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UBS Agrees To Pay $10M To Settle Bonds Sale Violation Charges With SEC

UBS Agrees To Pay $10M To Settle Bonds Sale Violation Charges With SEC

A unit of UBS Group AG (NYSE: UBS) is paying $10 million to settle charges with the United States Securities and Exchange Commission that it broke rules concerning giving priority to small investors in the purchase of municipal bonds.

What Happened

The SEC said Monday it found that UBS Financial Services Inc. allocated municipal bonds meant for retail investors to so-called “flippers,” who then immediately resold the bonds to other broker-dealers for gain between 2012 to 2016.

This practice allowed the Swiss bank to obtain bonds for its own inventory in an improper way that violated rules concerning the priority of orders. 

The federal agency has imposed a $1.7 million penalty, $6.74 million in disgorgement of ill-gotten gains, and $1.5 million in prejudgement interest along with a censure on UBS.  

The bank neither denied nor admitted to the findings of the order, saying, “retail order periods are intended to prioritize retail investors’ access to municipal bonds,” the Wall Street Journal reported.

UBS had adopted “enhanced systems and procedures” since the alleged malpractice occurred, the bank said.

Why It Matters

Nearly $60 billion in freshly issued municipal bonds between 2013 and 2017 were resold by customers within the span of a single day, the Journal found.

Issuers of municipal bonds, such as school districts and cities can give priority to small investors in order to help local residents, the Journal noted. Such investors reportedly tend to hold on to bonds thus keeping prices stable.

Price Action

UBS shares closed 0.4% lower at $12.02 on Monday, and were slightly up in the after-hours session.

Photo Credit: UBS Group AG


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