UBS AG Case 6/16/2008

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Company Name(s): 
Case Name: 
UBS AG Case 6/16/2008
Case Status: 
Lawsuit Filed
Affected Securities
Lawsuit Overview
Type of Lawsuit: 
Civil Action
Date Filed: 

Just over a month after financial services giant UBS agreed to return more than $ 35 million to Massachusetts municipalities and government agencies Massachusetts’ top securities regulator now filed on Thursday, June 16th 2008, civil fraud charges against two units of the Swiss bank UBS AG with fraud and dishonest conduct in sales of auction-rate securities. The Lawsuit alleges that the bank units misled customers who bought their retail auction rate securities, fraudulently marketing the products as safe, liquid “cash alternatives,” in an effort to minimize its own losses . The 101-page complaint accused UBS representatives told investors where safe, while they knew they were not. “The actual reality, well-known to UBS but undisclosed to its customers, was that in fact no true auctions existed for many of these securities,” the complaint said. The consequence was, that investors have often treated auction-rate securities as being similar to cash deposits or money market accounts. While in reality the securities are long-term debt, interest rates are periodically set at auctions. The complaint also alleges that while UBS was selling these securities to its customers and pushing its sales team, while USB insiders were bailing out of the personal holdings in these investments. The goal is the USB returns the money that the investors put into these investments to the investors. In addition the complaint wants UBS censured and seeks an order to prevent it from committing further possible violations of the Massachusetts Uniform Securities Act. UBS on Thursday said the firm is working on solutions, it was “disappointed” that the complaint was filed, and it would “defend the specific allegations”.