FINRA Fines UBS US$2.5 Million for Misleading Investors
15 April 2011
The US Financial Industry Regulatory Authority (FINRA) has announced that it has imposed a US$2.5 million fine on UBS Financial Services (UBS) and has ordered it to pay US$8.25 million in restitution for misleading investors regarding the sales of 100% Principal-Protection Notes (PPNs), issued by Lehman Brothers Holdings (Lehman) prior to its collapse in 2008. Even as the credit crisis worsened, UBS failed to inform investors that the structured notes were unsecured obligations of Lehman and subject to issuer credit risk. FINRA found that some UBS financial advisors did not appreciate the limitations of the “protection” feature in the PPNs, passed on incorrect information to customers and misguided them as to the features and risks of the PPNs. It was found that UBS did not have appropriate suitability procedures in place, as a result of which “PPNs were sold to some investors for whom the product was not suitable”.
FINRA’s media release (11 April 2011)