Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, July 16, 2007

New York Attorney General Announces Settlement with UBS Over Fee-Based Accounts

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.

http://lawprofessors.typepad.com/securities/2007/07/new-york-attorn.html

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