Britain Bars Former UBS Senior Trader From Financial Industry

LONDON - Britain’s Financial Conduct Authority on Thursday barred John Christopher Hughes, a former senior trader at UBS, from working in the financial industry, but did not fine him for failing to report a slush fund of money used to help manage his desk’s daily profit and losses.

The fund was part of a fraudulent scheme resulting in $2.3 billion in trading losses incurred by Kweku M. Adoboli, who was junior to Mr. Hughes. Mr. Adoboli was sentenced to seven years in prison in November 2012 after being found guilty of two counts of fraud.

In 2011, Mr. Hughes was the most senior trader on the global synthetic equities desk in UBS’s London office. According to the Financial Conduct Authority, part of Mr. Adoboli’s trading scheme involved creating and using an undeclared fund of profits, called the “umbrella,” to manipulate the desk’s reported profits and losses.

Mr. Hughes knew about the fund. He told regulators that although he “felt a bit sick” upon learning about it in January, he quickly got comfortable with the idea and, by February, he and Mr. Adoboli chatted online about when to take money out and when to bulk up the fund. He said that he knew he was “lying every day.”

Mr. Hughes knew that UBS would not authorize the “umbrella,” and in barring him, the Financial Conduct Authority said Mr. Hughes was “not a fit and proper person.”

“Approved people should operate to the highest standards of integrity,” said Tracey McDermott, the regulator’s director of enforcement and financial crime. “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.”

UBS was fined 29.7 million pounds, or about $50 million, in November 2012 for failing to detect or prevent the unauthorized trading. Though Mr. Hughes was aware that the “umbrella” fund was being used to manipulate the desk’s results, he said he was not aware of the rouge trades.

The regulator’s office said Mr. Hughes had represented himself in the case.

Mr. Hughes was suspended soon after Mr. Adoboli was arrested in September 2011. After a disciplinary hearing at the bank, he was fired in January 2012 and did not contest the decision, the regulator said.

The regulator said that it considered the ban the “appropriate” course of action.

UBS employees fired for gross misconduct lose all of their deferred compensation.

In November 2012, Financial News reported that Mr. Hughes was setting up an online gambling venture called BetsofMates.com. Mr. Hughes could not be reached for comment.

This post has been revised to reflect the following correction:

Correction: May 1, 2014

An earlier version of this article misstated the name of the UBS trader. He is John Christopher Hughes, not Christopher Hughes.