{"id":5226,"date":"2011-11-11T00:00:00","date_gmt":"2011-11-11T06:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2011\/11\/ubs_settles_for_8m_sec_charges"},"modified":"2022-04-06T10:45:38","modified_gmt":"2022-04-06T15:45:38","slug":"ubs-settles-for-8m-sec-charges","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/ubs-settles-for-8m-sec-charges\/","title":{"rendered":"UBS Settles for $8M SEC Charges Over the Inaccurate Recordkeeping of Short Sales"},"content":{"rendered":"

Less than a month after UBS Securities, LLC agreed to pay $12M to settle Financial Industry Regulatory Authority claims of supervisory failures<\/a> and violating regulation SHO in securities short sales, the broker-dealer has now consented to an $8M penalty to settle Securities and Exchange Commission charges over poor recordkeeping related to the short sales.<\/p>\n

Under Regulation SHO, broker-dealers have to accurately record how it has given out locates. A locate is a determination of that broker-dealer\u2019s representation that it has set up to borrow, already borrowed, or reasonably believes it is able to borrow the security to settle a short sale. The SEC contends that UBS employees regularly attached a lender\u2019s employee name to such locates even though that person had never been contacted to confirm availability. Thousands of locates were sourced this way.<\/p>\n

The Commission also claims that at least for the last four years, UBS\u2019s \u201clocate log\u201d inaccurately showed which locates came from direct confirmation with lenders and which ones were based on electronic feeds. (Although broker-dealers employees usually can access the electronic availability feed that lenders send to broker-dealers, they can\u2019t always depend on the feeds and need to get directly in touch with lenders to confirm the security\u2019s actual availability.) The SEC\u2019s probe found that UBS employed practices made it hard to determine whether it had reasonable grounds for granting locates. <\/p>\n

While the Commission\u2019s order did not find that the broker-dealer executed short sales without a reasonable grounds for thinking that it could borrow the stock to complete its settlement obligations, it did find that UBS violated sections of Regulation SHO and the Exchange Act. SEC Director George S. Canelllos noted that it is important that regulators be able to know that a firm\u2019s records are accurate and can serve as evidence that the financial firm is complying with the law in addition to safeguarding \u201cagainst illegal short selling.\u201d With short sales, the security being sold doesn\u2019t belong to the seller. The short seller must either buy or borrow the security to deliver it.<\/p>\n

In addition to the $8M penalty, UBS greed to hire an independent consultant that will review the UBS Securities Lending Desk\u2019s policies, practices, and procedures regarding locate requests. By settling, the broker-dealer is not denying or admitting to wrongdoing.<\/p>\n

Regulation SHO<\/strong>
\nUnder Regulation SHO, broker-dealers cannot accept short-sale orders in equity securities or a effect a short sale in one unless the dealer or broker has borrowed the security, become involved in an arrangement to borrow it, or has reasonable grounds to believe it can borrow the security to be delivered when due. Documented compliance must come with this requirement. A \u201clocate\u201d shows that the broker-dealer has fulfilled these requirements. It is fairly common for customers to ask for locates from broker-dealers. <\/p>\n

With the FINRA case, the SRO contended that it was supervisory failures that allowed UBS\u2019s employees to commit the Regulation SHO violations. Significant deficiencies with UBS aggregation units were also believed to be factors resulting in locate violations and order-marking. <\/p>\n

SEC Charges UBS With Faulty Recordkeeping Related to Short Sales<\/a>, SEC, November 10, 2011<\/p>\n

FINRA Fines UBS Securities $12 Million for Regulation SHO Violations and Supervisory Failures<\/a>, FINRA, October 25, 2011<\/p>\n

\nMore Blog Posts:<\/strong>
\nUBS Fined $12M for Supervisory Failures and Regulation SHO Violations in Securities Short Sales<\/a>, Institutional Investor Securities Blog, October 25, 2011<\/p>\n

UBS Financial Services Fined $2.5M and Ordered to Pay $8.25M Over Lehman Brothers-Issued 100% Principal-Protection Notes, Stockbroker Fraud Blog, April 12, 2011<\/p>\n

UBS Trader Charged with Fraud Related to $2B Trading Loss<\/a>, Stockbroker Fraud Blog, September 23, 2011\n<\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Less than a month after UBS Securities, LLC agreed to pay $12M to settle Financial Industry Regulatory Authority claims of supervisory failures and violating regulation SHO in securities short sales, the broker-dealer has now consented to an $8M penalty to settle Securities and Exchange Commission charges over poor recordkeeping related to the short sales. Under […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3752,3755],"tags":[],"class_list":["post-5226","post","type-post","status-publish","format-standard","hentry","category-financial-firms","category-ubs"],"yoast_head":"\nUBS Settles for $8M SEC Charges Over the Inaccurate Recordkeeping of Short Sales — Investor Lawyers Blog — November 11, 2011<\/title>\n<meta name=\"description\" content=\"Less than a month after UBS Securities, LLC agreed to pay $12M to settle Financial Industry Regulatory Authority claims of supervisory failures and — November 11, 2011\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.investorlawyers.com\/blog\/ubs-settles-for-8m-sec-charges\/\" \/>\n<meta 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