A convenient witch hunt is what's needed to clear out the equities business at UBS

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Things are moving at UBS. An internal audit team has been put on a 'day and night rota' in an effort to find out what went wrong.

Francois Gouws and Yassine Bouhara, co-heads of global equities, have handed in their resignations. A further 8 front office staff are also said to have left. The internal auditors will start focusing on compliance, legal and risk next, although we understand that at least two senior risk directors have already been removed.

The alleged trades of Kweku Adoboli are turning out to be the perfect excuse for shaking up UBS's equities business. Formerly the diamond in the bank's tiara, equities wasn't doing too well even before Kweku came along. Equities sales and trading revenues fell 10% at the bank in the first half of 2011; across the market as whole, they increased by an average of 0.5%.

The first half performance was all the more disappointing in light of the fact that UBS hired 321 new people for its equities division, including 124 new MDs/EDs in 2010. It's not just Kweku: the business has allegedly gone downhill.

"There's no way it [a rogue trader] would have happened at UBS in equities, with the kind of culture it had, before the 2008 crisis," a UBS 'insider' told the Financial Times at the weekend.

What next? Whether they're implicated in the $2bn loss or not, recently hired UBS equities and equity derivatives professionals have reason to feel nervous - especially if they were hired by Bouhara following his arrival in May 2010. When Mike Stewart finally arrives from BofA Merrill as sole head of global equities, he's likely to right size the business to fit the reduced revenue outlook.

In another sense, however, Stewart's appearance will represent yet more upheaval for a business that could benefit from stability. Daniel Coleman, global head of UBS equities until March 2010, was with the bank for 24 years. Stewart, an outsider, will be the third head of global equities in 17 months. His biggest challenge may be convincing UBS's equities veterans to stay.

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