On August 6, 2013, UBS Securities agreed to pay nearly $50 million to settle charges with the Securities and Exchange Commission (SEC). The SEC charges allege that while structuring and marketing a collateralize debt obligation (CDO), known as ACA ABS 2007-2 (ACA), UBS failed to disclose the $23.6 million received in upfront payments earned from acquiring the CDOs
According to the SEC news release, in addition to a disclosed fee of 10.8 million, UBS recieved $23.6 million in upfront payments that was earned from acquiring credit default swaps (CDS) as collateral, which should have gone to the CDO and not to the firm. “In doing so, UBS misrepresented the nature of the CDO’s collateral and rendered false the disclosures about how that collateral was acquired,” said the co-director of the SEC’s Division of Enforcement, George S. Canellos.
The collateral for ACA primary included CDS on sub prime residential mortgage-backed securities (RMBS). When ACA was marketed to prospective investors it included a disclosed fee to UBS of approximately $10.8 million, however, their was no reference to the $23.6 million in upfront payments. Similarly, inaccurate information was provided to the directors of ACA. UBS’s failure to disclose was inconsistent with industry standards and their actions were a violation of securities law.
As part of the settlement UBS agreed to pay $9.7 million in prejudgment interest in addition to repaying the $23.6 million and the 10.8 million they kept in upfront fees. The SEC also hit UBS with a 5.7 million dollar penalty.
The foregoing information, which is publicly available on the SEC website, is being provided by The White Law Group.
If you invested in ACA ABS 2007-2 or another CDO through UBS Securities and have suffered losses, The WhIte Law Group may be able to help. To speak with a securities attorney about your litigation options please call our Chicago office at 312-238-9650 for a free consultation.
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