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UBS Pays $19.5 Million to Settle the SEC’s Charges That it Mislead Investors on Derivatives

By Katherine S. DiDonato, Esq.  of Shustak Reynolds & Partners, P.C. posted on Friday, October 16, 2015.

Kara Siegel

Kara Siegel

Senior Attorney

UBS AG has agreed to a $19.5 million settlement with the SEC over claims the bank misled investors about the risk tied to debt securities packaged with derivatives. This is the first case against an issuer of “structured notes”–a $50 billion dollar-a-year industry. Structured notes are a complex financial product that typically consists of debt securities with a derivative tied to the performance of other securities, commodities, currencies, or proprietary indices. Many of these notes are sold to relatively unsophisticated retail investors.

The SEC alleges that UBS misled investors that the investments were “transparent” and that it used “market prices” to calculate the financial instruments underlying the index, when, in reality, undisclosed hedging trades by UBS reduced the index price by about five percent.

As part of its settlement with the SEC, UBS agreed to cease and desist from similar conduct in the future and $5.5 million of the settlement funds will go to V10 investors to cover the total amount of investor losses.

Shustak Reynolds & Partners, P.C.’s New York, San Francisco, Irvine and San Diego securities, FINRA and SEC attorneys handle a wide range of securities and FINRA related issues and have substantial expertise and experience in the securities and brokerage business.  Contact us today for a confidential analysis of your situation. 



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