Switzerland's largest bank has agreed to pay $25 million to settle SEC fraud charges involving complex options trading.
The U.S. Securities and Exchange Commission (SEC), alleged UBS invested about $2 billion in assets from 600 investors in what is referred to as a Yield Enhancement Strategy (YES) from 2016 to 2017. However, its advisors were not adequately trained and supervised to ensure the options strategy was in the best interest of clients, according to a statement from the SEC.
Risky Strategy
According to the regulator, UBS knew of the possibility of significant downside risks but failed to share information with advisors or clients. As a result, some UBS advisors did not understand the risks and could not assume that their advice was in the best interests of clients.
«Advisory firms are obligated to implement appropriate policies and procedures to ensure all parties involved in the sale of complex financial products and strategies have a clear understanding of the risks those products present,» said Osman Nawaz, Chief of the Division of Enforcement’s Complex Financial Instruments Unit
YES UBS, You Have to Pay
UBS did not admit or deny the SEC's findings and agreed to a cease-and-desist order, a censure, and will pay $5.8 million in restitution and interest of $1.4 million, which is «deemed satisfied by payments made to investors in related arbitration proceedings,» the statement said. The settlement includes a civil penalty of $17.4 million, which will be distributed to investors.
As reported by the online portal Advisorhub, the YES strategy was developed by a team of New York-based consultants led by Matthew Buchsbaum, a brokerage veteran with 30 years of experience who joined UBS from Credit Suisse in 2015. The SEC's order did not name individuals, but referred to a New York YES team that joined in late 2015, it added. UBS said fixed the problems through formal training and improved supervisory controls in 2017.
