UBS Agrees To Pay $8 Mln To Settle SEC Charges Over Volatility-tied Compliance Failures

(RTTNews) - UBS Financial Services Inc agreed to pay more than $8 million to settle charges made by the U.S. Securities and Exchange Commission over compliance failures related to sales of a volatility linked exchange-traded product or ETP.

According to the SEC order, issuer of the product warned UBS that it was not appropriate to hold the product for extended periods, and the product's offering documents made clear that the product was more likely to decline in value when held over a longer period.

The SEC order found that UBS prohibited brokerage representatives from soliciting sales of the product and placed other restrictions on sales of the product to brokerage customers, but did not place similar restrictions on certain financial advisers' use of the product in discretionary managed client accounts.

The order also found that UBS adopted a concentration limit on volatility-linked ETPs, but failed to implement a system for monitoring and enforcing that limit for five years. UBS prohibited the financial advisers from making additional recommendations of this ETP prior to being contacted by the Commission staff.

The SEC order also found that between January 2016 and January 2018, certain financial advisers had a flawed understanding of the appropriate use of the volatility-linked ETP and failed to take sufficient steps to understand risks associated with holding the product for extended periods.

The financial advisers purchased and held the product in client accounts for lengthy periods, including hundreds of accounts that held the product for over a year, resulting in meaningful losses.