UBS Category Archives — Page 19 of 20 — Investor Lawyers Blog Published By Investment Fraud Attorneys

Former UBS Executive Director Must Forfeit $15.81 Million in Illegal Profits and Serve 6 1/2 Year Prison Term for Insider Trading

Published on: November 13, 2008 | by Shepherd Smith Edwards & Kantas, LLP

In the U.S. District Court for the Southern District of New York, former UBS Securities LLC Executive Director Mitchell Guttenberg was ordered to forfeit $15.81 million in alleged illegal profits, as well as serve 78 months in prison. Guttenberg is accused of taking part in an insider trading scheme that generated millions of dollars for its participants. Earlier this year, he pleaded guilty to six counts of securities fraud and conspiracy.

Guttenberg allegedly sold material nonpublic data provided by UBS stock analysts regarding upgrades and downgrades before the information became available to the public. Tips included ratings change information about numerous stocks, including Whole Foods Market Inc, Amgen Corp, Caterpillar Inc., and Union Pacific Corp.

Trader David Tavdy, hedge fund manager Erik Franklin, and others allegedly paid Guttenberg for the information, as well as a share of their profits. Tavdy and Franklin, who are codefendants in the insider trading scam case, are among those who then passed on the data to other individuals.

Hundreds of trades took place because of the nonpublic data provided by Guttenberg. The trades resulted in over $15 million in illegal profits for the former UBS executive director, while others made over $17.5 million.

Guttenberg and 12 other individuals, mostly former employees at Morgan Stanley, Bank of America Corp, and Bear Stearns Co., Inc., were criminally charged for their involvement in the insider trading ring. Investigators say the participants tried to conceal their illegal actions by conducting meetings at restaurants, using disposable cellular phones, and coming up with coded text messages. Continue Reading ›

Former UBS AG Co-General Counsel David Aufhauser Agrees to Settle Insider Trading Charges for $6.5 Million

Published on: October 30, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The New York Attorney General’s Office says it has reached a $6.5 million settlement agreement with former UBS AG co-general counsel David Aufhauser over insider trading charges. Aufhauser is also a former general counsel for the Treasury Department.

In the complaint, Attorney General Andrew Cuomo accused Aufhauser of selling his personal auction-rate securities holdings because of inside information he received regarding UBS’s crumbling auction-rate securities market.

Among other allegations included in the complaint, which the New York Attorney General filed in New York State Supreme Court on July 24, 2008:

• A UBS executive received an e-mail on December 14, 2007 from the company’s chief risk officer discussing potential problems with ARS.
• This same UBS executive then sent an email to his financial advisor saying that he wanted to get out of the ARS market.
• AT this executive’s request, the financial advisor sold $250,000 of ARS.
• Cuomo’s complaint identifies Aufhauser as the executive and accuses him of violating New York’s Section 352-c of the General Business Law when he allegedly used insider information to commit securities fraud.
• The complaint also alleges that Aufhauser was in breach of a duty owed to the source of the insider information.

As part of his $6.5 million settlement with New York State, Aufhauser’s payments will include his $6 million UBS discretionary incentive compensation and another half a million dollars. The former UBS attorney is also barred from the industry for two years and cannot practice law or serve as an officer or a director of any public company in the state off New York for two years.

The New York Attorney General’s complaint against Aufhauser is part of Cuomo’s ongoing probe into the ARS market collapse.

Related Web Resources:
Ex-UBS Counsel to Pay $6.5 Million to Settle Auction-Rate Trading Case, NY Times, October 8, 2008
Ex-UBS general counsel settles insider trading case, Newsday, October 8, 2008
Continue Reading ›

US Labor Department Wants Whistleblower To Show that Sarbanes-Oxley Act Covers UBS Financial Services

Published on: September 2, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Whistleblower and former UBS Financial Services Senior Vice President Timothy Flynn has been asked to show that the UBS AG subsidiary falls under the federal whistleblower statute. According to Flynn’s attorney, The US Department of Labor made the request. The department is in charge of enforcing the Sarbanes-Oxley Act’s whistleblower protection for employees who report alleged wrongdoings that occur publicly traded companies.

While UBS AG is publicly traded, the labor department wants Flynn to show that subsidiary UBS Financial Services is integrated into the Zurich-based company and is therefore covered by the act. Flynn’s lawyer, however, says that when a whistleblower is employed by the subsidiary of a publicly traded company, the subsidiary, along with the entire company, is subject to the same securities laws.

Flynn filed his whistleblower complaint against UBS Financial Services last June. He alleges that after he told Massachusetts regulators that the company did not tell its advisors that there were liquidity issues brewing within the auction-rate securities market, UBS financial services retaliated by locking him out of his office, preventing staff members from interacting with him, and suspending him from his job.

Last May, UBS Financial Services said it would return $37 million to the Massachusetts Turnpike Authority and the state municipalities that invested in ARS. The repayments are part of the settlement the company reached with the Massachusetts Attorney General. The agreement was reached after Flynn, the broker for many of these clients, testified.

Related Web Resources:

Labor Asks Whistleblower to Show Why Act Covers UBS Subsidiary, Wall Street Journal, August 31, 2008
Ex-UBS broker sues, alleging firm retaliated, Boston.com, July 3, 2008
The Sarbanes-Oxley Act

Same broker tied investors to UBS, May 16, 2008 Continue Reading ›

New York Attorney General Files Securities Fraud Lawsuit Against UBS

Published on: July 24, 2008 | by Shepherd Smith Edwards & Kantas, LLP

New York State Attorney General Andrew Cuomo filed a securities fraud lawsuit today against UBS AG related to what he is alleging was the firm’s fraudulent promotion of auction-rate securities as safe investments. He is reportedly seeking to make UBS offer to purchase back at face value approximately $25 billion in ARS instruments held by UBS clients in New York and across the United States.

Sources report that UBS is not the only entity that Cuomo may file charges against in the wake of his office’s investigation of auction-rate securities debacle. Thousands of investors have complained that they were told that the securities were like cash and would yield a little higher than a money market account.

Cuomo’s probe has focused on whether UBS and other investment firms notified investors of the risks involved with investing in auction-rate securities. He began his investigation in April when he subpoenaed 18 institutions. Since then, Cuomo has sent subpoenas to 100 individuals and 30 entities, including JP Morgan Chase & Co, Citigroup Inc., Goldman Sachs Group, Inc., and Merrill Lynch and Co.

Ex-Broker Files Whistle-Blower Complaint Against UBS Financial Services

Published on: July 7, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Timothy P. Flynn, an ex-UBS broker, has filed a whistle-blower complaint. Flynn alleges that UBS Financial Services forced him to resign as part of the firm’s retaliation because he cooperated with regulators. Flynn, who sold $30 million in auction-rate securities to the Massachusetts municipalities, testified earlier this year at the request of Massachusetts Attorney General Martha Coakley. who was investigating the sale of auction-rate securities to Massachusetts municipalities.

Flynn told investigators that UBS had told its brokers that the auction-rate securities were safe alternatives to cash. Flynn claims that UBS shut him out of his office and work e-mail files soon after he gave testimony and he was told to resign or face termination.

In his lawsuit, Flynn alleges that UBS knew the market could be on the brink of collapse but kept telling brokers to inform customers that the securities were safe investments. He filed his whistle-blower complaint with the Occupational Safety and Health Administration in New York. The former broker’s lawyer says his client filed the complaint to preserve his reputation and enforce his rights.

Massachusetts Commonwealth Secretary William Galvin Sues UBS for Fraud

Published on: June 30, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Commonwealth of Massachusetts Secretary William Galvin is suing UBS because it says the investment firm pushed auction-rate securities onto investors in an effort to minimize its own losses. In his complaint, the state’s head securities regulator cited fraud as grounds for the lawsuit.

Galvin cites several e-mails that indicate that UBS told its sales team to aggressively sell the notes to as many investors as possible after the firm realized that the $300 billion auction-rate securities market was in trouble and there were beginning to be more people selling than buying.

One e-mail, dated December 15, indicates that UBS’s wealth management unit held $33 billion of the auction-rate securities and that the firm had underwritten $43 billion of the market’s securities. Galvin says UBS engaged in a “comprehensive and deliberate” strategy to minimize their inventory.

SEC and State Regulators Probe Whether UBS Played a Role in Auction-Rate Securities Collapse

Published on: June 16, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Boston Globe says it has reviewed documents that indicate that UBS Financial Services continued selling municipal bond investments without warning clients of the risks even though the firm already knew that trouble was brewing. Yet when the $330 billion auction-rate securities market shut down in February, UBS brokers expressed surprise at the collapse.

This lack of disclosure is in contrast to UBS’s dealings with some of its bigger clients. The investment bank reportedly advised them of the pending problems at least three months before all trading ended. All this indicates that there is a possibility that UBS played a bigger part in the auction-rate securities collapse than it has owned up to, and the Securities and Exchange Commission and New Hampshire and Massachusetts regulators are investigating this matter-in addition to trying to determine whether UBS did in fact mislead investors.

UBS has acknowledged that it did not give some investors enough warning, and it has refused to explain why it warned other clients about the auction-rate securities risks. If only one side of UBS did in fact know about the upcoming auction-rate securities crisis and did not warn the other side, securities attorneys say that the investment firm could be in legal hot water.

UBS To Pay Massachusetts Municipalities Over $35 Million for Auction-Rate Securities Losses

Published on: May 11, 2008 | by Shepherd Smith Edwards & Kantas, LLP

UBS Financial Services Inc. and UBS Securities LLC, both units of UBS AG, have agreed to pay 19 Massachusetts public agencies and local governments over $35 million for their losses in the auction-rate securities market. The sum represents the return of principal payments by the municipalities.

The settlement agreement follows a probe by the Massachusetts Attorney General’s Office into accusations that the two UBS units misled the local entities by convincing them that the investments were low-risk enough that they were allowable for towns and cities under Massachusetts law.

According to a UBS spokesperson, the investment bank agrees that the auction-rate securities investments are not in fact permissible under this law. The spokesperson said that the repayment and agreement with the Massachusetts entities only apply because of this specific law.

UBS Securities, Bank of America, and Merrill Lynch Among Firms Subpoenaed In Massachusetts Auction-Rate Market Sales Probe

Published on: April 1, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts Secretary of the Commonwealth William Galvin is subpoenaing Merrill Lynch, Pierce, Fenner, & Smith Inc., UBS Securities, and Bank of America Investments because it wants information about the companies’ involvement in selling auction-rate market securities to retail investors. The companies are all registered Massachusetts broker dealers. Galvin issued the subpoenas on behalf of the Massachusetts Securities Division.

The division wants to determine whether the firms followed proper procedures in letting Massachusetts investors know of the possibilities that their investments could become illiquid. The state is also trying to determine what role big investment banks played in causing the auctions to fail and whether the investments sold to retail investors were suitable.

Many of the investors that bought auction market securities cannot get their money because the securities are frozen. Small business owners and individual investors have been especially hurt by the failures in the auction market because of the subprime mortgage collapse.

Merrill Lynch, Prudential Securities, Pruco and UBS Must pay $2.4 Million in Fines for Mutual Fund Abuses

Published on: February 28, 2008 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) announced today that five major brokerage firms have agreed to pay fines totaling $2.4 million for supervision violations and improper mutual fund sales to thousands of investors. These firms must take remedial steps to prevent such actions in the future and pay amounts estimated to exceed $25 million to their clients because of such practices.

According to FINRA, the violations include sales by these firms of load securities, meaning clients were required to pay commissions, when these investors were eligible to make fund exchanges without paying commissions. FINRA’s press release states that “Class B and Class C mutual fund shares and failure to have supervisory systems designed to provide all eligible investors with the opportunity to purchase Class A mutual fund shares at net asset value (NAV) through NAV transfer programs.”

Prudential Securities must pay an $800,000 fine, UBS Financial Services, Inc. was fined $750,000 and Pruco Securities was hit for $100,000 for improper sales of Class B and Class C mutual fund shares. These firms also agreed to remediation plans that will address over 27,000 fund transactions in the accounts of 5,300 households. Merrill Lynch, Prudential Securities, UBS and Wells Fargo must take steps regarding customers who qualified for but did not receive the benefit of NAV transfer programs. It is estimated that total remediation to fhese firms’ customers will exceed $25 million.