UBS AG, Switzerland's largest bank, will pay almost $50 million to settle U.S. regulatory claims that a brokerage unit improperly retained millions of dollars of upfront cash it received while acquiring collateral for a financial product.
The Zurich-based bank's UBS Securities unit failed to tell investors in 2007 that it was keeping $23.6 million in payments rather than transferring it to the collateralized debt obligation (CDO), the Securities and Exchange Commission (SEC) said in an administrative order filed today.
The upfront payments "under the terms of the deal should have gone to the CDO for the benefit of its investors," George S. Canellos, co-director of the SEC enforcement unit, said in a statement. "UBS misrepresented the nature of the CDO's collateral and rendered false the disclosures about how that collateral was acquired."
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