UBS to buy back auction rate securities

UBS plans to buy back up to $3.5 billion of its auction rate securities after it was accused of fraudulent practices.
JUL 16, 2008
UBS AG plans to buy back as much as $3.5 billion of its auction rate securities from its customers after regulators in Massachusetts accused the firm of fraudulent practices related to the ARS market. The Zurich, Switzerland-based company is developing a structure that would offer to purchase all auction rate preferred stock issued by registered closed-end tax-exempt funds and held by eligible UBS advisory and brokerage clients in their accounts, the company said in a statement. If the structure is implemented, UBS clients who accept the offer will receive cash in an amount equal to the liquidation preference of their auction rate preferred stock and any accrued and unpaid dividends. In order to be eligible for the offer, UBS clients must have held the securities in their accounts as of July 15. Last month, William Galvin, the Massachusetts secretary of the commonwealth, sued two units of UBS, charging them with fraud and dishonest conduct related to the sale of auction rate securities. The regulator alleged that representatives from UBS Securities LLC and UBS Financial Services Inc., both of New York, aggressively sold the investment vehicles to clients without informing them that the bank had planned to pull out of auctions used to set the interest rates on the securities.

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