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UBS Group Penalized for Improper Transaction Reporting by FCA

Zacks Equity Research
Higher shipments and pricing, as well as cost management help Martin Marietta Materials (MLM) to post solid first-quarter 2019 results.

UBS Group AG UBS is required to pay about £27.6 million penalty to the Financial Conduct Authority (“FCA”) for failing to provide complete and accurate information in relation to 135.8 million transactions conducted between November 2007 and May 2017.

Per the U.K. regulator, lenders are required to report proper details about the transactions they have carried out, in terms of place, price, quantity and the party involved. Lapses in such reporting can lead to “fundamental risks”.

UBS has been accused of failing to provide complete information for 86.7 million reportable transactions. Further, it has been charged for sending incorrect details regarding 49.1 million transactions to the FCA, which were, as a matter of fact, not reportable. UBS is also held responsible for failing to take reasonable care and control in respect of its transaction reporting duty.

Per FCA’s statement, UBS has been able to lower the penalty amount by agreeing to resolve the case. Without this discount, the FCA would have imposed a financial penalty of £39.4 million.

In February 2018, UBS was penalized with EUR 4.5 billion ($5.1 billion), including civil damages of EUR 800 million, on being found guilty by the French trial court of tax fraud and money laundering against allegations that the bank helped its clients in the country to evade taxes.

Following this verdict, UBS had raised its litigation provisions by about $382 million. The bank set aside $2.5 billion as provisions for legal fines. However, profits in 2019 are likely to be impacted by these legal costs.

Legal Probes & Settlements of Other Foreign Banks

Recently, UBS along with Standard Chartered PLC SCBFF have agreed to settle a lawsuit related to the alleged mishandling of a 2009 IPO in Hong Kong. The details of the settlement and the alleged misconduct have not been disclosed yet.

In January 2019, HSBC Holdings HSBC agreed to pay $30 million to settle a lawsuit filed by investors who accused 11 big banks of rigging the roughly $9-trillion government agency bond market from 2009 to 2015.

The Royal Bank of Scotland RBS is being investigated for its involvement in colluding to acquire and trade sovereign bonds issued by eurozone governments to mislead competition, between 2007 and 2012.

Our Take

UBS’ efforts to settle lawsuits and regulatory probes, with an aim to focus on strengthening core operations, bode well. Also, it is focused on controlling costs, which will aid bottom-line growth. However, the top line remains under pressure due to a persistent negative interest rate environment in the domestic economy.

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