UBS Financial Services has agreed to pay approximately $25m (£20.6m, €24m) to settle with the Securities and Exchange Commission (SEC) over fraud charges.
The charges relate to a “complex investment strategy” referred to as YES or Yield Enhancement Strategy.
According to the SEC, UBS marketed and sold YES to approximately 600 investors through its platform of US financial advisers from February 2016 through February 2017.
The SEC found that, during this time, UBS “did not provide its financial advisers with adequate training and oversight in the strategy”, and although UBS recognised and documented the possibility of significant risk in YES investments, it “failed to share this data with advisers or clients”.
As a result, the SEC found some of UBS’s advisers “did not understand the risks and were unable to form a reasonable belief that the advice they provided was in the best interest of their clients”.
The SEC said: “When investors suffered losses, many of them, along with their financial advisers, expressed surprise and closed their YES accounts.”
Appropriate products
Osman Nawaz, chief of the division of enforcement’s complex financial instruments unit at the SEC, said: “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.
“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.”
Without admitting or denying the SEC’s findings, UBS agreed to a cease-and-desist order, a censure, and to pay disgorgement of $5.8m and prejudgment interest of $1.4m million.
UBS also agreed to pay a civil penalty of $17.4m, which it will distribute to investors.
