UBS settles suit for $23.3 million

Jul 16, 2007 @ 2:47 pm

By Diane Hess

New York state Attorney General Andrew Cuomo said today that UBS Financial Services, Inc. has agreed to pay a $23.3 million settlement for "inappropriately steering" brokerage customers into fee-based accounts, according to Crain's New York Business.

Under the agreement, UBS will reimburse approximately 3,000 customers $21.3 million and pay a $2 million penalty for placing clients into the fee-based accounts of its InsightOne program.

According to a statement issued by the AG’s office, UBS charged a 91-year-old InsightOne client more than $35,000 for four trades over two years, at approximately $8,800 per trade.

In another example, it says an 82-year-old account holder paid approximately $24,000 in InsightOne fees in 2003 while completing only one transaction.

"UBS convinced customers to rely on its advice and then abused that trust," said Mr. Cuomo in a statement.

"This major settlement is a win for customers inappropriately pushed into unsuitable brokerage accounts and a warning to the entire industry that customers' interests must come first."

UBS confirmed the settlement, but said that it is "disappointed with the AG's statement, which mischaracterizes the program and its operation."

The bank said it settled the case to avoid litigation, and that "despite what the AG's press statement alleges,” it did not “inappropriately steer customers into unsuitable accounts or switch them regardless of whether the accounts fit their needs."

UBS also defended InsightOne as a program that provides a choice of payment plans, and said in its statement that the "vast majority" of clients who chose InsightOne over the relevant period saved money.

A spokeswoman for the AG’s office said the settlement is part of a broader investigation -- the office is continuing to look at fee-based brokerage accounts throughout the state.


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