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Tuesday, October 15, 2019

UBS agrees to pay $4.4 million to settle probe

By Chris Rizo | Jul 30, 2008

Martha Coakley (D)

BOSTON (Legal Newsline)-UBS AG has agreed to pay $4.4 million to settle allegations by the Massachusetts attorney general that the bank misled cities and government agencies by urging them to invest their money in auction-rate securities.

UBS is paying $750,000 to the state to cover fees and expenses of the lawsuit and $250,000 to local governments impacted. The company has also agreed to repurchase $3.4 million of auction-rate securities sold to the 17 towns and cities.

UBS has not admitted to any wrongdoing.

"We are pleased with the results in this case," said Attorney General Martha Coakley. "Our primary interest was to promptly return to these towns and cities the investment monies they placed with UBS. However, another important goal was to find a way to prevent this from happening to towns and cities in the future."

Coakley said UBS misled cities and government agencies into thinking that auction-rate securities were as liquid as cash by describing the holdings as cash equivalents on brokerage statements.

Coakley's office had been investigating allegations that the Swiss bank misled Massachusetts officials over whether state law allowed them to invest in auction-rate securities for which the interest rate or dividend is reset periodically through an auction mechanism.

The state contended that in some instances, towns and cities were persuaded to invest their cash accounts into the security accounts that were aimed at allowing local governments to borrow at low interest rates.

But the investments have been difficult to liquidate since the market for auction rate securities soured earlier this year. With that came the collapse of many auctions, where Wall Street investors re-upped their holdings sometimes even weekly.

Officials in New York and Texas are also investigating UBS for its role in managing auction-rate securities.

From Legal Newsline: Reach reporter Chris Rizo at

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