Menu Call

SEC Settles With UBS Financial Services

SEC Settles with UBS
July 24, 2021

The SEC recently settled against UBS Financial Services Inc. for compliance failures on sales of an exchange-traded product (ETP) that was tied to volatility.

As the SEC’s order states, the ETP in question aimed to track short-term volatility sentiments in the market.  The order provides that the ETP issuer told UBS that the product should not be held for lengthy periods.  The order further states that the offering documents made clear that the product was more likely to lose value when held over a lengthy period. 

The order finds that although UBS barred its stockbrokers from soliciting sales of the product, it failed to place similar restrictions on the stockbrokers in discretionary client accounts.  The order further states that while UBS adopted a concentration limit on volatility-linked ETPs, it failed to implement a system for monitoring and enforcing the concentration limit for years. 

The order further provides that for two years between January 2016 and January 2018, some advisers did not understand the ETP’s risks associated with holding it for long periods.  According to the order, these advisers bought and held the product in client accounts for long periods, often for over a year in hundreds of client accounts, resulting in substantial losses.

Daniel Michael, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, stated: “Advisory firms must protect clients from inappropriate investments in complex financial products.  We will continue to scrutinize firms’ policies and procedures related to these risky products, and we will take action when they are inadequate.”

Without admitting or denying the SEC’s findings, UBS agreed to a censure, an $8 million civil penalty, and disgorgement and prejudgment interest of $112,274, which will be distributed to investors harmed by the conduct at issue.

The ETP Initiative is led by the Enforcement Division’s Complex Financial Instruments Unit. 

If you invested in volatility-linked ETPs or other volatility products with UBS or any other brokerage firm, you may have a legal claim.  The securities attorneys at Morgan & Morgan’s Business Trial Group are here to help.  Please contact us at 888.744.0142 or visit us online for a free consultation.

The Business Trial Group is part of the largest contingency law firm in the nation, with 700 lawyers and 50 offices. 

The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis.  We are only paid if we successfully recover money for you.  We have helped investors recover tens of millions of dollars of investment losses.