The New York Attorney General filed a civil complaint yesterday against UBS Securities LLC and UBS Financial Services, Inc. alleging that UBS "committed a multi-billion dollar consumer and securities fraud on the investing public by falsely selling securities facing mounting liquidity risk as cash equivalents."
The allegations in the complaint mirror many of those made in the recent complaint filed against UBS by the Massachusetts Securities Division (see here), centering around alleged failure to disclose the true nature and risks of auction rate securities (ARS), failure to disclose UBS' alleged internal concerns about the state of the ARS market, alleged conflicts of interest in UBS' different roles in ARS securities, and alleged sales of ARS by senior officers at UBS. In support of these allegations, the NYAG complaint references information purportedly provided by anonymous UBS customers and UBS financial advisors, as well as a number of alleged internal UBS emails.
The complaint seeks an injunction prohibiting future similar conduct, disgorgement of all profits, restitution to customers, damages, and a buy-back of ARS from customers.
A UBS spokeswoman reportedly responded to the filing of the complaint as follows: "UBS does not believe that there was illegal conduct by any employee . . . we have found cases of poor judgment by certain individuals and are evaluating appropriate disciplinary measures for these individuals . . . It is frustrating that the New York Attorney General has filed this complaint while we have been fully engaged in good-faith negotiations with his office to bring liquidity to our clients holding auction-rate securities."
Merrill Lynch, Wachovia, Citigroup and a number of other companies remain under investigation by various state attorneys general.