John Hughes, a former senior ETF trader at UBS, was found to be not a fit or proper person by the FCA and subsequently banned for life following the $2.3 billion unauthorised trading losses incurred by Adoboli.
Between 1 January 2011 and 14 September 2011 Hughes worked in the Global Synthetic Equities division of the London branch of UBS where he was the most senior trader on the ETF Desk. During this time period Adoboli was making unauthorised trades, which caused losses amounting to $2.3 billion.
Part of the unauthorised trading involved creating and using an undeclared fund of profits, termed the “Umbrella”, which had the effect of manipulating the Desk’s reported profit and loss.
According to a note from the FCA, Hughes was aware of the existence of the Umbrella and that it was being used to misrepresent the ETF desk’s profit and loss. In addition he made enquiries about the Umbrella’s size and influenced decisions about how it would be funded and used.
The note continued: “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.”
Tracey McDermott, the FCA's director of enforcement and financial crime, said: “Hughes was the most senior person on the 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.”
Adoboli was sentenced to seven years imprisonment in November 2012 after being found guilty of two counts of fraud by abuse of position.