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Univ. of Toledo College of Law

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Thursday, June 26, 2008

Massachusetts Files Complaint Against UBS for Marketing of Auction Rate Securities

The Massachusetts Securities Division has filed a complaint against UBS Securities LLC and UBS Financial Services, alleging violations of the Massachusetts Uniform Securities in connection with the sale of auction rate securities (ARS) to retail customers.  According to the complaint, the sales were typically made with the express representation that the investments were liquid, safe, money-market instruments, whose interest rates would reset at periodic auctions, and that they could be sold at the next auction.  Instead, as UBS knew, no true auctions existed for many of these securities.  In addition, UBS failed to disclose to its customers the conflicts of interest because of UBS's dual role in underwriting the securities and selling them to their customers.  The requested relief includes requiring UBS to offer rescission of the ARS sales at par, censure, and administrative fines.  In re UBS Securities, LLC (filed June 26, 2008).

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