Bank faulted for not warning of investment risk
A Swiss bank warned some investors but not others in December of potential trouble ahead in a securities market used by some student loan agencies and municipalities, The Boston Globe reported Monday.
The paper cited a notice the New Hampshire Higher Education Loan Corp. put on its Web site in December announcing steps to try to address possible trouble in the auction-rate securities market. The agency said it acted on the advice of its investment banker, UBS Securities LLC.
UBS declined to comment on the report, but spokesman Kris Kagel in New York said the firm is working with clients to solve liquidity problems in the auction-rate market.
The short-term bonds once were considered safe. But starting in February, buyers stayed away from auctions at which they are sold as credit markets were roiled by the subprime mortgage crisis.
UBS kept selling auction-rate securities to other investors, including Richard Stahl of Hollis, N.H., without the warning, the Globe said. Stahl said he was assured the securities he bought on Jan. 10 were safe municipal bonds.
Investors around the country have complained they were misled by brokers from various firms about the safety of auction-rate securities. Last month, UBS settled claims under Massachusetts law by some municipalities and public agencies there for about $35 million.
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Information from: The Boston Globe, http://www.boston.com/globe
