UBS Settles With SEC for Nearly $20 Million

Banking, finance, and taxes

Published: October 13, 2015 12:55 pm

Last Updated: October 13, 2015 12:57 pm

The U.S. Securities and Exchange Commission (SEC) announced that UBS Group A.G. (NYSE: UBS) has agreed to settle and pay $19.5 million. This is in regards to false or misleading statements and omissions in offering materials that UBS provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

These structured notes were tied to the V10 Currency Index with Volatility Cap. The firm got into hot water when it started falsely stating that the investment relied on a “transparent” and “systematic” currency trading strategy using “market prices” to calculate the financial instruments underlying the index.

The time frame for this was limited between December 2009 and November 2010, when approximately 1,900 U.S. investors bought $190 million of structured notes linked to the V10.

As one of the largest issuers of structured notes in the world, UBS must be held to a high standard of transparency with investors. Although this case is the agency’s first involving misstatements and omissions by an issuer of structured notes.

Mary Jo White, SEC Chair, commented on the case:

This first-of-its-kind case involving misstatements and omissions by a structured notes issuer shows that the SEC continues its commitment to pursue wrongdoing across the securities industry in order to better protect investors. It is critical that large global financial institutions have and implement policies and procedures designed to ensure that all facts relevant to investors are made known to individuals responsible for disclosures.

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Andrew Ceresney, Director of the SEC’s Division of Enforcement, also said:

This case demonstrates the importance of being truthful in offering materials to be used in the offer and sale of structured notes to retail investors. We will remain focused on protecting investors who are not in a position to protect themselves by virtue of their limited access to information, the complexity of the product, or both.

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