UBS will pay almost $50m to settle regulatory claims that a brokerage unit improperly retained millions of dollars of upfront cash it received while acquiring collateral for a financial product.
Bloomberg News reports that the Zurich-based bank’s UBS Securities unit failed to tell investors in 2007 that it was keeping $23.6m in payments rather than transferring it to the collateralized debt obligation, the Securities and Exchange Commission said in an administrative order filed today.
The upfront payments 'under the terms of the deal should have gone to the CDO for the benefit of its investors,' George S. Canellos, co-director of the SEC enforcement unit, said in a statement. 'UBS misrepresented the nature of the CDO’s collateral and rendered false the disclosures about how that collateral was acquired.'
The settlement comes as the SEC wraps up its investigation of conduct and financial products that helped fuel the financial market turmoil of 2008. Probes of how banks including Goldman Sachs and JP Morgan structured and sold CDOs linked to souring mortgages were the centerpiece of the agency’s investigation of the credit crisis.
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