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Regulation and Compliance > Federal Regulation > FINRA

UBS to Pay $850K Fine Over Rep's Unapproved Third-Party Sales

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What You Need to Know

  • UBS failed to supervise a rep who sold a purported fixed annuity offered by an entity formed by his college friend.
  • The rep sold the product to at least 30 UBS clients, who lost most or all of their investments, according to FINRA.
  • UBS has paid the affected clients more than $17 million in restitution.

The Financial Industry Regulatory Authority has censured and fined UBS Financial Services $850,000 for failing to supervise a rep who sold a purported “fixed annuity” product as part of a private securities transaction offered by a third party.

According to FINRA’s order, from at least September 2010 to July 2021, UBS “failed to establish and maintain a supervisory system reasonably designed to achieve compliance with the firm’s obligation to monitor transmittals of customer funds to third parties and to respond reasonably to red flags of private securities transactions.”

During this period, UBS failed to detect that a registered rep, who was acting outside the scope of his employment with the firm, “facilitated at least 30 UBS customers’ investments in private securities transactions totaling over $7.2 million,” FINRA states.

From approximately 1997 to 2021, the UBS rep sold to at least 30 of his UBS customers a “fixed annuity” product offered by an entity formed by the rep’s college friend and business acquaintance, the order states.

Beginning in at least 2010, 10 of the customers invested approximately $1.8 million through 64 direct wire transfers from their UBS accounts to the third party, according to FINRA.

This activity violated NASD Rules 3010 and 3012 and FINRA Rules 3110 and 2010.

The “fixed annuities” were not approved or offered by UBS. Nor were they in fact fixed annuities but securities, according to FINRA.

Collectively, the rep’s UBS customers invested over $7.2 million in the third-party firm, the order states.

“UBS did not discover the representative’s misconduct until the fall of 2021 when one of the representative’s former UBS customers sought to withdraw her entire investment” from the third-party firm.

The rep’s customers who invested in the third-party firm “lost most, if not the entirety, of their investments,” the order states.

After discovering the rep’s misconduct, UBS repaid the customers who had invested in the firm “their principal plus the amount of appreciation” listed on the customers’ statements, totaling more than $17 million in restitution.


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