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July 21, 2020 at 02:28 PM
An illuminated UBS logo sits outside UBS AG’s headquarters in Zurich, Switzerland. (Photographer: Gianluca Colla/Bloomberg)
UBS Financial Services agreed to pay more than $10 million to resolve securities violations related to municipal bond offerings, according to the Securities and Exchange Commission.
The firm “circumvented the priority given to retail investors in certain” muni offerings, the SEC said Monday in announcing the settlement.
UBS did not immediately respond to a request for comment on Tuesday.
According to an SEC order, between August 2012 and June 2016, UBS improperly allocated bonds intended for retail customers to parties known in the industry as “flippers,” who then immediately resold or “flipped” the bonds to other broker-dealers at a profit.
“During the relevant period, UBS improperly allocated bonds to the flippers on hundreds of retail orders when those flippers were not eligible for retail priority,” according to the order.
“In addition, UBS, through certain registered representatives, improperly obtained negotiated new issue bonds for UBS’s inventory by placing indications of interest with the flippers who then placed customer orders with the underwriting syndicate, instead of UBS submitting dealer orders directly with the syndicate on its own behalf,” the order said.
Also, UBS-registered representatives facilitated more than 2,000 trades with flippers, enabling UBS to obtain bonds for its own inventory, circumventing the priority of orders set by the issuers and improperly obtaining a higher priority in the bond allocation process, the SEC alleged.
UBS-registered representatives knew or should have known that flippers were not eligible for retail priority, according to the SEC.
Without admitting or denying the findings, UBS consented to a cease-and-desist order that found it violated the disclosure, fair dealing and supervisory provisions of Municipal Securities Rulemaking Board Rules and also failed reasonably to supervise within the meaning of Section 15(b)(4)(E) of the Securities Exchange Act of 1934, according to the SEC.
