Q3 Earnings Alert! Plan early for this week’s stock reports with all key data in 1 placeSee list

SEC says UBS to pay $15 million over sales practices

Published 09/28/2016, 01:50 PM
© Reuters. The logo of UBS bank is seen in Brussels
UBSG
-

By Jonathan Stempel and Elizabeth Dilts

NEW YORK (Reuters) - UBS Group AG (S:UBSG) has agreed to pay more than $15 million to settle U.S. Securities and Exchange Commission charges that its failure to properly train brokers led to customers buying hundreds of millions of dollars of unsuitable securities.

The SEC said on Wednesday that UBS from 2011 to 2014 sold about $548 million of "reverse convertible notes," derivatives tied to individual stocks, to more than 8,700 retail customers who were relatively inexperienced and unsophisticated.

These notes, with mouthfuls of names as Trigger Phoenix Autocall Optimization Securities and Airbag Yield Optimization Securities, were sold to people of modest means, often with low risk tolerances, and included some retirees, the SEC said.

"UBS dropped the ball," SEC enforcement chief Andrew Ceresney said in a statement.

Gregg Rosenberg, a UBS spokesman, in a statement said the Swiss bank was pleased to settle. It did not admit wrongdoing.

UBS's payout includes a $6 million civil fine, $8.23 million of improper gains and about $798,000 of interest.

The case is part of a years-long crackdown by the SEC, the Financial Industry Regulatory Authority and other regulators to stop banks and brokerages from selling products that retail and even professional customers may not want, need or understand.

According to the SEC, UBS's notes were designed to offer attractive yields with a lessened risk of loss.

But Ceresney said on a conference call that UBS's training focused on describing the "potential upside" from the various products, not their volatility.

"Due to the rising stock market most of these products did perform well," Ceresney said. "But our view of the harm was due to the unsuitable recommendations."

Many critics of structured products have said they can be too opaque and expensive.

Ceresney said the UBS case also reflected SEC efforts to "harness the power of big data analytic techniques."

He said this enabled the regulator to uncover a "pattern" of questionable sales to particular groups of customers, without having to go customer-by-customer.

© Reuters. The logo of UBS bank is seen in Brussels

"We will use these advanced analytic techniques" in future investigations, Ceresney said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.