Events at the investment bank raise important questions about workplace matters and how to intervene appropriately. It is noteworthy that Adoboli [accused of 'rogue trading']declared his unauthorised trades to his employer. This suggests he may have felt pressurised to take risks in order to succeed in his role.
Organisations have a responsibility to scrutinise and monitor what is going on in their businesses and, crucially, should take steps to ensure that clear boundaries are set so employees know what is acceptable and what is not.
In addition, robust risk management controls should be applied to ensure that employees don’t step out of line. In the UBS case, it appears that Adoboli was able to carry out unauthorised trades over a significant period of time without any intervention from his employer.
Successful trading activity involves a high degree of risk so it’s all the more surprising that Adoboli’s trading activities within the ‘Delta One’ team were not detected internally. The sophisticated risk management systems and one-to-one management controls typically put in place to supervise individuals involved in such critical operational activities seem, in this case, to be lacking.
But a degree of concession should be allowed for employers found wanting in this area. Employers need to be able to demonstrate that they are in control of their businesses. On the flipside, the phone hacking scandal has brought into focus the risk of potentially negative PR if found to be snooping on employees or monitoring their activities excessively.
Magnifying the issue for UBS is its track record of risk management and controls, which appears to be in question. During the financial crisis, they were forced to write off $50 billion in toxic debt and have since faced scrutiny from the Financial Services Authority, resulting in the payment of a fine in 2010 for poor controls of its clients’ money.
Recent reports in the media suggest that colleagues of Adoboli may have known something wasn’t quite right but failed to bring it to the attention of their employer. This raises the possibility that staff members refrained from raising the issue because of concerns surrounding their own positions and a lack of awareness of the protection available to them under the Public Interest Disclosure legislation, otherwise known as the ‘Whistleblowers Act’.
It also highlights the need for employers to be more pro-active in their efforts to make workers aware of the fact that, should they decide to disclose the alleged irregular activities of fellow employees, their employment rights would remain fully protected.
Following the revelations of Adoboli’s unauthorised trading activity, UBS chose to invalidate his FSA registration, thereby preventing him from carrying out any further trading activity, which amounts to suspending his employment. Although UBS may decide to retain him on suspension pay in order to ensure they’re not being seen to prejudge the outcome of the impending court case, it is more likely that they will choose to terminate his employment once they have completed their own internal investigation.
Corporate employers must learn lessons from recent events at UBS and make sure their own risk controls and procedures stand up to scrutiny.
Paula Whelan (pictured), is an employment law partner at law firm Shakespeares
