FCA bans former UBS trader linked to $2bn Adoboli fraud

John Christopher Hughes was the most senior trader on the exchange-traded funds (ETF) desk during the period Adoboli made unauthorised trades using a secret fund known as the ‘Umbrella’. In total, Adoboli lost UBS $2.3bn, and was sentenced to seven years imprisonment in November 2012 after being found guilty of two counts of fraud by abuse of position.

The FCA said: “Hughes was the most senior person on the exchange-traded funds (ETF) 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.”

Between 1 January and 14 September 2011, Hughes worked in the Global Synthetic Equities division of the London banch of UBS AG (UBS). During that time, Adoboli undertook unauthorised trading, part of which involved creating and using an undeclared fund of profits, termed the ‘Umbrella’. Adoboli argued during the trial that he had been encouraged by his bosses.

Hughes was aware of the existence of the Umbrella and that it was being used to misrepresent the desk’s profit and loss. Furthermore, he made enquiries about the Umbrella’s size and influenced decisions about how it would be funded and used.

The FCA statement said: “Hughes did not consider the Umbrella to be honest and knew that UBS would not have authorised its use.

“Hughes’ conduct in relation to the Umbrella was dishonest and demonstrates that he is not a fit and proper person to perform functions in relation to any regulated activity carried on by an authorised or exempt person.”