Swiss bank UBS has agreed to pay the Securities and Exchange Commission $19.5 million to settle charges it lied to investors about an index linked to its products.
The regulator called the case “the agency’s first involving misstatements and missions by an issuer of structured notes,” remarking that roughly $45 billion worth of the financial instrument are registered annually with its offices.
Structured notes are typically made up of debt securities and derivatives linked to the value of other financial products and indicators, the commission said.
UBS had in 2009 and 2010 fraudulently stated that investments tied to a currency index were being employed in a “transparent” and “systematic” strategy determined by “market prices.” Meanwhile, the bank was actually reducing the index’s value through unrevealed hedging trades, the commission stated.
“UBS, one of the largest issuers of structured notes in the world, agreed to settle the SEC’s charges that it misled US investors in structured notes tied to the V10 Currency Index with Volatility Cap by falsely stating that the investment relied on a ‘transparent’ and ‘systematic’ currency trading strategy using ‘market prices’ to calculate the financial instruments underlying the index, when undisclosed hedging trades by UBS reduced the index price by about five percent.
UBS neither admitted nor denied the SEC’s findings.
Read the SEC’s order announcing the settlement here.
