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UBS Auction-Rate Securities

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UBS Funds Under Investigation

UBS Auction-Rate Securities

Read the Complaint filed against UBS by the State of Massachusetts

Read the Complaint files against UBS by the State of New York

Overview

UBS Under Investigation

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.

Massachusetts Charges UBS with Fraud and Dishonest Conduct

William F. Galvin, Massachusetts Secretary of State, just charged UBS Securities and UBS Financial Services with fraud and dishonest conduct in connection with UBS' sale of auction-rate securities.

Galvin's office is saying UBS told investors the auction-rate securities were safe, liquid cash alternatives when UBS knew they were not and UBS continued selling the securities even as it planned to suspend auctions. UBS stopped selling the securities in February of this year. Galvin also points out that one UBS employee “spearheaded” efforts to sell more auction-rate securities while he sold most of his auction-rate shares at the same time.

Consequently, UBS investors have their assets frozen in devalued or worthless auction-rate paper. So far, UBS has only offered to give their investors loans to meet cash needs.

Galvin is alleging UBS failed to tell their investors about the vulnerabilities in auction-rate securities and it's a “fixed” game where the investors were kept in the dark.

News Commentary

E-Mails Once Again Tell Wall Street's Story

“The words “conflicts of interest”and “Wall Street” have become almost indistinguishable from each other these days. Credibility was added to this notion last week courtesy of e-mail messages concerning auction-rate securities - messages that ultimately led to Swiss-based financial giant UBS becoming one of the first investment banks to face fraud and securities charges since the auction-rate market seized up in February.”

Risk management and accountability were the subject of a June 29 New York Times column by Gretchen Morgenson in which she laid out in black and white a seemingly elaborate subterfuge that UBS took part in to palm off auction-rate securities on unsuspecting investors when all the while the company knew the auction market was headed for disaster.

UBS Charged In Auction-Rate Securities Debacle

“The game was fixed; only the customers were in the dark.”

That statement by William F. Galvin, Massachusetts top securities regulator, confirmed what investors caught in the tangled web of auction-rate securities have said all along.

On June 26, they finally received a little bit of justice when Massachusetts securities regulators filed civil charges of fraud and dishonest conduct against UBS for misrepresenting auction-rate securities as cash-alternatives investments. The charges mark one of the first sets of government-fraud charges filed since the market for auction-rate securities froze up in February.