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Adoboli sent rogue trader warnings by UBS after Kerviel losses

Adoboli worked at ETF desk

By Lindsay Fortado

October 23, 2012 • Reprints

Kweku Adoboli, the former UBS AG trader who is accused of causing a $2.3 billion loss, and other bank staff were sent e-mails alerting them to the conduct of Jerome Kerviel at Societe Generale SA.

UBS sent two e-mails about Kerviel’s 4.9 billion-euro ($6.4 billion) trading loss at Societe Generale to all investment bank employees, prosecutors told jurors at Adoboli’s trial in London yesterday. The first one, after the French banker’s trades were uncovered in 2008, called Kerviel a “rogue trader” and warned UBS staff to be on alert for “unusually large trading volumes.”

Prosecutors have said Adoboli, who is on trial for fraud and false accounting dating back to October 2008, hid the risk of his trades by booking fake hedges while he worked at the exchange-traded funds desk. Kerviel was found guilty in 2010 of forgery and breach of trust and given a prison sentence and ordered to repay the full 4.9 billion-euro loss.

“Any suspected fraudulent activity or breach of trust should be escalated to your local compliance officer,” UBS’s internal compliance department said in an e-mail following Kerviel’s conviction, read to the jury by prosecutor Esther Schutzer-Weissmann. “UBS does not tolerate violations of its code.”

Compliance Alert

Adoboli, 32, has pleaded not guilty and his lawyers have sought to show the jury that others knew about his trading.

The first UBS e-mail, sent on Jan. 25, 2008, was titled “Global Compliance Alert: Rogue Trader Costs Societe Generale $7.1 Billion.” It compared Kerviel to Nick Leeson, the former British derivatives trader who caused the collapse of Barings Plc in 1995.

That e-mail, from the internal communications department at UBS’s investment bank, warned staff to be on the alert for “unusually large trading volumes” and other warning signs such as traders exceeding risk limits, transactions “that don’t seem to serve a purpose,” a pattern of late or canceled trades, or unusual amounts of profit or loss.

Bloomberg News

About the Author

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Related Terms
UBS AG 455investment bank 415UBS 77Societe Generale SA. 45Jerome Kerviel 29rogue trader 26Nick Leeson 16Kweku Adoboli 9bank staff 8Kerviel 7Adoboli 6trading loss 5adoboli 3Barings Plc 3Esther Schutzer-Weissmann 2false accounting dating 1investment bank employees 1internal communications department 1

Free Newsletter Modern Trader Follow

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