March 9, 2015 Comments (0) Blog, Securities Fraud

UBS Investigated by DOJ over forex trading.

(Last Updated On: July 17, 2015)

According to multiple reports, the US Department of Justice is widening its probe of the forex market. Until now their investigation has been limited to rigging of rates, but now it appears that the judicial authority will be examining currency-linked investments sold by UBS, including UBS’s V10 enhanced FX carry strategy.

The DoJ will reportedly be examining whether UBS neglected to disclose profit from the selling of structured products (specifically profit from the currency trades that generate the products’ returns).

The structured products under scrutiny are both based on carry trades. A carry trade is when an investor borrows from a low-yielding currency and invests in a higher-yielding one, earning the spread.

UBS’ V10 enhanced FX carry strategy supposedly allows investors to switch out their positions if currency markets became volatile.  The question for the DoJ is whether UBS profited from switching their positions and, more to the point, whether these profits were disclosed to clients.

According to the Financial Times’ sources, the DoJ will also be investigating other banks on allegations of inadequate profit disclosure of currency deals to clients and counterparties. It has reportedly been known for some time that the DoJ is planning to seek retribution for undisclosed fees and mark-ups that sales staff charged to clients, but this is the first solid information to emerge.

UBS already paid out $799 million to US, UK and Swiss authorities in November as part of a settlement with five other banks on allegations that they did not satisfactorily prevent traders from fixing forex rates. The overall settlement was upwards of $3 billion.

Their probe still ongoing, the DoJ didn’t take part in that settlement either. Now UBS might be the first bank to face a DoJ fine.

The White Law Group continues to investigate the liability that UBS may have for selling these products to their clients.  Specifically, The White Law Group is investigating the liability that brokerage firm’s may have for recommending this risky investment.  Brokerage firms are required to perform adequate due diligence on any investment they recommend and to adequately disclose the risks of any investment.  Additionally, brokerage firms are required to ensure that all investment recommendations made are suitable in light of the client’s age, investment experience, investment objectives, net worth, and income.

If it can be demonstrated that a brokerage firm failed to perform adequate due diligence, to properly disclose the risks, or recommended an investment unsuitably, the firm may be held responsible for any resulting losses in a FINRA arbitration claim.

If you suffered losses invested in UBS’s V10 enhanced FX carry strategy and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.  The firm represents investors throughout the country in FINRA arbitration claims against their brokerage firm.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

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