FOR IMMEDIATE RELEASE: March 4, 2010
Contact: Benette Zivley, Director, Inspections & Compliance, at 512-305-8394
Contact: Robert Elder, Communications, Texas State Securities Board, at 512-305-8386
Final Settlement with UBS Provides $200 Million for Investors in Auction Rate Securities Not Covered by Initial Agreement
Austin, Texas — The Texas State Securities Board has finalized a settlement with UBS Securities LLC and UBS Financial Services Inc. that requires the company to purchase up to $200 million in auction rate securities from investors who were not covered in UBS' initial agreement with state and federal regulators.
The March 4 Consent Order finalizes a national settlement with UBS over its sale of auction rates securities (ARS), which brokerage firms marketed as safe and liquid alternatives to cash. UBS will continue to repurchase approximately $22 billion in auction rate securities from investors across the country – including up to $2.7 billion from Texas investors.
UBS will also pay a fine of $6,640,432 to the General Fund of the State of Texas by March 12, 2010.
According to the Consent Order, UBS will provide $200 million of relief nationally to holders of auction rate securities who were left out of the initial settlement in August 2008. These investors were not covered because UBS, in the earlier settlement, agreed to buy back securities only from investors who held the securities in accounts at UBS. The Consent Order covers non-institutional investors who purchased auction rates securities from UBS but moved their accounts from UBS before Feb. 13, 2008. Investors who believe they are covered by the Consent Order are encouraged to contact UBS about their auction rate securities holdings.
The Consent Order is available at http://www.ssb.state.tx.us/Enforcement/files/IC10-07.pdf
"Today's Consent Order is an important step in ensuring that as many investors as possible are made whole in their ARS investments," Texas Securities Commissioner Denise Voigt Crawford said. "UBS was one of many big financial firms that routinely misled its clients about the risks of the ARS market."
Crawford thanked the U.S. Securities and Exchange Commission and securities regulators in Georgia, Missouri and New Jersey for their work on the final settlement.
The UBS case was part of a cooperative investigation into the ARS market by state securities regulators and the SEC. The inquiry found that firms selling auction rate securities told their clients the securities were cash-like instruments that could be accessed at almost any time. In fact, auction rate securities were long-term bonds subject to a complex auction process that, upon failure, resulted in accounts being frozen and lower interest rates on the bonds.
State securities regulators alleged that UBS knew of the impending collapse of the ARS market in early 2008 but took no steps to protect its clients and continued to sell the securities.
For more information on the Texas State Securities Board: