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Ex-UBS trader Kweku Adoboli pleads not guilty

Kweku Adoboli pleads not guilty to charges of unauthorised trading and false accounting. Will he use UBS's risk-management track record in his defence?

The former UBS employee accused of being the instigator of one of the largest rogue-trading scandals in recent history has pleaded not guilty.

In a London court, Kweku Adoboli pleaded not guilty to all four charges of fraud and false accounting.

In September 2011, UBS accused Adoboli, a London-based trader at the Swiss investment bank, of accumulating around $2.3 billion-worth of losses through unauthorized trading, wiping out most of the cost-reduction measures the firm had planned three weeks earlier.

In a statement, UBS announced it would cut 3,500 jobs as part of a cost-cutting programme to save around SFr2 billion ($2.3 billion).

After this announcement, Euromoney exclusively revealed that the alleged UBS rogue trader could use the bank's risk-management record as a defence.

According to a source close to UBS:

Kweku Adoboli, the ex-UBS employee accused of rogue trading, could claim UBS “lacks a clear risk-management structure” as part of his defence, says a senior legal source close to the Swiss bank.

However, regulators, following an investigation, would first need to confirm this is the case and Adoboli would have to plead not guilty to the charges.

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It will be interesting to see what will transpire in court as more details are released. The source continues:

"Firstly, relating to the previous UBS fine in 2009 which followed an investigation of the bank’s systems and controls, it took two years for investigations to transpire and resulted in a fine of £8 million from events which took place in 2006 and 2007.

“It takes time to conduct these investigations, so we could see the results of this year’s major investigation in the next calendar year, which always follows extraordinary cases like these. I don’t know what the trader will do, but he has to decide ultimately whether he fights the case or accepts the charges. If he claims he didn’t do what has been alleged against him, it might be relevant to his defence that there was no clear guidance or rules [in the risk-management system and structure].” 

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Adoboli was remanded in custody and the judge set a provisional trial date of September 3.

For more coverage on the trading scandal that has rocked UBS, check out:

Exclusive: Alleged UBS rogue trader could use bank's risk-management record as defence 

Kweku Adoboli could use “lack of a sufficient risk-management structure” as part of his defence, says a source close to UBS

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Alleged UBS rogue trader exploited ETF settlement loophole

New disclosures on UBS’s $2.3 billion loss adds to doubts about the quality of Swiss bank’s risk-management controls and practices

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Exclusive: UBS’s operational risk management unit used rogue-trader loss events data

Euromoney exclusively reveals that UBS’s operational risk-management unit uses a database of case studies of major loss events, including other rogue-trader scandals in history

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Reading between the lines on what UBS's announcement means for its investment bank

A "less capital intensive bank" will have people working in much of UBS's FICC business looking for an exit.

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Editor's letter: UBS loss only raises more questions

Disclosures from UBS about the details of the alleged fraudulent trading that has cost the bank $2.3 billion raise more questions than they answer about the extraordinary results.

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Abigail with attitude: Chaos in the ranks at UBS

Grübel should have stayed to steady the ship; Ermotti becomes fourth CEO in four years, but what are his credentials for the role?; and a lame duck chairman cannot be the right person to force through the changes that UBS urgently needs to make

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Risk managers lack tools to monitor rogue trading

UBS rogue trading scandal most likely occurred due to the lack of risk-management tools needed to monitor trades between bank silos, says operational risk expert.

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Rogue trader scandals: roll-call of shame

With the arrest of UBS’s Kweku Adoboli on a charge involving $2 billion of losses accumulated from unauthorized trades, Euromoney takes a quick look at some of the largest rogue trader scandals to hit the headlines.

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Banks have not learnt lessons on risk management

The banks that paid huge sums to financial engineers to fill their balance sheets full of toxic waste stopped digging their way into that hole rather quickly after the shock of 2007 and 2008, and have spent the time since trying to dispose of assets and garner the financial wherewithal to write down or at least reserve against those they can’t sell.

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- Euromoney Skew Blog

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