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UBS will pay $25 million to Resolve SEC Fraud Allegations 

UBS Financial Services Inc. has decided to pay around $25 million to resolve fraud allegations connected to a sophisticated investing approach known as the YES, or Yield Enhancement approach, according to a statement made on 29th June 2022  by the Securities and Exchange Commission.

Through its network of domestic financial advisers, UBS advertised and sold YES to about 600 investors, per the SEC’s order, from February 2016 to February 2017. While UBS acknowledged and recorded the potential for considerable risk in YES investments, it failed to convey this information to advisers or customers. The ruling further states that during this period, UBS failed to supply its financial advisors with necessary instruction or supervision in the strategy. 

The court’s decision concludes that certain of UBS’s advisers failed to comprehend the risks as a result and were unable to reasonably believe that the guidance they offered was in their customers’ best interests. Many investors experienced losses and terminated their YES accounts after expressing astonishment to their financial advisors and to one another.

“Advisory firms are required to put in place appropriate policies and procedures to guarantee that all parties who participate in the purchase of complex financial goods and techniques have an in-depth knowledge of the risks those products present,” said Osman Nawaz, Chief of the Complex Financial Instruments Unit of the Division of Enforcement. “Advisers must provide appropriate advice to their customers as fiduciaries. The SEC will continue to be watchful and take action to safeguard people who invest in such goods from fraud. Complex products can bring special hazards.

UBS agreed to the SEC’s order being entered after it was determined that it had broken Rule 206(4)-7 and Sections 206(2) and 206(4) of the Investment Advisers Act of 1940. 

Without acknowledging or disputing the SEC’s conclusions, UBS consented to a cease-and-desist order, a censure, and agreed upon repayment of $5.8 million and presumption interest of $1.4 million, which is fulfilled by payments made to investors in associated arbitration procedures. 

In accordance with the fair fund requirements of the Sarbanes-Oxley Act of 2002, UBS also agreed to pay an administrative fine of $17.4 million, which it would commit to distributing to investors who were damaged.

James F. Murtha, Jonathan C. Shapiro, and Brent S. Mitchell worked on the SEC’s investigation, which was overseen by Reid A. Muoio of the Complex Instruments Unit with help from Timothy K. Halloran of the Trial Unit.

The article was originally posted on – U.S. Securities & Exchange Commission (SEC.gov | UBS to Pay $25 Million to Settle SEC Fraud Charges Involving Complex Options Trading Strategy)