This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/feb/12/ubs-fined-misselling-wealthy-clients

The article has changed 3 times. There is an RSS feed of changes available.

Version 0 Version 1
UBS fined £9.45m for mis-selling to wealthy clients UBS fined £9.45m for mis-selling to wealthy clients
(about 4 hours later)
Swiss bank UBS has been fined £9.45m and ordered to pay a similar sum in compensation for mis-selling an investment fund that took in more than £6bn from wealthy customers.Swiss bank UBS has been fined £9.45m and ordered to pay a similar sum in compensation for mis-selling an investment fund that took in more than £6bn from wealthy customers.
The Financial Services Authority said it had fined UBS for serious failures relating to the sale of the AIG Enhanced Variable Rate Fund. The banking group also failed to deal properly with complaints from customers.The Financial Services Authority said it had fined UBS for serious failures relating to the sale of the AIG Enhanced Variable Rate Fund. The banking group also failed to deal properly with complaints from customers.
The announcement comes less than two months after UBS was hit with a £940m fine for its part in the Libor scandal.The announcement comes less than two months after UBS was hit with a £940m fine for its part in the Libor scandal.
The regulator said UBS failed to carry out proper due diligence on the AIG fund before selling it, so did not properly understand the nature of what people's money was being invested in, and the risks involved. UBS indicated to customers that the product was a cash fund that invested in money market instruments. Instead, a sizeable chunk of the fund was invested in other assets, such as UK sub-prime mortgages.The regulator said UBS failed to carry out proper due diligence on the AIG fund before selling it, so did not properly understand the nature of what people's money was being invested in, and the risks involved. UBS indicated to customers that the product was a cash fund that invested in money market instruments. Instead, a sizeable chunk of the fund was invested in other assets, such as UK sub-prime mortgages.
The FSA also found that four customers were advised to put between 50% and 100% of their entire investable assets into the fund.The FSA also found that four customers were advised to put between 50% and 100% of their entire investable assets into the fund.
Between December 2003 and September 2008, UBS sold the fund to 1,998 "high net worth" customers – including wealthy private investors and investment funds. Initial investments totalled around £3.5bn, an amount that was topped up by a further £2.6bn. That means the average amount invested per customer was £3m.Between December 2003 and September 2008, UBS sold the fund to 1,998 "high net worth" customers – including wealthy private investors and investment funds. Initial investments totalled around £3.5bn, an amount that was topped up by a further £2.6bn. That means the average amount invested per customer was £3m.
When the financial crisis of 2007 and 2008 caused the value of some of these assets to nosedive and AIG's own share price plummeted, customers started a run on the fund. It was suspended in September 2008, with customers prevented from immediately withdrawing all of their investment. At that point, 565 Coutts customers still had £816m invested.When the financial crisis of 2007 and 2008 caused the value of some of these assets to nosedive and AIG's own share price plummeted, customers started a run on the fund. It was suspended in September 2008, with customers prevented from immediately withdrawing all of their investment. At that point, 565 Coutts customers still had £816m invested.
A sample review by the FSA of sales to 33 customers found that 19 were mis-sold, and there was a considerable risk that 12 of the remaining 14 may have been mis-sold. The FSA also reviewed 11 complaints made by these customers, and found that all had been assessed unfairly. UBS has agreed to pay around £10m compensation to those who remained in the fund at the time of its suspension.A sample review by the FSA of sales to 33 customers found that 19 were mis-sold, and there was a considerable risk that 12 of the remaining 14 may have been mis-sold. The FSA also reviewed 11 complaints made by these customers, and found that all had been assessed unfairly. UBS has agreed to pay around £10m compensation to those who remained in the fund at the time of its suspension.
Tracey McDermott, the FSA's director of enforcement and financial crime, said: "UBS's conduct fell far short of what its customers deserved and what the FSA requires.Tracey McDermott, the FSA's director of enforcement and financial crime, said: "UBS's conduct fell far short of what its customers deserved and what the FSA requires.
"It failed to ensure it understood the product it was selling, failed to recommend it to the right customers and failed to take effective action in the financial crisis when the problems with the fund came to the fore.""It failed to ensure it understood the product it was selling, failed to recommend it to the right customers and failed to take effective action in the financial crisis when the problems with the fund came to the fore."
UBS agreed to settle at an early stage, entitling it to a 30% discount on its fine, which would otherwise have been £13.5m.UBS agreed to settle at an early stage, entitling it to a 30% discount on its fine, which would otherwise have been £13.5m.
In November 2011 the FSA fined private banking group Coutts £6.3m for failings relating to its sale of the same AIG fund.In November 2011 the FSA fined private banking group Coutts £6.3m for failings relating to its sale of the same AIG fund.
A UBS spokesman said: "We are pleased we can put this issue that dates back to 2008 behind us, so we can continue to focus on serving our clients and executing our strategy."