Thursday, February 10, 2011
New Jersey's Bureau of Securities and UBS have signed a final Consent Order that requires UBS to repurchase auction-rate securities (ARS) from New Jersey clients to settle allegations that the firm’s securities dealers sold ARS without disclosing known risks of the ARS market. Under the terms of the settlement, UBS Securities LLC and UBS Financial Services, Inc. have agreed to offer the repurchase of $1.5 billion in ARS sold to retail investors in New Jersey. This is the eighth such settlement that the Bureau has reached with firms that sold ARS to New Jersey investors. More than $2.5 billion of these assets have been repurchased by the firms, under terms of the settlements.
The order also requires UBS to pay $3,790,487 in civil penalties to New Jersey. This amount represents the state’s pro-rata share of a settlement negotiated by a multi-state task force of state regulators formed by the North American Securities Administrators Association (NASAA).
The investigation into UBS’ role in the sale of these securities is part of a larger state-led effort to address problems in connection with ARS investments. Early in 2008, state offices began receiving complaints from investors throughout the country. As a result, 12 states, including New Jersey, formed a task force to investigate whether certain Wall Street firms had systematically misled investors when placing them in auction rate securities.