UBS Compensates Auction Rate Securities Losses
Friday, May 16, 2008
On May 8, 2008, two divisions of Zurich, Switzerland-based UBS AG agreed to pay 19 Massachusetts local governments and public agencies more than $35 million to compensate them for auction-rate securities losses.The agreement comes three months after the Massachusetts attorney general's office began investigating allegations that UBS Financial Services Inc. and UBS Securities LLC, both of New York, misled towns, cities and state entities regarding whether auction-rate securities were an allowable investment for the municipalities under Massachusetts law.
An auction-rate security is a debt instrument, such as a bond or preferred stock, for which the interest rate or dividend is periodically reset through an auction mechanism.
With the collapse of the auction-rate-securities market earlier this year, assets have been frozen due to lack of market liquidity, and the value of many of the municipal investments has been written down.
"UBS is pleased this matter has been resolved," said Karina Byrne, a spokeswoman for UBS.