UBS to pay Mass. $1 million to settle investigation

UBS AG will pay Massachusetts $1 million as part of its agreement to settle the state’s probe of the investment bank’s inappropriate sale of auction-rate securities to 17 cities and towns.

UBS will also repurchase $3.4 million worth of auction-rate securities sold to the municipalities, according to a statement today from Massachusetts Attorney General Martha Coakley.

UBS is paying $750,000 to cover fees and expenses and $250,000 to provide support to cities and towns affected by the breakdown of the auction-rate markets. Auction rate securities involve long-term debt with interest rates that reset weekly or monthly through auctions.

Under a preliminary May agreement, UBS agreed to repurchase $35 million of the securities, which have been impossible to sell since credit markets froze up in January.

Coakley’s office began investigating allegations in February that UBS misled government entities regarding whether the auction-rate securities were a permissible investment for them under state law.

A UBS spokeswoman said today’s news is the final step in the resolution of the matter. The bank denied any wrongdoing.
(Reuters)