|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
UBS To Repay $35M To Mass. For Auction Rate Sales
Ron Zapata
Securities Law360. May 7, 2008
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EXCERPT: UBS AG agreed to return more than $35 million to Massachusetts municipalities and government agencies after state Attorney General Martha Coakley questioned whether the bank's auction rate securities were legal investments under state law, Coakley announced Wednesday. The Swiss bank's U.S. units, UBS Financial Services Inc. and UBS Securities LLC, agreed to repurchase the securities at investment price after the AG's office questioned whether the purchasers were misled into believing auction rate securities were permissible, the AG said. Massachusetts law forbids municipalities' entering into risky investments that are not liquid. “We appreciate that UBS has taken action to return the invested monies to our cities, towns and other government entities,” Coakley said. “In these tight financial times, Massachusetts municipalities need to have access to their monies and to invest them appropriately.” Coakley said she is reviewing certain municipal trust fund accounts and whether to seek potential penalties against UBS under the False Claims Act. UBS said it was pleased to purchase the Massachusetts municipalities' investments at par value. “The agreement addresses particular ARS transactions that were not permissible for these public entities’ accounts under applicable law,” said UBS spokeswoman Karina Byrne. “The reasons supporting this agreement apply only to the circumstances of this specific case under Massachusetts law.” Byrne said individual investors are not covered by the state law, which applies only to municipalities that dip into general fund accounts for investments. No other states have questioned UBS over whether their respective state laws also prohibit investments into auction rate securities, according to Byrne. Auction rate securities are bonds and preferred stocks with interest rates or dividends that are reset periodically through an auction. The $330 billion market for auction rate securities went bust in mid-February amid growing panic over the widening subprime crisis. Without enough bidders willing to participate in periodic auctions, many who bought auction rate securities have been left holding financial instruments they are now unable to sell. |
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