Lead Story: Lessons from a rogue trader

This article first appeared in Capital, The Edge Malaysia Weekly, on December 2, 2019 - December 08, 2019.

Photo by Haris Hassan/The Edge

-A +A

KWEKU Adoboli was a rising star at investment bank UBS in London when his world collapsed spectacularly.

The Ghana-born trader, who had joined the Swiss bank in 2003 right out of university, was sentenced to seven years’ jail in November 2012 after being found guilty of making a series of unauthorised trades that cost the bank a staggering US$2.3 billion. It was deemed the biggest fraud in British history. Adoboli was 32 at the time.

He was released in June 2015 after serving half his sentence but the final blow came in November last year. After years of trying to fight off deportation — foreign nationals sentenced to more than four years’ jail are automatically deported unless there are strong reasons to let them stay — Adoboli got booted out of the UK, which he considers home, to Ghana where he has not lived since he was four.

“It was traumatic. It broke me,” he tells The Edge of his swift fall from grace in an exclusive interview in Kuala Lumpur recently. He was here as a speaker at the Asian Institute of Chartered Bankers’ international conference on financial crime and terrorism financing.

Adoboli has been on the speaking circuit, sharing his story and experiences in a bid to help others, particularly young bankers, learn from his mistakes.

What is interesting about Adoboli’s case is that even though he owned up to having made reckless trades that were well beyond the bank’s authorised risk limits to hide his true positions, he maintained throughout his trial that his actions were purely to make profits for UBS and in line with the bank’s culture. He said he was a dedicated employee, exemplary even, who had been under tremendous pressure to deliver on unreasonable targets.

He argued that his superiors knew what he was doing and turned a blind eye to it for as long the trades were making money for the bank. UBS argued otherwise.

When handing down the jail sentence in 2012, judge Brian Keith said Adoboli was “arrogant enough” to think that the bank’s rules for traders did not apply to him. “The tragedy for you is that you had everything going for you,” he is reported to have said, referring to Adoboli’s private school education in England, his intelligence and easy charm.

How did it all go so wrong for Adoboli?

 

The rise and fall

Born in Ghana in 1980, Adoboli was constantly on the move with his family, going wherever his father, who worked for the UN, was posted. As a child, he lived in Israel and Syria.

“All that disruption in my early life meant that my parents thought it would be a good idea for me to go to boarding school. That’s how I ended up going to boarding school in Yorkshire in the UK when I was 12,” he says.

Adoboli attended Ackworth School, where he was well liked and fit in like a charm. He went on to become head boy at the school and later attended the University of Nottingham, taking up computer science and management while being active in the students’ union, among other things.

“I was very much a community guy. Funnily enough, that’s the way I was brought up. I think part of the reason I did so well at Ackworth is that the school’s values were about community being above the individual. And that’s what I tried to carry into my job at UBS,” he says.

Ironically, Adoboli never had a desire to join a bank.

“I knew nothing about finance. I did an internship [at UBS] in my penultimate year at university just to get some experience. This was in 2002, after the dotcom bubble burst. I had wanted to go into consulting but there were just no jobs,” he recounts.

He remembers being “really embraced” by his colleagues at UBS and, by the end of the internship, was offered a job. “I was over the moon. So in September 2003, I started working in operations, literally on the bottom rung, doing settlements.”

Not long after, he was sent for short stints in UBS offices in Stockholm and Hong Kong and eventually worked his way up to become a trader in London in January 2006. He moved to the exchange-traded funds and index desk — the Delta One desk — in September that year.

According to Adoboli, he had to learn a highly complex job under pressure and with little experience or guidance. “If you can imagine a US$50 billion book with 4,000 moving parts … the profit and loss (P&L) accounting of the book was very volatile. One day you’d come in and you’ve made US$5 million and you don’t know why; another day you’d come in and you’ve lost US$5 million and you don’t know why.”

He speaks of having to develop ways to deal with the P&L volatility and just desperately trying to “make the bloody book work”. His desk was central to the bank’s strategy of remaining relevant to the equities world after the 2008/09 global financial crisis (GFC), he says.

“I think it’s important to highlight that the equivalent desk at Morgan Stanley had 11 people but here, it was just three of us, and my boss left after some time, so then, it was just two.”

It was in 2011, when he was on the global synthetic equities trading team, that he racked up the massive losses.

In September 2011, UBS issued a statement revealing that the losses from the unauthorised trading stood at US$2.3 billion. Adoboli had reportedly concealed speculative trades in various S&P 500, DAX and Euro Stoxx index futures.

He was charged with fraud and false accounting but was only convicted of fraud. The scandal was a massive blow to the reputation of the Swiss bank, which had only just begun to recover from its near-collapse during the GFC. Not long after, the then UBS CEO Oswald Grubel resigned, as did the bank’s co-heads of global equities.

“In the end, 19 people were either fired or asked to leave as a result of the loss,” says Adoboli.

 

‘Ask for help’

A point Adoboli tries to drive home throughout the interview is that what happened to him could easily happen to any young person in finance wanting to excel at the job.

“It is really important to get this right, and that is that young people, put in the same situation [as I was], given the same challenges, will get the same outcome. They’re not bad kids. Like, I am not a bad person. It’s really a lesson that it can happen to anyone. And I’m not saying this because I don’t want the responsibility or that I’m trying to absolve myself of responsibility — I’ve paid the price, I went to prison, I’ve learnt so much from it.”

He staunchly believes that there will continue to be more Adobolis, Nick Leesons and Jerome Kerviels — referring to other notable rogue traders in the last few decades — for as long as there is no real cultural and systemic change in the financial industry. (Leeson was with Barings Bank while Kerviel was with Societe Generale.)

“I’m trying to use my punishment, suffering and lessons learnt … to inspire others to recognise that this isn’t about people but it’s about systems, it’s about processes, it’s about purpose, it’s about the social contract. If we can get those things right, then you start to reduce these bad outcomes,” he says.

Adoboli insists that at no point when making those trades did he stop to think that what he was doing was wrong. Profit targets had been raised by half and all he could think of was how to deliver amid 18/19-hour work days. Not delivering would mean he was a failure.

“I think it’s important that people understand that when you’re there on the trading floor with 4,000 stocks on your book, US$50 billion worth of assets, and you’re given this impossible task, there’s no point in that process where you go ‘what I’m doing here is wrong’. Actually, what you’re thinking is, ‘this organisation really needs me to do this successfully, and if I don’t do it, then my colleagues, the clients and the bank will suffer’. You just don’t recognise that you’re facing an ethical dilemma.”

Today, the No 1 piece of advice Adoboli would offer a young person in that situation is this: Have the courage to admit when a task is too difficult and ask for help in terms of resources and leadership. “It’s difficult for young people to do this because to say ‘I just can’t do it’ is an admission that they are not capable … especially when the people around them are all achievement-oriented and the [best of the best].”

He laments how financial scandals are often blamed on “bad apples”, with the industry failing to recognise that it is a much bigger problem.

“The industry is moving to this point where we can no longer just say ‘well, there are lots and lots of bad apples’. We’re having to admit that the barrel, the barrel-maker and the apples within — basically everyone — are involved in a process of increasing complexity. And [bad things happen] not because we’re bad people … but because it’s getting harder to do what we’re being asked to do, and so more and more manipulation is deployed to achieve it.”

Adoboli is still struggling to come to terms with all that has happened. He was, after all, the poster boy for UBS.

“I was the guy they would send to universities all around the country to do the milk-round stuff — basically convince students to apply for jobs there. I’d be the one to say come work for us, it’s a great place, we’re changing the world … and I truly believed it. So when I was convicted, I was broken … and when I was deported, I was even more broken.”

His deportation — a result of him not having taken the time to apply for a British passport — was controversial as a group of people, including several members of parliament and celebrities, lobbied for him to stay on a human rights basis. In the end, however, he was put on a plane to Ghana, escorted by five security officials, without being given the opportunity to say goodbye to loved ones and friends.

These days, apart from speaking engagements, he teaches and is involved in a group called the AfroChampions Initiative that aims to support the development of African multinationals. He also works on his father’s mango farm.

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.