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March 22, 2018

UBS to pay $230m fine for toxic securities sale in New York

UBS has reached a $230m settlement with the New York state to resolve allegations of misleading investors over marketing and sale of residential mortgage-backed securities (RMBS) before the financial meltdown.

The bank will pay $189m in consumer relief for affected New Yorkers along with $41m in cash to the state.

The settlement includes 15 securitisations offered by UBS from 2006 to 2007, worth over $10bn.

UBS was accused of selling RMBS to investors based on inaccurate statements, and failing to adhere to underwriting guidelines or applicable laws in this regard.

The bank was also accused of ignoring the advice of its diligence vendors who detected that it sold loans that did not meet underwriting guidelines.

New York attorney general Eric Schneiderman said: “Today’s settlement marks another key step forward as New Yorkers rebuild their lives and communities. The dollars we’ve secured have funded critical housing programmes across New York – and this settlement means even more community revitalisation work in the years to come.”

In a separate move, UBS Securities Asia was fined HK$4.5m by the Hong Kong Securities and Futures Commission (SFC) for failing to implement effective controls during client trading activities.

The regulator alleged that the firm did not put sufficient controls in place to record transactions and client consents, as well as failed to provide complete data related to client facilitation trades.

Notably, the firm was only found to provide SFC client consent records for almost half of the client facilitation trades between June 2015 and June 2016.

In deciding the fine, SFC considered the firm’s cooperation in the matter and its remedial measures such as launching a supervisory review to ensure the adequacy of client consents.

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