Market regulator fines UBS traders

(July 18, 2005) Market regulator RS has fined two former senior traders at UBS Securities Canada a total of $225,000.

Zoltan Horcsok, former head of sales trading, was fined $100,000, ordered to pay costs of $25,000 and banned from the equities market for three months.

Glen Grossmith, former executive director in the firm’s equity sales division, was fined $75,000, ordered to pay costs of $25,000 and also suspended for three months.

Horcsok admitted that in February, he failed to fulfill his supervisory responsibilities and engaged in conduct which resulted in UBS Securities Canada contravening the regulator’s Universal Market Integrity Rules.

Grossmith admitted that during the same period, he engaged in conduct inconsistent with just and equitable principles of trade.

The case originated in the U.S., when a U.S. trader, upset with a client for moving an outstanding order to a competitor, bought 10,000 shares of the same stock.

When the client complained to UBS, the U.S. broker, Mark Webb, said they were for a Canadian client. He then asked for Horcsok’s assistance in finding a Canadian trade ticket time stamped around the time of Webb’s purchase, as well as a Canadian buyer.

Horcsok relayed the request to Grossmith, who found a Canadian buyer.

With Horcsok’s knowledge, Grossmith altered an existing trade ticket for another Canadian client’s purchase of a TSX-listed security to reflect an order to purchase 10,000 shares of the stock involved.

“Grossmith also created false and misleading communication to Webb and made false statements to a UBS employee, which continued the charade that Webb had been provided with an order to purchase 10,000 shares of the stock for a Canadian client,” RS says.

Horscok admitted to the infractions several days after the falsified trades took place. Both men were fired by UBS on February 22.

RS has decided to take no action against the firm. “The actions of these senior traders to cover up a willful act of a colleague were unethical and unacceptable,” said RS vice-president Maureen Jensen in a statement. “They knowingly abused the trust of a Canadian client and risked the integrity of the Canadian equity market when they deliberately falsified trading information and created a misleading audit trail.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com

(07/18/05)