UBS to Pay $500,000 to Settle SEC Charges

Investment firm UBS agreed Wednesday to pay $500,000 to settle federal regulators’ charges that it had failed to supervise a stockbroker who looted tens of millions of dollars from clients of the firm’s former PaineWebber unit between 1994 and 1998.

The move sends a message about brokerages’ accountability for the actions of their brokers, regulators said.

The broker, Enrique E. Perusquia, pleaded guilty to securities fraud last year and is serving a 6 1/2-year sentence for secretly investing client funds in highly speculative gold mines in exchange for kickbacks, and for other unauthorized trades.

He was ordered to make restitution of $68 million and has been barred from the securities industry for life.

The Securities and Exchange Commission found that Perusquia conducted trades for clients at PaineWebber through an omnibus account in the name of a Swiss bank. At the close of each day, Perusquia instructed the Swiss bank on how to assign the trades to specific accounts.

As a result of this arrangement, the SEC said, Perusquia’s supervisors could not properly identify his clients, did not know their asset bases or investment objectives, and could not evaluate the suitability of trades placed on their behalf.

“Brokerage firms have a duty to adopt procedures reasonably designed to prevent fraudulent conduct by their employees,” said Helane L. Morrison, administrator for the SEC’s San Francisco office, which conducted the investigation. “PaineWebber’s failure to adopt such procedures made it easier for Perusquia to carry out his fraud.”

Perusquia worked in PaineWebber offices in New York and San Francisco.

UBS, which acquired PaineWebber in 2000, consented to the SEC’s findings and agreed to pay the civil penalty without admitting or denying wrongdoing.

“The firm is pleased that this matter, involving conduct by a former broker that occurred between five and nine years ago, has been resolved,” UBS spokesman Paul Marrone said.