Corporate & Securities Law

Documents Show UBS Knew About Risks Of Auction-Rate Securities But Cautioned Only Some Of Its Clients As Other Clients Purchased Auction-Rate Securities

By James Eccleston

The latest news in the auction-rate securities debacle is that UBS Financial Services might have known as early as December that a segment of the municipal bond business was in trouble, but the Wall Street firm kept selling the investments to some clients without warning them of the risk.  This is according to documents reviewed by The Boston Globe. 

By February, the $330 billion auction-rate securities market had collapsed, locking out the nonprofits and municipalities that had used the market for years to issue inexpensive debt, as well as the investors who had purchased it.  UBS brokers have said they were as surprised as anyone about the market's shutdown.

But on the other side of the firm, UBS was advising some large investment banking clients of the looming problems at least three months before all trading had stopped, according to a letter to investors by one of those clients, a New Hampshire bond issuer.

Attorneys at SNSFE continue to investigate the role of investment banking firms, such as UBS, in the marketing and sale of auction-rate securities to investors.  Those with information should contact attorneys at SNSFE. 

Source:  The Boston Globe

Full post as published by FinancialCounsel on June 13, 2008 (boomark / email).