On October 13, 2015, the SEC announced that UBS AG has agreed to pay $19.5 million to settle charges that it misled US investors by providing false or misleading statements and omissions in its offering materials regarding certain structured notes linked to a proprietary foreign exchange trading strategy. The SEC investigation found that UBS falsely stated that the investment relied on a “transparent” and “systematic” currency trading strategy and used “market prices” to calculate the securities underlying the index to which the securities were linked, the V10 Currency Index with Volatility Cap. However, the company did not disclose that its employees were engaged in certain hedging trades that could impact the index price, which trades were determined to have depressed the V10 Currency Index price by approximately five percent, resulting in losses to investors. This is the SEC’s first case related to misstatements and omissions by an issuer of structured notes.
The SEC press release is available at: http://www.sec.gov/news/pressrelease/2015-238.html and the SEC order is available at: http://www.sec.gov/litigation/admin/2015/33-9961.pdf.