Monday, July 16, 2007
The New York State Attorney General announced a $23.3 million settlement with UBS Financial Services for inappropriately steering customers into the fee-based accounts of its InsightOne brokerage program. It is the largest settlement involving fee-based accounts. UBS has agreed to reimbuse customers $21.3 million and pay a $2 million penalty.
In the lawsuit, the AG charged that UBS placed thousands of traditional brokerage customers into the fee-based accounts by falsely promising comprehensive and sophisticated financial advice. In addition, the complaint charged that UBS was aware that the fee-based accounts were unsuitable for many customers who engaged in infrequent trading. The press release gives a number of horror stories, including a 91-year-old customer who was charged more than $35,000 for four trades over two years.
The D.C. Circuit recently vacated a SEC rule that would have exempted brokerage firms offering fee-based programs from regulation as investment advisers.