Walls Street’s brokerage regulator has ordered UBS to pay $10.75 (SFr9.69 million) to settle charges it misled customers about the risk of owning Lehman Brothers debt.
The Financial Industry Regulatory Authority (Finra) said the Swiss bank agreed to pay a $2.5 million fine and reimburse its customers $8.25 million. UBS did not admit or deny any wrongdoing in agreeing to settle.
Finra said UBS and its brokers failed between March and June 2008 to emphasise that payment was not guaranteed on a certain category of Lehman’s debt, sold as “100% principal-protection notes”.
UBS sold $16.2 million of these notes in the three-month period from mid March 2008, after Bear Stearns was acquired by JP Morgan Chase in a US government-backed rescue, a time of financial turmoil on Wall Street. Lehman Brothers went bankrupt on September 15, 2008.
The notes were sold to 764 unique accounts with “conservative” to “moderate” risk profiles and UBS generated $228,630 in fees and commissions on these sales, Finra said.
Lehman’s bankruptcy, the largest in US history, wiped out the value of the notes and sparked a wave of arbitration claims by investors.
swissinfo.ch and agencies