UBS-ROGUE TRADER SCANDAL Harvard Case Solution & Analysis



Kweku Adoboli has made UBS loseits $2 billion by unauthorized trading, which he made as a director of bank’s global synthetic Equities Trading team in London in September 2011. Although the central system has made the warnings of such unauthorized trading however,the UBS has failed to act on such warning and failed to prevent such loss. The risk management system ofthe desk office where Adoboli made such trades was not asstrong as in the central system; therefore this has made such act of fraud possible.

UBS declares that it will cut back its half of the risk-weighted assets, to reduce risk exposure through this scandal over the next five years in its investment banking. The system failure has been identified and weaknesses are resolved in the system to prevent such scandals from happening in the future, said UBS.

Adoboli had used forward settling and ETF cash positions to make the trades hidden and undetected. ETF transactions in Europe don’t issue confirmations until the transactions get settled. This allows the party to receive payment before the transaction has been settled. He uses fictitious hedging trade in order to conceal the fact that he has exceeded his risk limits. The loss was manageable; however it created net loss for the company for the following financial quarter report.As a result, Adoboli was charged with the allegations and then imprisoned for his fraudulent activity.

Could this happen in United States?

Several arguments can be made while discussing this question. Although everything is possible and in this era where it has become easier to do any type of fraud and with vast opportunities to commit frauds and increasing middle class population and increased personal needs any one can manipulate the irresponsibility and authority to make unfair attempts in securing their aims. However, the possibility can be discussed by analyzing some global factors:...................

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