Fraud rap says UBS deceived investors

By Jay Lindsay  |   2008-6-28  |     NEWSPAPER EDITION

MASSACHUSETTS regulators filed civil fraud charges against UBS Financial Services for allegedly selling investments it knew were extremely risky, but portrayed as safe.

The complaint filed by the Massachusetts Securities Division alleges that the financial services arm of UBS AG knowingly let brokers present its auction-rate securities as virtually risk-free so it could reduce its own stake in the failing program. The investments have their interest rates set at periodic auctions, depending on the submitted bids.

When the program ultimately failed, investors - many of them retirees or small business owners - were left with securities they couldn't sell, the complaint said.

UBS spokeswoman Karina Byrne said the company was disappointed that state regulators filed the complaint while the company was working to solve the problems caused by the auction rate market failure. "Contrary to the allegations, UBS is committed to serving the best interests of our clients," she said.