Thursday, February 18, 2010
The New York AG continues its aggressive enforcement in the auction rate securities (ARS) market, announcing today settlement of insider trading charges against David Shulman, formerly a top executive at UBS. According to the AG, Shulman sold his personal holdings of auction rate securities based on insider information about UBS’s collapsing auction rate securities market. Shulman must pay $2.75 million to New York State and must serve a suspension from employment by, or association with, a broker or dealer. Shulman was formerly the Global Head of the Municipal Securities Group of UBS AG and the Head of Fixed Income for the Americas of UBS Securities LLC. From August 2006 to August 2008, Shulman was UBS’s highest-ranking executive with day-to-day responsibility for UBS’s auction rate securities program.
According to the AG, between December 11 and December 13 of 2007, Shulman learned that UBS’s auction rate securities program was in distress and that there was concern that upcoming auctions in student loan auction rate securities could fail. At that time, Shulman owned $1.45 million in student loan auction rate securities, which were scheduled to be sold in late December and early January. On December 13, 2007, Shulman instructed his broker to immediately sell his holdings in student loan auction rate securities, before the upcoming auctions could occur. Later that day, Shulman’s student loan auction rate securities were sold, inter-auction, directly to the UBS Short Term Trading desk, which was under his supervision. Shulman’s broker mentioned Shulman by name when he called the desk to place the trades. This was the first and only time Shulman sold auction rate securities inter-auction.
The settlement resolves charges that Shulman violated New York’s Martin Act. Today’s action marks the second settlement with a UBS senior executive over insider trading in the Attorney General’s auction rate securities investigation