New Jersey Attorney General Paula Dow Tuesday announced that UBS Securities LLC will pay the state $3.79 million in civil penalties and buy back $1.5 billion of auction-rate securities from New Jersey investors.
The agreement will resolve allegations that UBS did not disclose to investors the risks associated with the ARS market. The $3.79 million payment to New Jersey is part of a settlement negotiated by a multi-state panel of state regulators formed by the North American Securities Administrators Association.
The ARS market collapsed in the first quarter of 2008, leaving investors holding the securities in an illiquid market. Many states have argued that investment firms did not adequately inform investors of the risks involved with the securities.
“Investors suffered because of this firm’s failure to disclose known risks,” Dow said in a statement. “Disclosure of material facts to the investing public is not only the law, but is necessary for consumers to make fully informed decisions about investing their hard-earned money.”
UBS has also repaid municipalities and local governments for refinancing fees they paid on outstanding debt to get out of the auction-rate market.
This is New Jersey’s eight settlement regarding ARS investments. Banks have repurchased more than $2.5 billion of these securities in the agreements, according to the state.
“UBS is pleased this matter has been resolved,” the bank said in a statement. “This is part of UBS’ ongoing effort to restore liquidity to its ARS clients who were adversely affected by the failure of the ARS market in February 2008 and who continue to have difficulty finding relief.”
