UBS Precious Metals Misconduct Found by Finma in FX Probe

Switzerland’s regulator found “serious misconduct” by UBS AG (UBSN) employees in precious metals trading, particularly with silver, as part of its review of the bank’s foreign-exchange business.

Electronic chats played a “key” role in the improper conduct in foreign exchange and precious metals trading, the Swiss Financial Market Supervisory Authority, or Finma, said in a statement today. It found front running, when traders profit from advance knowledge about a transaction expected to influence prices, over client orders for silver.

“The behavior patterns in precious metals were somewhat similar to the behavior patterns in foreign exchange,” Mark Branson, Finma’s chief executive officer, said today on a conference call. “We have also seen clear attempts to manipulate fixes in the precious metals markets.”

UBS’s precious metals spot-trading desk has been part of the foreign-exchange desk since 2008 and was subject to the same control and monitoring procedures, according to Finma. Traders engaged in activities including sharing of information on orders, flows and customers as well as front-running and triggering of stop-loss orders, it said.

Trading desk supervisors at UBS eventually prohibited front running in the light of the “obviousness and frequency” of misconduct, Finma said.

UBS Precious Metals Misconduct Found by Finma in FX Probe