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WASHINGTON – A UBS unit agreed to pay more than $ 10 million to settle the charges that eluded the priority given to retail investors in certain municipal bond offerings, the US Securities and Exchange Commission said Monday.
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Over a four-year period, UBS Financial Services Inc improperly allocated bonds intended for retail clients to parties known in the industry as “flippers,” who immediately resell the bonds to other profit-making stockbrokers, the agency said in a statement.
UBS registered representatives facilitated more than 2,000 transactions with such fins, allowing the company to obtain bonds for its own inventory and improperly obtain a higher priority in the bond allocation process, according to the SEC.
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The regulator also settled the proceedings with UBS registered representatives William S. Costas and John J. Marvin, finding that they had “negligently” submitted retail bond orders on behalf of flipper’s clients. Costas also helped UBS operators improperly obtain bonds for the company’s inventory through the fins, the SEC said.
Costas agreed to pay the return and interest totaling $ 16,585 and a civil penalty of $ 25,000. Marvin agreed to pay the return and interest of $ 27,966 and a civil penalty of $ 25,000, the SEC said.
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“Retail order periods are intended to prioritize retail investor access to municipal bonds and we will continue to pursue violations that undermine this priority,” said LeeAnn G. Gaunt, chief of the Public Finance Abuse Unit of the Division of SEC Compliance.
UBS and the two representatives neither admitted nor denied the agency’s findings, the SEC said. A spokeswoman for the firm said UBS had fully cooperated with the agency and was pleased to resolve the matter.
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