Commonwealth of Massachusetts Secretary William Galvin is suing UBS because it says the investment firm pushed auction-rate securities onto investors in an effort to minimize its own losses. In his complaint, the state’s head securities regulator cited fraud as grounds for the lawsuit.
Galvin cites several e-mails that indicate that UBS told its sales team to aggressively sell the notes to as many investors as possible after the firm realized that the $300 billion auction-rate securities market was in trouble and there were beginning to be more people selling than buying.
One e-mail, dated December 15, indicates that UBS’s wealth management unit held $33 billion of the auction-rate securities and that the firm had underwritten $43 billion of the market’s securities. Galvin says UBS engaged in a “comprehensive and deliberate” strategy to minimize their inventory.
UBS Global Head David Shulman is identified in the complaint as pushing employees to find more clients to purchase auction-rate securities even though he sold his entire personal stake. The Massachusetts regulator wants UBS to buy investors out for the same prices they paid for the risky instruments and compensate investors that have sold their stakes for any losses.
UBS plans to defend itself against Galvin’s allegations. A company spokesperson says the firm is working on solutions to the frozen market that has kept so many shareholders locked into shares that were supposed to be as liquid as cash.
While some issuers, such as John Hancock and Eaton Vance have managed to get their investors out of the frozen market, UBS and many other Wall Street Firms have only been able to let clients borrow against their holdings’ value.
Please contact Shepherd Smith Edward and Kantas, LLP if you believe that broker misconduct or negligence caused your investment loss. Our stockbroker fraud lawyers have helped thousands of investors recover their losses.
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William Francis Galvin, Secretary of the Commonwealth