UBS to pay $50 million to settle SEC claim

Regulator says firm misrepresented parts of a CDO deal, making disclosures false

Aug 6, 2013 @ 2:30 pm

UBS, CDO, broker, SEC, disclosure
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UBS AG (UBSN), Switzerland's largest bank, will pay almost $50 million to settle U.S. regulatory claims that a brokerage unit violated securities laws in structuring and marketing a collateralized debt obligation.

The Zurich-based bank's UBS Securities unit failed to disclose that it retained millions of dollars in upfront cash it received while acquiring collateral for the CDO in 2007, the Securities and Exchange Commission said today in a statement.

“UBS kept $23.6 million that under the terms of the deal should have gone to the CDO for the benefit of its investors,” George S. Canellos, co-director of the SEC enforcement unit, said in the statement. “In doing so, UBS misrepresented the nature of the CDO's collateral and rendered false the disclosures about how that collateral was acquired.”

In the settlement, UBS agreed to disgorge the $23.6 million in upfront payments and the disclosed fee of about $10.8 million, as well as paying prejudgment interest of approximately $9.7 million and a $5.7 million penalty, the SEC said. The company agreed to settle the agency's claims without admitting or denying wrongdoing.

“UBS is pleased to put this investigation behind us, which involved a legacy business that was closed almost five years ago,” Megan Stinson, a UBS spokeswoman, said in an e-mail. “We believe this settlement marks the conclusion of all SEC investigations relating to UBS's structuring and marketing of CDOs backed by residential mortgage-backed securities.”

(Bloomberg News)

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