UBS hit with $50m bill to settle mortgage bond claim

City A.M. Reporter
SWISS bank UBS yesterday agreed to pay $49.8m (£32.4m) to settle claims it misled investors in a mortgage bond product, and kept money which should have gone to benefit investors.

The bank has not admitted wrongdoing in the settlement, which ends the probe into the collateralised debt obligation (CDO) created in 2007.

The Securities and Exchange Commission (SEC) said UBS kept $23.6m of cash instead of passing it into the CDO for investors’ benefit.

Those investors lost around $130m when the CDO was wound up in 2008.

According to the regulator, UBS violated securities law by failing to disclose the upfront cash, and inaccurately representing its cost of acquiring the collateral.

One senior UBS banker said “let’s see how much money we can draw out of the deal” early on in the structuring, said the SEC when presenting the findings of its probe.

But no individuals were charged. The $49.8m payment includes the upfront cash and disclosed fee, $9.7m of interest and a $5.7m fine.

It is the latest in a line of cases involving major banks.

Goldman Sachs paid $550m in 2010 to settle a case with the SEC over a 2007 CDO. And JP Morgan agreed a $153.6m payment.

In both of those cases the banks also did not admit wrongdoing as a part of the settlement with the authorities.