UBS has agreed to pay $25 million to settle fraud charges brought by the US Securities and Exchange Commission (SEC). The wealth manager and banking group was blamed for marketing and selling a complex investment strategy.
The SEC’s announcement on Wednesday detailed that UBS marketed and sold the investment strategy to around 600 investors between February 2016 and February 2017 through its domestic financial advisors’ platform.
However, the financial giant did not provide adequate training and oversight in the strategy to the financial advisors despite the documents of the investment strategy mentioning it to be significantly risky. It prompted some UBS advisors to recommend the product to customers without knowing their risk profile.
“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, the Chief of the Division of Enforcement in the Complex Financial Instruments Unit at the SEC.
“As fiduciaries, advisers also must make suitable recommendations to their clients. Complex products can present unique risks, and the SEC will remain vigilant and continue to take action to protect those who invest in these products from misconduct.”
Neither Agreeing nor Denying
Though UBS agreed to settle with the SEC, it did not admit or deny any of the charges.
Out of the total settlement , $5.8 million came as a disgorgement payment with prejudgment interest of $1.4 million. The remaining $17.4 million came as a civil monetary penalty.
Further, UBS agreed to a cease-and-desist order and a censure.
“UBS is pleased to have amicably resolved this matter related to training provided between February 2016 and February 2017 for an options overlay strategy,” UBS said in a statement shared with media outlets.
“UBS appreciates the SEC's acknowledgement that in early 2017, UBS voluntarily remediated the issue by enhancing its risk control framework and strengthening its training program for the strategy.”
