Please Note: You are viewing the unstyled version of Subprimelosses. Either your browser does not support CSS (Cascading Style Sheets) or it is disabled. As a result, much of this website will not look the way it was intended, although all of its contents will be accessible to you. For more information, visit our Browser Support page.

Skip to Primary Site Navigation, Secondary Site Navigation, Content

Home > Cases > UBS Auction-Rate Securities > UBS Charged With Civil Fraud Over Auction-Rate Securities Deals

UBS Charged With Civil Fraud Over Auction-Rate Securities Deals

After a year-long investigation, Massachusetts securities regulators have filed civil fraud charges against UBS over the way it marketed and sold auction-rate securities to investors. The charges, if proven, would confirm what investors have said all along since the auction market became frozen in February - that investment banks knowingly misled them about the risks associated with the investments.

Similar to long-term bonds, auction-rate securities are bought and sold at auctions held every seven, 28 or 35 days. The first signs of distress in the $330 billion auction-rate market began to unfold in February when investment banks and securities firms - which also conducted the auctions for the securities - pulled back their financial support and no longer bid on the securities. As a result, auction failures became rampant, leaving individual investors trapped in a long-term, illiquid investment they once thought was short term and safe as safe as cash in the bank.

Following complaints from investors, the Securities and Exchange Commission (SEC) and securities regulators in nine states began investigating the way in which investment banks and their brokers marketed auction-rate securities. On June 26, Bryan Lantagne, director of Massachusetts' securities division, officially filed civil fraud charges against UBS for misrepresenting investment opportunities and calling auction-rate securities “cash alternatives.” The charges also allege UBS had increased its efforts to sell the securities after knowing the market was headed for serious trouble.

The state wants to force UBS to return all investor funds, as well as pay a fine. The amount of money sought was not disclosed in the complaint.

The latest news for UBS follow a continuing legal headache for the Swiss bank. Last month, UBS reached an agreement with the Massachusetts attorney general's office to reimburse approximately $37 million to 17 local governments and the state's Turnpike Authority by buying back the auction-rate securities that towns and cities had previously invested in.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.


Return to UBS Auction-Rate Securities >


Top