UBS Fined $50 Million In Mortgage Security Fraud Case

In another in a series of mortgage backed securities fraud cases against major investment banks, the SEC announced on Tuesday that UBS agreed o to pay $50 million to settle federal accusations that it misled investors about a complex mortgage security, a transaction that loomed over the government’s recent legal battle with a former Goldman Sachs trader blamed for his role in creating a similar security. Among the allegations made by the SEC was that UBS pocketed $23 million dollars that should have been placed in the invesment pool, and that UBS marketed the deal, according to the S.E.C., “using materials that omitted any reference to its retention of the upfront payments,” making it an “undisclosed fee.”

UBS kept $23.6 million that under the terms of the deal should have gone to the CDO for the benefit of its investors,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement.  “In doing so, UBS misrepresented the nature of the CDO’s collateral and rendered false the disclosures about how that collateral was acquired.

The SEC's complaint and press release detail allegations of UBS senior employees discussing how to keep the 23 million dollars without disclosing the retention.

According to the New York Times, while UBS did not deny the SEC's allegations, it stated that it was “pleased to put this investigation behind us, which involved a legacy business that was closed almost five years ago.”

That's very cute. UBS calls its CDO Group, which wrote tens of billions of dollars in business, and ultimately collapesd, a "legacy business" as if it was something UBS acquired, had nothing to do with, and closed. It is a legacy business only because the rampant fraud that came to light in 2008 caused that business to collapse, which is also the reason that the business closed "almost 5 years ago." That means late 2008 as the financial crisis was collapsing our economy. The business was not shut down voluntarily by UBS.

For more information - UBS to Pay $50 Million to Settle SEC Charges of Misleading CDO Investors

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The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including the representation of individual and institutional investors who have been defrauded. We represent investors, financial professionals and investment firms  nationwide For more information contact Mark Astarita at 212-509-6544 or at email us.