The SEC said Tuesday that UBS AG (UBS) will pay $19.5 million to settle charges that it made false or misleading statements and omissions in investor materials for structured notes linked to a proprietary foreign exchange trading strategy.
The fines are associated with about $190 million of structured notes sold to about 1,900 U.S. investors from December 2009 to November 2010 and associated with losses of roughly $5.5 million.
UBS agreed to settle the Securities and Exchange Commission’s charges that it “misled U.S. investors in structured notes tied to the V10 Currency Index with Volatility Cap by falsely stating that the investment relied on a ‘transparent’ and ‘systematic’ currency trading strategy using ‘market prices’ to calculate the financial instruments underlying the index, when undisclosed hedging trades by UBS reduced the index price by about 5%,” the organization explained.
“This first-of-its-kind case involving misstatements and omissions by a structured-notes issuer shows that the SEC continues its commitment to pursue wrongdoing across the securities industry in order to better protect investors,” said SEC Chairwoman Mary Jo White, in a statement. “It is critical that large global financial institutions have and implement policies and procedures designed to ensure that all facts relevant to investors are made known to individuals responsible for disclosures.”
For its part, the financial services company says it is “pleased to have resolved this legacy matter with the SEC,” according to spokeswoman Karina Byrne. “UBS is firmly focused on the future with an unwavering commitment to upholding a culture of doing the right thing and reducing operational risks.”
Returns on structured notes are linked to the performance of a derivative tied to a debt security. Between $40 billion and $50 billion of structured notes are registered with the SEC annually, and many notes are sold to relatively unsophisticated retail investors, the regulatory body says.