UBS AGREES TO $25 MILLION SETTLEMENT WITH THE SEC

On June 29, 2022, the Securities and Exchange Commission and UBS Financial Services agreed to a $25 million settlement to resolve claims that the company sold $2 billion of a complex investment strategy to customers without adequately explaining the risks of the strategy to both advisers and clients. 

The settlement stems from allegations that between February 2016 and February 2017, UBS marketed and sold a complex investment strategy called the “Yield Enhancement Strategy” (“YES”) to approximately 600 advisory clients. According to the SEC Order, the strategy was intended to generate profits by using an existing portfolio of debt or equity securities as collateral to purchase and sell a combination of options on the S&P 500. The SEC alleged that UBS failed to provide advisers with adequate training or oversight related to the strategy. Due to that failure, some advisors did not understand the downside risk of the strategy, which was then in turn not adequately communicated to clients before the value of the investments dropped 18% in 2018. 

UBS agreed to pay a civil penalty of $17.4 million, to be distributed among harmed investors. Additionally, UBS agreed to disgorge $5.8 million, along with prejudgment interest of $1.4 million. UBS did not admit or deny the findings as part of the settlement. 

A copy of the settlement order can be found here: https://www.sec.gov/litigation/admin/2022/34-95168.pdf.