Risk Management News, November 2011

Risk Management News, November 2011

by George Lekatis
     
 
Today we will start our journey from UBS. It is a good example of Sarbanes Oxley related controls that are very important for all, domestic and foreign companies. It is also interesting to read the Sarbanes-Oxley related disclosures.

Headquartered in Zurich and Basel, Switzerland, UBS has offices in more than 50 countries, including all major financial

Overview

Today we will start our journey from UBS. It is a good example of Sarbanes Oxley related controls that are very important for all, domestic and foreign companies. It is also interesting to read the Sarbanes-Oxley related disclosures.

Headquartered in Zurich and Basel, Switzerland, UBS has offices in more than 50 countries, including all major financial centers, and employs approximately 65,000 people.

Under Swiss company law, UBS is organized as an Aktiengesellschaft, a corporation that has issued shares of common stock to investors. UBS AG is the parent company of the UBS Group (Group).

The operational structure of the Group comprises the Corporate Center and four business divisions: Wealth Management & Swiss Bank, Wealth Management Americas, Global Asset Management and the Investment Bank.

UBS has discovered important unauthorized trading activities. As a US-listed company, UBS is required under the Sarbanes-Oxley Act to evaluate the effectiveness of its "internal control over financial reporting" and "disclosure controls and procedures" on an annual basis.

Group CEO and Group CFO, has concluded that there was a material weakness in their internal control over financial reporting on 31 December 2010 and, accordingly, that their internal control over financial reporting was not effective as of that date.

FORM 6-K
Date: October 25, 2011
UBS AG

“Following the discovery in September 2011 of unauthorized and fictitious trading by an employee in our Global Synthetic Equity business unit in London, and on the basis of information now available to management concerning the circumstances surrounding the trading and the related controls, we have determined that certain controls designed to prevent or detect the use of unauthorized and fictitious transactions on a timely basis were not operating effectively.

We have further determined that the control deficiencies that led to the failure to prevent or detect unauthorized and fictitious trading on a timely basis also existed at the end of 2010.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a registrant’s financial statements will not be prevented or detected on a timely basis.

Management has re-assessed whether our internal control over financial reporting was effective on 31 December 2010, and has determined that there is a reasonable possibility that the control deficiencies that existed on that date could have been sufficient to result in a material misstatement of our consolidated financial statements as of and for the year ended 31 December 2010.

On this basis, management, including our Group CEO and Group CFO, has concluded that there was a material weakness in our internal control over financial reporting on 31 December 2010 and, accordingly, that our internal control over financial reporting was not effective as of that date.

On the basis of the available information to date, management has concluded that

(i) the control requiring bilateral confirmation with counterparties of trades within our Investment Bank’s equities business with settlement dates of greater than 15 days after trade date was not operating, and when such trades were cancelled, re-booked or amended, the related monitoring control to ensure the validity of these changes had ceased to operate effectively, and

(ii) the controls in the inter-desk reconciliation process within the Investment Bank’s equities and fixed income, currencies and commodities businesses to ensure that internal transactions are valid and accurately recorded in our books and records, including controls over cancellations and amendments of internal trades that require supervisor review, intervention and resolution, did not operate effectively.

Management has likewise determined that, solely because of these deficiencies, our disclosure controls and procedures were not effective on 31 December 2010.

Accordingly, our previous evaluation stating that our disclosure controls and procedures were effective on 31 December 2010 and the reports of management and of our independent registered public accounting firm on internal control over financial reporting on 31 December 2010, all of which were included in our 2010 Annual Report on Form 20-F filed with the SEC on 15 March 2011, should no longer be relied upon.

Notwithstanding the foregoing, we have determined that our consolidated financial statements included in our 2010 Annual Report on Form 20-F continue to fairly present, in all material respects, our financial position on 31 December 2008, 2009 and 2010 and our results of operations and cash flows for the years ended 31 December 2008, 2009 and 2010 in accordance with IFRS.

Product Details

ISBN-13:
2940013255128
Publisher:
Compliance LLC
Publication date:
11/02/2011
Sold by:
Barnes & Noble
Format:
NOOK Book
Pages:
81
File size:
1 MB

Meet the Author

George Lekatis is the General Manager and Chief Compliance Consultant of Compliance LLC, a leading provider of risk and compliance training and executive coaching in 36 countries.

George has more than 17,000 hours experience as a professional speaker and seminar leader. He has worked for more than 15 years as a management consultant and educator and has demonstrated exceptional presentation and communication skills.

George is the president of the Basel ii Compliance Professionals Association (BCPA, www.basel-ii-association.com), the largest association of Basel ii professionals in the world, and the Basel iii Compliance Professionals Association (BiiiCPA, www.basel-iii-association.com), the largest association of Basel iii professionals in the world.

George is also president of the Sarbanes Oxley Compliance Professionals Association (SOXCPA, www.sarbanes-oxley-association.com), the largest Association of Sarbanes Oxley professionals in the world

George is an expert witness, qualified to investigate and testify about risk and compliance management standards, policies, procedures, best practices, due care and due diligence.

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