Business

UBS alleged rogue trader pleads not guilty to all charges

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Published Jan. 30, 2012, 11:28 a.m. ET

LONDON — Former UBS trader Kweku Adoboli pleaded not guilty Monday to all charges related to alleged unauthorized investments which cost the Swiss banking giant around $2.3 billion in losses.

Adoboli, 31, who was originally scheduled to make a plea last month before changing his legal team, pleaded not guilty to two counts of fraud and two counts of false accounting in a London court, according to The Wall Street Journal.

The Ghanaian-born trader was arrested in September of last year after UBS said it discovered his role in alleged rogue deals dated between October 2008 and December 2010.

The scandal led to the resignation of UBS CEO Oswald Grubel shortly thereafter and prompted a strategic overhaul at the firm, as management pledged to scale back riskier operations and put more focus on the bank’s core wealth management business.

Earlier Monday, a report in the WSJ said that British and Swiss regulators were likely to begin enforcement proceedings against UBS for internal shortcomings that allowed Adoboli to make the illicit trades.

While the bank has completed its own internal investigation, a joint probe by the UK’s Financial Services Authority (FSA) and the Swiss Financial Market Supervisory Authority (Finma) continues. Until now, that had been seen largely as a fact-finding mission to determine what went wrong.

Now, however, the proceeding is expected to result in regulators penalizing the bank for gaps in oversight that allegedly allowed Adoboli to make the trades without authorization, people familiar with the situation told the WSJ.

The regulators’ investigation is expected to be completed by mid-February, although it could take far longer for them to move forward with enforcement action.

The newspaper suggested that a not-guilty plea from Adoboli could set the stage for a prolonged trial that may prove embarrassing for UBS.

The trading loss pushed the investment bank to a loss of 650 million Swiss francs ($709 million) in the third quarter.

UBS reports its full-year earnings on Feb. 7.