Finma Issues Guidelines on Preventing Unauthorized Trading

The Swiss Financial Market Supervisory Authority said it expects banks to provide a “robust” framework measuring and controlling trading risks to prevent losses from unauthorized transactions as seen at UBS AG. (UBSN)

The watchdog, known as Finma, said it will check “selectively” if and how institutions fulfill guidelines it issued today on the application of its rules to prevent unauthorized trading, according to a statement on the Bern, Switzerland-based regulator’s website.

UBS, Switzerland’s biggest bank, reported a $2.3 billion trading loss in September after “unauthorized or unexplained” activity that the bank’s internal systems detected wasn’t “sufficiently” probed and controls weren’t enforced, Chief Executive Officer Sergio Ermotti told employees in October.

“Operational risks for banks active in trading are substantial and often relate to unauthorized trading,” according to the statement from the Swiss markets watchdog. “Such risks can rapidly result in significant losses, as recent events caused by unauthorized trading activity at UBS in London have shown.”

Banks’ senior management should appropriately prioritize the risks associated with unauthorized trading while “a balance must be struck between profitability and risk when determining annual goals,” Finma said. Control systems must be given priority, it added.

To contact the reporter on this story: Carolyn Bandel in Zurich at

To contact the editor responsible for this story: Frank Connelly at

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