FSA fines UBS £8 million

By Kirstin Ridley

LONDON (Reuters) - Four former dealers at UBS (UBS.N) (UBSN.VX) plundered customer accounts to trade and dumped the resulting losses on them, Britain's financial regulator said, further denting the battered Swiss bank's reputation.

The scandal has cost UBS more than $55 million (33.2 million pounds) as the Financial Services Authority slapped on an 8 million pound penalty -- its third largest ever -- and the bank compensated clients by more than $42 million.

The Zurich-based bank's systems and controls failed to prevent four London-based employees carrying out unauthorised trades on at least 39 accounts over almost two years, the FSA said on Thursday.

The four dealers at UBS -- struggling to rebuild its reputation after a high-profile U.S. tax fraud probe -- traded foreign exchange and precious metals using customer money, with as many as 50 trades a day taking place at the peak.

"These employees were able to take advantage of UBS's inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal," said Margaret Cole, FSA director of enforcement and financial crime.

The FSA said UBS failed to heed warnings its systems might not appropriate.

However, UBS said it had taken full remedial action since a whistleblower raised the alarm internally and the trades, which took place between January 2006 and December 2007 at the bank's London-based wealth management business, came to light.

"UBS deeply regrets this incident and, having fully co-operated with the FSA's investigation, we are now pleased that this matter has been settled so that we can move forward," it said in a statement. The employees have been fired.