UBS Securities LLC placed David Shulman, the global head of its municipal securities group and Fixed-Income Americas unit, on administrative leave as the bank continues to deal with legal issues arising from the collapse of the auction-rate securities market, according to a source familiar with the matter.
UBS confirmed it placed a person on administrative leave last week, but would not identify the employee.
Both New York and Massachusetts have filed lawsuits against UBS, saying the bank pushed auction-rate securities on retail investors as "cash-like" instruments, even as employees within the company expressed doubts about the liquidity of the ARS market.
The Massachusetts suit points to internal e-mails Shulman sent last year voicing his concerns about the market and notes he began to sell his own ARS positions last August, while the firm was still hawking the instruments to investors.
"I don't want to service this product either, quite frankly, and am happy to responsibly dispose of it - we are trying for sure," Shulman wrote last September.
Seven UBS managers sold at least $21 million of personal holdings of ARS between Nov. 1 and Feb. 12, according to the New York lawsuit, which did not identify bankers by name.
Once the ARS market virtually froze, Shulman said the potential to capitalize on the failures made it a "banker's dream market," according to the Massachusetts complaint.
"After the fails - I am being bombarded!!! Every muni issuer (even just our [ARS]) are asking for [letters of credit] to convert," a banker wrote Shulman Feb. 14. "We have a money-making opportunity!!! We are rarely in the leverage position. I think we should [sic] as much of our capacity as possible for core munis-[issuers] are desperate."
Shulman e-mailed back: "Am aware - sit tight - we are at the gates - great chance for us to step in."
UBS said in a statement it would "vigorously" defend itself against the New York lawsuit. The bank said its actions were "honest and ethical" in a reply to the Massachusetts' suit.
Shulman is "cooperating fully" with UBS on the legal issues, his spokesman, Jonathan Gasthalter, told the Wall Street Journal, which first reported the news Saturday.
Gasthalter did not return a call seeking comment.
UBS named Shulman as head of its municipal securities group in 2006 when long-time boss Terry Atkinson announced he would retire the following year. Shulman sought to move the bank beyond its traditional public finance role by expanding into capital markets.
But this May, UBS announced it would shutter its public finance group to refocus its fixed-income, currencies, and commodities business on its core areas. It formally closed in June, although UBS continues to bid on competitive deals.
