* John Hughes banned from regulated financial services jobs
* Watchdog's first ban for not blowing whistle on colleague
* Hughes' failings led to "catastrophic consequences"
(Adds UBS fine over Adoboli, whistleblowing data, details)
By Kirstin Ridley and Clare Hutchison
LONDON, May 1 Britain's financial regulator has
banned a former senior UBS trader for failing to blow
the whistle on colleague Kweku Adoboli, the "rogue trader"
jailed in 2012 for running up $2.3 billion in unauthorised
Announcing its first ban from regulated financial jobs for
such a failure, the Financial Conduct Authority (FCA) said on
Thursday John Hughes had been aware of Adoboli's actions but had
failed to challenge him, report him or act as a role model with
"Instead he ... allowed the desk's profit and loss to be
misstated over an extended period," FCA enforcement and
financial crime division head Tracey McDermott said.
"This failure contributed to Adoboli's unauthorised trading
continuing unchecked. Approved people should operate to the
highest standards of integrity."
Between January and September 2011, Hughes was the most
senior person on UBS's Exchange Traded Funds desk at the London
branch of UBS - a period during which Adoboli ran up such hefty
trading losses that they that risked undermining the Swiss bank.
Adoboli was sentenced to seven years in jail in November
2012 for two counts of fraud by abuse of position. Shortly
afterwards, the FCA fined UBS 29.7 million pound ($50 million)
for systems and controls failures.
Hughes - who was dismissed for gross misconduct weeks after
Adoboli's arrest - wept in court in October 2012 after reading
an email in which his former colleague admitted to the trades.
Part of the unauthorised trading involved creating and using
a secret fund, dubbed the "Umbrella", which had the effect of
manipulating the desk's reported profit and loss.
The FCA said Hughes knew about the existence of the
Umbrella, how it was being used, did not consider it to be
honest and knew UBS would not have authorised its use.
Although Hughes felt "a bit sick" when he first learned
about the existence of the Umbrella, the FCA said he soon
ensured he was regularly told about its size and became involved
in decisions about how to fund and use it.
"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," the FCA said.
British authorities are keen to encourage whistleblowing as
they attempt to develop a corporate culture of integrity and
restore faith in financial markets.
British law firm Pinsent Masons said it had FCA data that
showed the number of whisteblowing reports had risen by 64
percent to an average 556 per month since the FCA took over from
the Financial Services Authority (FSA), in April 2013.
($1 = 0.5922 British pounds)
(Editing by Louise Ireland)