HELENA, Mont. – Commissioner of Securities and Insurance, Monica J. Lindeen, finalized a settlement with UBS Securities LLC and UBS Financial Services. UBS has agreed to buy back over $73 million of failed auction-rate securities and pay a $300,000 fine to the Montana general fund as part of a national investigation alleging brokerage firms stuck clients with hard-to-sell bonds.
According to complaints received from investors throughout Montana, UBS misrepresented to customers that auction-rate securities were safe, highly liquid investments that were comparable to money markets. In late 2007 and early 2008, investors alleged UBS knew that the auction-rate securities market was deteriorating and began purchasing additional inventory to prevent failed auctions.
Auction-rate securities are preferred shares or debt instruments such as corporate or municipal bonds. They have a long-term maturity and are sold at monthly or weekly auctions, and until recently were treated by many investors as cash investments. However, the auction-rate security market collapsed, bringing auctions to a halt and leaving investors illiquid investments.
“This settlement with UBS is my 14th auction rate settlement since I took office in January 2009,” said Commissioner Lindeen. “From the start, my primary goal has been return money to investors. However, the large fines are a clear message that when corporate executives unlawfully take advantage of their positions, we will hold them accountable.”
Contact the Commissioner of Securities and Insurance of the Montana State Auditor’s Office toll free at 1-800-332-6148.