The Texas State Securities Board and the North American Securities Administrators Association has finalized a settlement with UBS Securities LLC and UBS Financial Services Inc. that requires the company to purchase up to $200 million in auction rate securities from investors who were not covered in UBS’ initial agreement with state and federal regulators.
The consent order, announced Thursday, finalized a national settlement with UBS [UBS] over its sale of auction rates securities.
UBS will continue to repurchase approximately $22 billion in auction rate securities from nationally, including up to $2.7 billion from Texas investors.
UBS will also pay a $6.64 million fine to Texas’ general fund by March 12. A spokeswoman for UBS said that this comes from the state's portion of the $150 million the company agreed to in August 2008. At that time, UBS announced the terms of its settlement with NASAA, the Securities and Exchange Commission and New York and Massachusetts committing the firm to buy $8.3 billion of auction rate securities during a two-year time period that began Jan. 1, 2009.
According to the consent order, UBS will provide $200 million of relief nationally to holders of auction rate securities who were left out of the initial settlement. These investors were not covered because UBS, in the earlier settlement, agreed to buy back securities only from investors who held the securities in UBS accounts. The consent order covers non-institutional investors who purchased auction rates securities from UBS but moved their accounts from UBS before Feb. 13, 2008.
Denise Voigt Crawford, the Texas State Securities Board commission, said the consent order “is an important step in ensuring that as many investors as possible are made whole in their ARS investments.”
“UBS was one of many big financial firms that routinely misled its clients about the risks of the ARS market,” she said.
UBS said in a statement Thursday that it was the first major firm to announce a definitive timetable for institutional clients, agreeing to purchase $10.3 billion of institutional client auction-rate securities holdings beginning in June. “UBS supported the ARS auctions longer than any other major financial firm, was the first to provide accurate market pricing, and the first to provide loans at 100% par value to clients,” the company said.
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