex-UBS trader refused bail as bank probe deepens

LONDON (Reuters) - Former UBS AG trader Kweku Adoboli, who is accused of unauthorized deals that cost the Swiss bank $2.3 billion, was refused bail by a London court on Friday less than an hour after regulators stepped up their probe into the scandal.

UBS trader Kweku Adoboli leaves City of London magistrates' court in the City of London October 20, 2011. REUTERS/Andrew Winning

The Financial Services Authority (FSA) and the Swiss Financial Market Supervisory Authority (FINMA) said they were launching enforcement investigations, which depending on their findings can be a prelude to actions such as fines or court proceedings.

The Swiss bank is conducting its own probe and has blamed the losses on an unauthorized trading incident.

Adoboli, 31, the British-educated son of a retired United Nations official from Ghana, was arrested straight after the losses were unveiled last September. He pleaded not guilty earlier this week to charges related to the scandal.

He will remain in custody in Wandsworth prison in south London until his trial, which is set for September 3.

It was the first time lawyers for Adoboli, a former director, had applied for his release from custody since he was detained last year.

“These are serious allegations backed up with cogent evidence,” said Judge Alistair McCreath at London’s Southwark Crown Court after refusing his application.

Adoboli was not in court for the hearing, but his friends, family and his partner were there.

Prosecutors accuse Adoboli of two counts of fraud and two of false accounting in one of the world’s biggest cases of alleged “rogue trading.”

The FSA and FINMA had launched an initial probe on September 16, a day after UBS unveiled the huge loss, and are now deepening that investigation. This could take several months.

“This is a formal enforcement proceeding, at the end Finma usually issues a decision. Only if a party challenges this Finma-decision it goes to court,” said FINMA spokesman Tobias Lux.

The regulators will assess and rule on the adequacy of the controls in place to prevent and detect unauthorized trading in UBS’s investment bank.

UBS said on Friday it would cooperate fully with its regulators.

The Swiss bank said its ability to disclose further details about events was limited by the ongoing criminal proceedings and

investigations, but that it was still making internal changes in response to the losses.

“This does not prevent us from taking further decisive action to improve our operational risk controls,” UBS said.

The trading losses have already forced UBS into a big management shake-up, culminating in the departure of its Chief Executive Oswald Gruebel. Several top equities bankers have also left, and the bank’s chief risk officer replaced.

It has also pressed ahead with a long-awaited restructuring of its investment bank. That strategy will be under renewed scrutiny next week, when UBS reports annual results.

Additional reporting by Sudip Kar-Gupta and Michael Holden in London and Martin de Sa'Pinto in Zurich; Editing by Hans-Juergen Peters and Andrew Callus

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