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UBS fined $300,000 by US regulator

UBS Global Asset Management has been fined $300,000 by the US Securities & Exchange Commission for “failing to properly price securities” in three mutual funds that caused a mis-statement of net asset value.

The US regulator says the ’misconduct’ was discovered during the course of one of its investigations.

The regulator’s enforcement division began an investigation following a referral from examiners, which uncovered that during a two-week period the investment adviser did not follow the funds’ fair valuation process in pricing “certain illiquid fixed-income securities in the portfolios”.

Merri Jo Gillette, regional director of the SEC’s Chicago regional office, says: “UBS Global Asset Management failed to fulfill one of its core delegated responsibilities on behalf of mutual funds it advises – to price securities in the mutual funds accurately.

“Fortunately this misconduct was brought to light quickly, so the duration was short and the harm to investors minimal.”

According to the SEC, 54 complex fixed-income securities were acquired by the funds in June 2008 at an aggregate price of approximately $22m, consisting of securities that were part of subordinated tranches of non-conforming mortgage-backed securities, asset-backed securities and collateralised debt obligations.

The SEC investigation found that all but six of the securities were subsequently valued at prices substantially in excess of the acquisition prices, “including many at least 100 percent higher”.

UBS settled the SEC charges without admitting or denying the SEC’s findings, agreed to be censured and pay the $300,000 penalty.


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