Security Fraud Charges: Cuomo Prepares To File UBS Civil Suit
NY Attorney general Andrew Cuomo is preparing to file civil security fraud charges against UBS. State securities regulators in Massachusetts filed charges against the Swiss-based bank for allegedly misleading investors about the risks of auction-rate securities. Seems like déjà vu all over again for UBS.
As reported July 23 in the Wall Street Journal, charges could be filed as early as this week. The lawsuit also could include allegations of misconduct by senior UBS executives, according to the Wall Street story.
Cuomo first began his investigation into the auction-rate securities market in April. Like other investigations that have been launched following the market’s collapse in February, Cuomo’s investigation focused on whether Wall Street firms knowingly misled investors about the risks inherent to auction-rate securities. As part of his probe, Cuomo subpoenaed 30 companies and 100 individuals. Among the Wall Street names on his list: Citigroup, UBS, Goldman Sachs, Merrill Lynch, JP Morgan Chase, as well as a number of high-profile financial advisors and others.
UBS customers currently hold about $25 billion worth of auction-rate securities.
UBS’ legal troubles over auction-rate securities have been gaining momentum in recent months. In May, the company reached a settlement with the Massachusetts attorney general to return $37 million to the Massachusetts Turnpike Authority and 17 municipalities that had invested in the securities.
Perhaps feeling the heat of more litigation to come, UBS agreed in mid-July to repurchase up to $3.5 billion of tax-exempt auction-rate securities from its clients, package them and sell new debt backed by the securities to money-market funds.
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