UBS Group AG will pay $19.5 million in a settlement with the Securities and Exchange Commission over claims the bank misled individual investors about the risks tied to debt securities packaged with derivatives.
The Swiss bank misrepresented a proprietary currency index tied to the so-called structured notes, according to a statement Tuesday from the agency. UBS misled investors that the investment was “transparent” and that it used “market prices” to calculate the financial instruments underlying the index while undisclosed hedging trades by UBS actually reduced the index by about 5%, according to the SEC. That led to investor losses of about $5.5 million.
The case is the first against an issuer of so-called structured notes, which are debt securities typically sold to unsophisticated investors. Wall Street banks issue as much as $50 billion of the securities annually.
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“This first-of-its-kind case involving misstatements and omissions by a structured notes issuer shows that the SEC continues its commitment to pursue wrongdoing across the securities industry in order to better protect investors,” SEC chairwoman Mary Jo White said in the statement.
(More: UBS agrees to settle hedge fund's lawsuit over asset-backed securities)
UBS, which didn't admit or deny the regulator's findings, agreed to pay an $8 million penalty and $11.5 million in disgorgement and interest.
“UBS is firmly focused on the future with an unwavering commitment to upholding a culture of doing the right thing and reducing operational risks,” Karina Byrne, a spokeswoman for the Zurich-based bank, said in a statement.
