«Financial Services Authority _ FINAL NOTICE _ To: Jaspreet Singh Ahuja Date of birth: 24 March 1967 Individual Ref: JSA01038 Date: 14 December 2011 ...»
Financial Services Authority
To: Jaspreet Singh Ahuja
Date of birth: 24 March 1967
Individual Ref: JSA01038
Date: 14 December 2011
TAKE NOTICE: the Financial Services Authority of 25 the North Colonnade, Canary
Wharf, London E14 5HS (the "FSA”) gives Mr Ahuja final notice that it has taken the
1.1. The FSA gave Jaspreet Singh Ahuja a Decision Notice on 9 July 2010 (the “Decision
Notice”) which notified him that the FSA had decided to take the following action:
(1) to make an order pursuant to section 56 of the Financial Services and Markets Act 2000 (the “Act”) prohibiting Mr Ahuja from performing any function in relation to any regulated activity carried on by any authorised or exempt person or exempt professional firm on the grounds that he is not a fit and proper person (the “Prohibition Order”); and (2) to impose a financial penalty of £150,000 on Mr Ahuja pursuant to section 66 of the Act for breaching Statement of Principle 1 of the Statements of Principle for Approved Persons.
1.2 On 5 August 2010, Mr Ahuja referred the decision to the Upper Tribunal (Tax and Chancery Chamber) (the “Tribunal”). On 8 November 2011, Mr Ahuja notified the Tribunal of his intention to withdraw his reference. On 17 November 2011, the Tribunal gave consent to Mr Ahuja’s withdrawal of his reference.
1.3 Accordingly, with effect from 14 December 2011, the FSA imposes the Prohibition Order and a financial penalty on Mr Ahuja in the amount of £150,000. Given the withdrawal of Mr Ahuja’s reference, this notice is drafted in terms that are consistent with the Decision Notice.
2. REASONS FOR THE ACTION
2.1. The FSA has decided to take this action as a result of Mr Ahuja’s conduct as an approved person at the London branch of UBS AG ("UBS") from 1 January 2006 to 30 January 2008 (the "Relevant Period").
2.2. Throughout the Relevant Period, Mr Ahuja was an approved person. In particular, from 23 April 2004 to 31 October 2007, Mr Ahuja was approved to perform the ‘Investment Adviser’ controlled function (CF21). On 1 November 2007, the Investment Adviser controlled function was superseded by the ‘Customer’ controlled function (CF30). Mr Ahuja held the ‘Customer’ controlled function until he resigned from UBS on 10 March 2008. UBS had suspended Mr Ahuja on 13 February 2008, and accepted his resignation on 18 March 2008.
2.3. Throughout the Relevant Period Mr Ahuja was a Client Adviser with UBS’s international wealth management business in London, providing wealth management services to private banking customers. In performing the Investment Adviser and Customer controlled functions, he had significant contact with UBS's customers and he was able to develop substantial relationships of trust with UBS's international wealth management customers. In addition, he undertook regulated activities and provided services that were substantially connected to regulated activities.
2.4. During the Relevant Period, Mr Ahuja’s conduct fell short of the FSA's prescribed regulatory standards for approved persons. Mr Ahuja's conduct demonstrated a lack of honesty and integrity and he is therefore considered not to be fit and proper to perform any controlled function. In particular, Mr Ahuja breached Statement of Principle 1 (“Principle 1”) of the Statements of Principle for Approved Persons contained in the High Level Standards part of the FSA’s Handbook entitled “Statements of Principle and Code of Practice for Approved Persons” (“APER”), which requires an approved person to act with integrity in carrying out his controlled function.
2.5. In summary, Mr Ahuja:
(1) utilised a pre-existing investment structure to enable an Indian resident customer, via an investment fund incorporated in Mauritius (the “Fund”), to breach Indian law in clear contravention of UBS guidelines. Ultimately, the customer invested over US$250 million in the Fund;
(2) wrongfully took steps to conceal the true nature of the customer’s investment, mainly by the deliberate and repeated provision of false and/or misleading information to UBS Legal and Compliance (“Compliance”) and other parts of UBS; and (3) assisted in unauthorised redemption payments out of the Fund knowing, among other things, that the redemptions were not properly authorised by the customer and breached UBS internal compliance rules.
2.6. The FSA regards Mr Ahuja's misconduct as particularly serious in view of the
(3) Mr Ahuja’s misconduct in relation to the deliberate concealment of the true nature of the customer’s investment (including the provision of false and/or misleading information to Compliance and other parts of UBS) occurred throughout the Relevant Period, and therefore constituted a consistent, deliberate course of misconduct over a period of 2 years;
(4) Mr Ahuja’s provision of false and misleading information to Compliance was unacceptable. The information he provided was repeatedly challenged by Compliance and he was explicitly warned by Compliance of the consequences of providing them with false or misleading information. Nevertheless, he continued to maintain that the information he was providing (which he knew to be false and/or misleading) was accurate;
(5) The misconduct concerned customers for whom Mr Ahuja was responsible and, as regards his assistance in the unauthorised redemption payments out of the Fund, resulted in a loss to one of his customers; and (6) Mr Ahuja’s conduct in utilising a pre-existing investment structure to assist his customer to breach Indian law; in deliberately providing Compliance and other parts of UBS with false and/or misleading information; and in assisting in redemption payments that he knew were not properly authorised and breached UBS internal compliance rules, was deliberate.
2.7. The FSA has taken into consideration the fact that Mr Ahuja has not previously been subject to any findings of misconduct by the FSA or any other regulatory body.
3.1. The FSA's statutory objectives, set out in section 2(2) of the Act are the maintenance of confidence in the financial system, promoting public awareness, the protection of consumers, supporting financial stability and the reduction of financial crime.
3.2. The FSA has the power, pursuant to section 56 of the Act, to make an order prohibiting an individual from performing a specified function, any function falling within a specified description, or any function, if it appears to the FSA that the individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised person. Such an order may relate to a specified regulated activity, an activity falling within a specified description or all regulated activities.
3.3. In addition, the FSA has the power, pursuant to section 66 of the Act, to impose a financial penalty on a person of such amount as it considers appropriate where it appears to the FSA that he is guilty of misconduct and it is satisfied that it is appropriate in all the circumstances to take action against him.
3.4. A person is guilty of misconduct if, while an approved person, he, among other things, fails to comply with a statement of principle issued under section 64 of the Act.
3.5. APER was issued by the FSA pursuant to section 64 of the Act and contains general statements regarding the fundamental obligations of approved persons under the regulatory system.
3.6. APER Principle 1 states “An approved person must act with integrity in carrying out his controlled function” (APER 2.1.2 P).
4.1. UBS is a major global financial group with its headquarters in Zurich. Amongst other businesses, UBS operates an international wealth management business, which focuses on providing wealth management services to individuals. Customers of UBS’s international wealth management business may also gain access to the services of UBS’s Investment Bank (“UBS IB”), including, amongst other things, services to trade in foreign exchange, precious metals, securities and derivatives.
4.2. UBS conducts its international wealth management business in the United Kingdom through its London branch (the “London Branch”).
4.3. The services UBS provides to its international wealth management customers in the UK include, amongst other things: bank account services; investment advisory services; portfolio management (i.e. the discretionary management of a portfolio of cash and investments in accordance with investment guidelines); the execution of trades on customer instructions; and the safekeeping of documents and assets.
International wealth management customers are typically non-UK resident individuals who have substantial assets to invest, and are sophisticated, active and performancedriven investors.
4.4. During the Relevant Period, the international wealth management business conducted from the London Branch operated from seven desks, each of which focused on nonUK resident customers from different geographic areas (the “International Business Desks”). Each International Business Desk had its own portfolio of customers and was led and managed by a Desk Head.
4.5. Each international wealth management customer was allocated to a particular Client Adviser. The Client Advisers had day-to-day contact with customers, executed customer orders, provided advice and made recommendations in relation to investments and other products and services where relevant.
4.6. Mr Ahuja has been in the financial services industry since 1994. He joined UBS in August 1999 and, prior to 2003, worked for UBS in India as a stockbroker. In 2003, he transferred to the UK to work for UBS’s international wealth management business as a Client Adviser. Throughout the Relevant Period, Mr Ahuja was a senior Client Adviser on one of the International Business Desks, the Asia II desk ("the Desk"). Mr Ahuja was one of the most senior Client Advisers on the Desk.
4.7. Mr Ahuja reported to the Head of the Desk, Sachin Karpe. From around December 2007, Mr Ahuja acted as Deputy Desk Head, (although this was not an official position).
4.8. As an approved person holding the ‘Investment Adviser’ and ‘Customer’ controlled functions, Mr Ahuja was able to deal with customers, and their property, in a manner substantially connected to the carrying on of regulated activities by UBS AG.
4.9. As an approved person, Mr Ahuja was expected to comply with APER. In addition, Mr Ahuja was required to act in accordance with UBS’s legal and compliance requirements (including money-laundering requirements, UBS Group and local policies and procedures and the UK Compliance Manual), the UBS Client Adviser Manual and the Employee Handbook.
4.10. Mr Ahuja managed a portfolio of customers, and offered a number of services to
(1) Advising customers regarding investments;
(2) Making recommendations to customers on financial products;
(4) Opening UBS accounts for customers and providing account maintenance.
The Securities and Exchange Board of India (Foreign Institutional Investors) Regulations 1995 (as amended) (the “Regulations”)
4.11. As referred to above, Mr Ahuja utilised a pre-existing investment structure to assist his customer to breach Indian law in clear contravention of UBS’s formal guidelines.
4.12. Under Indian law (i.e. the Regulations), an Indian investor (whether resident or nonresident in India) is not permitted to invest in Indian securities through a vehicle known as a “Foreign Institutional Investor” (“FII”) except in particular circumstances (which are not relevant here). Such vehicles are designed so that non-Indian investors may make investments in Indian securities.
Mr Ahuja’s utilisation of pre-existing investment structure to assist an Indian customer to breach Indian law
4.13. The customer in question consisted of a large group of Indian companies (“Customer A”) headed by a wealthy Indian individual (the “Customer A Chairman”).
4.14. Mr Ahuja initially arranged for the Fund to be set up in February 2006 for another of the Desk’s customers using a fund manager (the “Fund Manager”) based in France with whom he had had prior dealings.
4.15. The Fund was established as a Protected Cell Company (“PCC”): i.e. a single legal entity comprising a series of self-contained cells. This structure allowed an investor to invest in a particular cell, the assets and liabilities of which were ring fenced from the rest of the company.
4.16. On or around August 2006, Mr Ahuja arranged for the Fund Manager to create a new cell (“Cell X”) in the Fund for investment by Customer A. Customer A wanted to invest in an Indian company within its own group. In a bid to assist Customer A in breaching the Regulations, Mr Ahuja utilised an indirect investment route for Customer A into India whereby three Indian companies in Customer A’s group (the “Customer A Investors”) invested over US$250 million in Cell X which, in turn, invested in Indian securities including through FII vehicles. The Customer A Investors were the beneficial owners of Cell X.